FAINE:
Bill Shorten is the Assistant Treasurer in the Gillard Government. The nation's political and business leaders gather in the national capital, in Canberra, today for a tax forum, not a summit. Yesterday we spoke to the State Treasurer, Kim Wells. Today, Mr Shorten. Good morning to you.
SHORTEN:
Good morning Jon.
FAINE:
Where do you want to make changes?
SHORTEN:
Well, first of all, let's see what everyone's got to say. I think it is important to note how much has been achieved in this area and that's an important starting point for today's discussions. I mean, a fact which, I suppose its life, but it's still worth repeating, that we delivered significant personal tax cuts over the last four years. If you're on thirty thousand dollars you're paying 26 per cent less tax than you were four years ago.
FAINE:
And at the same time other forms of tax compensate for that – the Commonwealth's raking in more of our money than ever before. Let's go through a number of things. Yesterday Kim Wells, the State...
SHORTEN:
Jon, Jon...?
FAINE:
...Treasurer told us he wants to scrap...
SHORTEN:
Sorry, Jon...
FAINE:
... stamp duty but only if there's compensation and offsets from the Commonwealth.
SHORTEN:
Jon, you just made a statement that the Commonwealth, and I guess it's the nature of radio, but you just said "Oh, the Commonwealth's raking in more money than ever before". As the economy grows the proportion of taxes, or the actual dollar amount of taxes does increase, but if you compare the Government now to 2007 when Mr Howard was the Prime Minister, the proportion of taxation, the percentage, the amount of taxes coming out of the economy is less than it was in 2007. It's about 22 and a half per cent now, whereas in the Howard years it got up to 25 per cent, so 25 cents in every dollar in the economy was going in tax. Under this Government, it's one of the big myths, is that somehow Labor's higher taxing than the Liberals – it's not the case.
So, I beg your pardon, you were talking about the states.
FAINE:
The State Treasurer Kim Wells yesterday said that he was prepared to consider scrapping stamp duty on various transactions, and he suggested transfer of motor vehicles and the like, but only if there was an offset, compensation from the Commonwealth so the State wasn't out of pocket.
SHORTEN:
Oh, listen, I accept part of what Mr Wells is saying. It's clear to me, having been Assistant Treasurer for just over a year, that the states have to step up to the plate and play their part in improving the efficiency of the tax system. It is true that state and territory governments have a critical role to play because, as the tax review identified, some the nation's most inefficient taxes are state taxes. Now I do get that what happens, that stamp duty's one tax that can make it harder for families to buy a bigger or smaller home as their family circumstances change, but let's also be clear, GST revenue has doubled to the states from $24 billion to an estimated $48 billion this year.
FAINE:
Yes, and they've abolished some of their state duties, taxes, charges as an offset. That was the whole deal.
SHORTEN:
Oh yes, but let's be clear, the money going to the states from the GST has doubled in the last ten years...
FAINE:
And they've dropped other charges – that was the deal.
SHORTEN:
Do you think that they've dropped charges proportionate to the increase in the GST?
FAINE:
I don't have the budget papers in front of me, but they're still saying they need offsets – they can't surrender income unless they cut services or get compensation from the Commonwealth.
SHORTEN:
Yeah... a lot of people in state politics spend a lot of time getting elected just to explain why it's someone else's fault. Whilst I accept there are inefficient state taxes, the record speaks for itself. The Commonwealth, be it Liberal or Labor, federally, have seen a massive increase through GST and taxes going back to the states. So we will have a discussion about state taxes and charges as one of the items, but if people come to the tax forum with just a view that the only way they can reform tax is by someone else giving them money, that's just passing the buck, it's not tax reform.
FAINE:
Well, speaking of passing the buck, the West Australian Treasurer, Christian Porter, from the conservative side of politics, and clearly a man of some great wit, said:
"That doesn't mean the states are lazy, that means the Commonwealth is unimaginative."
He in fact puts the ball back in your court and says: "well, you are the guys who have all the cards, why don't you come up with some proposals?
SHORTEN:
Well, first of all, as the actress said about the Bishop, he would say that, wouldn't he? What I would make very clear here is, we've come up, we will come up with ideas and we have come up with a whole lot of things already and again, as I think we've spoken about on your show previously, good news doesn't seem to sell media ratings.
But, we are proposing to cut the tax for all small businesses in Australia through our Mining Resource Rent Tax, yet the West Australian Government doesn't support our Mining Resource Rent Tax, so this chap you just played, the Treasurer of Western Australia, he's happy to increase his taxes on mining companies, but when a Federal Labor Government does it, somehow that's unfair. He wants the Federal Government to do something, what we are saying is that when some of Australia's largest mining companies are making record profits that would put them into the Guinness Book of Records, all we're saying is, lets allocate some of that prosperity from the mining boom and decrease the company tax rate for all Australian companies. That's a fair dinkum idea.
We're also proposing to triple the tax-free threshold to $18,000 plus, which will mean an extra million people will no longer have to lodge a tax return.
FAINE:
OK, let's go to some of the other sacred cows. Why doesn't anyone tackle negative gearing?
SHORTEN:
Oh well, I imagine that we're going to welcome the exchange of all ideas ahead of the forum but we're not going to provide a running commentary on every single proposal that's made. But we've made it clear we're not touching negative gearing at this point.
FAINE:
Why? Every independent commentator and, by and large, I think every person listening to you now, knows, it's middle-class welfare and it distorts the housing market, particularly making it unaffordable for first home buyers. Why won't you unravel it?
SHORTEN:
I appreciate there are arguments against negative gearing, but I also appreciate there are arguments in favour of it. That argument goes that negative gearing allows people to invest in housing that will ensure a greater provision of housing stock in Australia. That matters...
FAINE:
There are other ways of achieving it without the same distortion and the same unlevel playing field. First home buyers competing against do-it-yourself superannuants is not fair.
SHORTEN:
Oh, we provide support for first home owners, I think you appreciate that. Also, when we talk about do-it-yourself superannuants, there's 900,000 people in that category, I don't accept that all of the proportion of self-managed super funds is in housing, so I do think that argument can only be stretched a certain distance Jon.
FAINE:
So you think there's nothing wrong with negative gearing? Why not even just start to grandfather it, just start to say 'we're not going to enter into new arrangements on the same basis as the past, as of a particular date'? Why can't you just start to rein in its excesses? It bleeds the economy dry.
SHORTEN:
Well, as Tony Jones would say, I'll probably take that as a comment. I will certainly see what happens in the next two days and come back to you if there is a discussion raised about this issue, but the Government view, and sometimes the job of Government is not always to tell you what you want to hear but be straight, negative gearing and removing that isn't on the agenda for Government policy.
FAINE:
Why not? Because of the political difficulty, is that all?
SHORTEN:
No, I think there's arguments for and against and I think you're sophisticated enough to understand there are arguments in favour of negative gearing as well as those that are against it.
FAINE:
And the super do-it-yourself explosion, there was an analysis in the Financial Review last week, I think, showing – and I can't remember the exact figures and I don't have the clipping in front of me – but it might be something like five per cent of the population, have got 60 per cent of the funds invested. It's gown at the top end, to the point where some people get excessive advantage from the rules.
SHORTEN:
Well, I think there are a number of points in what you're saying there Jon. In Australia there's a range of ways you can save for your retirement. You can invest your money in a retail fund or an industry fund, some large companies still have company funds and there's still public sector superannuation funds. There's also self-managed super funds. The argument in favour of self-managed superannuation funds is that if people accrue a large enough amount of savings then they want to be able to directly control the pattern of investments, not be hands-off in terms of the savings for their retirement. I can understand an argument which says people want to have some direct control over the performance of their investments for their retirement. So it's inevitable there'll be some growth in that area as people's account balances increase.
I think the second proposition though which you're raising is there's fewer people with larger accounts and...
FAINE:
The people with the most money are getting the greatest benefit...
SHORTEN:
... they're congregated at a larger level in the self-managed superannuation funds. I know this Government is doing a lot for the low-end income earners in terms of superannuation. One, we've basically, or not basically, we're abolishing all the tax you pay on superannuation if you earn less than $37,000 a year. Secondly we do want to lift superannuation compulsory savings over six years from nine to 12 per cent, indeed using some of the proceeds from the Mining Resource Rent Tax to assist with that. Now that is a big change that will allow people to save a lot more money than they currently would.
Now, the issue about people with larger account balances taking a more direct interest in picking a product category for superannuation that allows them to have greater direct say, I think is somewhat inevitable, but what I would say is this is a Government that's ,making sure these concessions go to the lower end of the market. Did you know that over 60 per cent of the people who earn less than $37,000 are women. They've got broken employment service, they've taken time out to raise a family, women get paid less than men on average in Australia, so we're putting a fair bit of effort in to the bottom end of the savings market. It is inevitable though that people with larger account balances will in some cases look to use the self-managed super fund option.
FAINE:
Right. Nine minutes to nine. Bill Shorten, the Assistant Treasurer, with us for a few more moments and then, still to come, black rock residents up in arms about what they say is the desecration of one of their iconic beaches. That story coming up in a moment. Two more quick things though Bill Shorten, first of all are your seriously going to legislate retrospectively to close a mergers loophole with billions at stake, that corporate Australia has used for its orderly and efficient conduct and business, including some of the nation's biggest companies?
SHORTEN:
Well, the issue you're referring to, the Howard Government in 2002 developed what was called 'Rights to Future Income' amendments, which were bipartisan...
FAINE:
...Consolidation rights, yes?
SHORTEN:
Yes. This is the ability of companies to right off tax losses as they merge entities...
FAINE:
What are called 'residual tax offsetting rules'. It's complex, but you're threatening to legislate retrospectively...
SHORTEN:
Not threatening. What we're doing is... the laws eventually got passed in 2010. Our government asked the Board of Taxation to review the changes in March this year, when we became aware of concerns about the application of the cost-setting rules, we've received the report in late May, we've been working with Treasury, ATO and stakeholders to develop our response. But not to put too fine a point on it, we believe the changes that have been made have been expanded to such an extent by the corporate's that it's unsustainable and we will act to protect the Commonwealth revenue...
FAINE:
... retrospectively?
SHORTEN:
We will act to protect the Commonwealth revenue, we haven't made a final...
FAINE:
...retrospectively?
SHORTEN:
I appreciate you're using one word, in an issue you concede is detailed, I'm trying to simplify it as much as I can. We will act to protect the Commonwealth revenue base. Now whether or not those changes are retrospective remains to be seen, but we're not ruling it out, let me be clear.
FAINE:
Alright, and the idea for a Tax Reform Commissioner, so that reform is constant and depoliticised?
SHORTEN:
Well, I don't know how reform ever gets depoliticised because whenever you try and change things vested interests, such as one the issue you just raised previously, vested interest will always rear its head. There is a session tomorrow afternoon on governance and certainly I'll be taking an active role. How we take this tax forum process forward after today and tomorrow hasn't been finalised but I do believe we need to have a constant debate about tax reform and to the extent we can drag partisanship out of it, we should. I have to say though that the Opposition's just indicated they're against everything we're saying, so in the current climate with Mr Abbott...
FAINE:
... Well, that's politics too
SHORTEN:
Well it is, but politics should be a bit better than the opposition always just saying 'no' to everything.
FAINE:
We shall see where things get to today. Thank you for your time, Bill Shorten, Assistant Treasurer.