The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Wayne Swan

Deputy Prime Minister and Treasurer

3 December 2007 - 27 June 2013

5 October 2011

Interview with Jon Faine

ABC News Radio 774, Melbourne

5 October 2011

SUBJECTS: Tax Forum; Australia's record of tax reform

FAINE:

Mr Swan, good morning.

TREASURER:

Good morning.

FAINE:

A very cynical response from people, including from your own former supremo, Ken Henry, who pretty much I thought nailed it, the former Treasury secretary when he said this:

Much of what has been said is quite predictable.  I could have written the script for this before coming in.

What's your reaction to the cynical response of everyone including your own former advisor?

TREASURER:

Well that was taken completely out of context.  He made those remarks after there had been what he called a predictable clash between business on the one hand and unions on the other.  But what actually went on after that was there was a pretty constructive discussion where we made a lot of progress about dealing with the challenges in business tax of structural change in the economy and I think we found a lot of common ground as a result of that.  But what he was referring to was a clash, if you like, between the Business Council on the one hand and unions on the other, but as the discussion went on I think we had a really sensible discussion about what could be done further in the business tax system.

FAINE:

Well what's achieved?  What's actually…

TREASURER:

Well, a degree of support which included support from both the Business Council and the unions about the need for us to look at some further measures in business tax.  I thought it was a big step forward, but that comment from Ken was taken out of context in the debate.  It didn't reflect actually how the debate went but that's the way things run these days and I'll just roll with it.

FAINE:

The ACTU says that you can't drop the company tax.  The business community says you must drop the company tax.  The Greens say we need congestion charges.  Everyone just came along and played to their pet themes and in the end they're all going to go away and nothing will have changed, won't it?

TREASURER:

Well, sorry that's just not right because what we did get was a fair bit of agreement around the room between business and unions that we had to do something further in the business tax system for those businesses, which are particularly the manufacturing sector but not exclusively there, certainly in tourism and other areas where we might want to recognise what is happening with their losses in a more contemporary way to assist them to restructure and survive and go forward.  That was a very big advance.

FAINE:

That's small.

TREASURER:

It's not small at all.  It's actually quite big.

FAINE:

It doesn't get to the very core of the system, does it?

TREASURER:

It does actually.  It does.  It goes to the very core of how businesses continue to grow.  It goes to the core of dealing with the pressures of the patchwork economy and it goes to the core of jobs in our community.  It was a very important discussion.  I think it was recognised around the room that we found some common ground between business on the one hand and unions on the other.  Now that might seem a bit technical for all of your listeners and I realise that it is.  But the truth is that we're dealing with some very complex challenges in our economy at the moment which is being impacted upon by an array of forces and we do need our tax system to reflect that, and these pressures have intensified in particular since Ken Henry brought down his original report 18 months ago.  But even in that report he did recognise that there were other pathways ahead rather than just doing simply a big business tax cut on the company rate.

FAINE:

Are you going to harmonise state-based payroll tax and stamp duty which seemed like there was some slim prospect of consensus but no actual progress.

TREASURER:

Well, I don't know what you want to do, people to get up and agree at the forum and then walk out the door and say here's a new system.  The fact was that we did make some progress in that regard because the states got up and - I think for the first time that I can really recall - a number of State Treasurer's recognised that there were substantial challenges with the efficiency and the effectiveness of their state tax bases and the offer was made to progress harmonisation relatively quickly.  We had a number of Treasurers around the room on board.  I certainly want to take up that offer to see if we can progress it pretty quickly. But the fact is with tax reform we've got some very big tax reforms in the system right now that we started planning 18 months ago.  Most of them don't start until 1 July next year; for example, the big tax cut for small business, 2.7 million small businesses, the cut in the company rate.  These are things that all take time and what this forum was about is the next wave after that.

FAINE:

Alright now what also this is about is the need for vigilance and constant reform.  A proposal I thought that had great merit was the idea of a tax reform commissioner.  Someone whose job it is just to keep looking at ways to improve the tax system.

TREASURER:

That's what we have Governments for, Jon.  I'm not in the business of contracting out what people elect us to do which is what we're doing with the forum and we've been doing for the last four years. 

FAINE:

I'm not suggesting you can strip the politics out of it but surely you can take advice in the way you have a law reform commissioner you can have a tax reform commissioner.

TREASURER:

Well, we do, that's why we actually had the Henry review.  We actually had that.  We've got a lot of recommendations.  We've done something like 32 recommendations that come from Henry in the last 18 months and most of them are the really big ones – the ones that really matter when it comes to company taxation and personal taxation. For example, let me give you one that is at the core of our price on carbon pollution - that is, tripling the tax free threshold.  That is a really big reform.  It doesn't start until 1 July next year but all of these things – the MRRT, that came straight out of the Henry review,  it's being progressed.  So what I'm saying is with tax reform, it takes a while, a whole lot of steps do add up to a much bigger picture.  There's already a big picture out there.

FAINE:

And just one last thing.  Yesterday we asked our listeners if they were at the tax forum what would they be submitting and pretty much the single thing most nominated was to reign in the cash economy which is rampant.  Now I remember when Peter Costello and John Howard brought in the GST, they said this will kill the cash economy.

TREASURER:

Yes they did.  I do recall that.

FAINE:

And it hasn't happened.  So what do you propose to do?

TREASURER:

Well, that was raised yesterday and the Commissioner of Taxation was there as well and as a result of yesterday I will be having some further discussion with him about what he's doing in the area of broadly what you call compliance which did get a guernsey yesterday with a number of speakers.

FAINE:

I'm grateful to you for your time and thank you.

TREASURER:

Thank you.