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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

4 October 2011

Interview with Naomi Woodley

ABC Radio, AM Program

4 October 2011

SUBJECTS: Tax Forum; responding to the challenges of a patchwork economy

WOODLEY:

Mr Swan, good morning.

TREASURER:

Good morning.

WOODLEY:

Welcome to AM. You've ruled out changes to the GST but you're clearly going to hear a different message today, and not just from state governments. Is it simply too politically difficult to consider at a time when you're trying to sell a carbon tax and mining tax?

TREASURER:

Well first of all can I say that I will welcome the ideas and the enthusiasm from all of the participants whether I agree with them or I don't agree with them. But when it comes to the GST, we've said for a long period of time that we're opposed to increasing the GST or widening the base. And there's very good reasons for that. That punishes low and middle income earners. It doesn't do anything for work incentives and when that last package was brought in it cost a bomb in terms of additional compensation.

So we don't see that as a panacea, we see it is as unfair and we don't see it as the most efficient way to organise our tax system. And it's a long-held position which everybody is aware of. But I understand that others have a different view. But the fact is they cannot advocate tax reform by saying simply on the one hand increase the GST for everybody else, for the punters, while they give themselves a tax cut. That's just not on.

WOODLEY:

But by the end of tomorrow's events will Australians be any clearer about the future of their tax system? This has a budget of almost $1 million this forum, what's it going to achieve?

TREASURER:

Well I think what we're identifying here is the next steps in tax reform. We've already put in place a substantial wave of tax reform: tripling the tax-free threshold, for example was a very big reform; $47 billion of personal tax cuts over three years; the very big change to resource taxation which is going to fund a tax cut for 2.7 million small businesses and increase the superannuation accounts of low paid workers. These are big reforms and we need to build on those and that's what today is about, having a discussion about the next steps. But tax reform isn't done overnight, it's always hard yards and I'm really looking forward to the discussion today.

WOODLEY:

But would you be having this forum if Rob Oakeshott didn't want it?

TREASURER:

Well of course we'd be having this sort of discussion. I'll tell you why. Because when we responded to the Henry Report over 18 months ago, we said that there are some things that we'd do now, and we've been doing a lot of those; we said there were some things we'd never do; and we said there was a great bulk of material that we needed to talk about in the decade ahead, and that's what today is all about.

WOODLEY:

The population though is ageing and it is growing; aren't the only options available to governments, yours and future ones, either to decrease government spending or increase taxes?

TREASURER:

Well what we've got to do is make our economy much more productive. That goes to the core of the intergenerational report that we've commissioned and received and responded to. And part of making our economy more productive is having a better tax system. So the reforms that we are currently putting in place are very important.

Tripling the tax free threshold, for example, improves the rewards for work. It takes something like a million people out of the tax system. It reduces those effective marginal tax rates for many people on the lowest incomes and enhances labour force participation. That's really what tax reform is about, about lifting productivity, lifting the economic capacity of the economy, along with investing in infrastructure, and many other reforms that we are putting in place.

WOODLEY:

But you can't meet the growing needs of health costs, in particular just by productivity. You're going to need to increase the tax base, aren't you?

TREASURER:

Well increasing productivity is a very important part of a growing economy, which is the most important response you can make to the ageing of the population; lifting workforce participation, making sure the economy grows. But we recognise that from time to time you do have to adjust the base. That's why we accepted the recommendation to put in place a resource rent tax, which we are using to give a tax cut to small business, to cut the corporate rate and to lift savings. And, astonishingly, all of that is opposed by the Liberals who somehow think profitable mining companies pay too much tax.

WOODLEY:

But the resource tax you're introducing is different to the one Ken Henry recommended.

TREASURER:

Yes it is, it is because there's been a degree of consultation and interaction and I think we've got to a very sensible result here which enables us to lift the capacity of the economy, to give a tax cut to 2.7 million small businesses, to bring down the corporate rate and to lift superannuation savings of low-paid workers. That's what growing the economy is all about.

WOODLEY:

The pressure facing manufacturing will be a central theme at the Tax Forum and the jobs forum later this week, can that sector expect something specific in the way of tax breaks by the end of this week's discussions?

TREASURER:

Well there's no doubt that we really do want to focus on responding to the pressures of the patchwork economy. We've been doing that. We're doing that with the resource rent tax and the other tax changes…

WOODLEY:

But they're calling for something sooner.

TREASURER:

Yes sure they are, and there are a variety of views about what should be done here, and this is the advantage of having the forum. Some people will have a proposal which relates to tax losses, others will have other solutions.

Let's have a talk about all of those because they're very important because dollar has been high, it's put a lot of our industrial sectors under pressure. And that's why we're looking at further initiatives in this area. We do want to hear what people have got to say. I'm not going to rule anything in or out this morning.

WOODLEY:

Mr Swan thanks for your time.

TREASURER:

Thank you.