SUBJECTS: Tax reforms
MARTIN KING:
Okay, the tax revolution we almost had. The Federal Financial Services and Superannuation Minister is Chris Bowen; it's a mouthful. He thinks we should be happy with what was announced yesterday. I spoke to Chris a short time ago.
Minister, what happened to the great tax revolution?
CHRIS BOWEN:
Well, what we've announced yesterday is big and serious reform. Reform which deals with the longstanding issues of the adequacy of our retirement incomes, dealing with the gaps in between what we've saved through superannuation and what we need. That's big reform; reform which puts our taxation of our resources sector on a much more equitable and, frankly, much more efficient setting; that's big reform. Reform which simplifies, very significantly, the tax treatment of our small businesses; that's big reform. So yesterday we have seen big reform; big reform which will make a big difference over the longer term of the Australian economy.
KING:
A big difference to who, Minister?
BOWEN:
Well, a big difference to all of us. A big difference to all of us who have superannuation accounts, a big difference to small business –
KING:
But Minister, so far down the track, all of these things are so far down the track.
BOWEN:
Well, not necessarily Martin. Small business tax cut comes in at the first practical time it could be done, for example, which is 2012, 1 July 2012. We start increasing the superannuation guarantee in 2013. It takes some time to implement because you want to give business plenty of time to adjust, and to negotiate with their employees and with unions about how that gets dealt with in wages outcomes. So it does take some time, but so did the original national superannuation scheme when that was introduced and that's been a big, beneficial reform for the Australian economy, just as the reforms and improvements we announced yesterday are big and beneficial reforms. But big reform like this doesn't come quickly, it doesn't come uncontroversially, and it doesn't come easy, but it's worth it.
KING:
But there was nothing controversial here, was there? There was nothing especially courageous.
BOWEN:
Well, I disagree with that.
KING:
What was courageous, Minister?
BOWEN:
Well, if you look at the responses from the mining industry to the super profits tax, that's controversial, that was a big –
KING:
But that was easy, wasn't it? That was a walk-up start.
BOWEN:
No, I don't accept that, Martin. I also don't accept that changes to superannuation are uncontroversial. There's been business groups out there today very roundly criticising the Government. We knew that would come, we deal with that, we answer it, we respond, and we correct the record. But that doesn't mean it's uncontroversial and it doesn't mean it's not a big decision to do it. When you're taking a decision in superannuation, for example, to improve the retirement of somebody who's 30 today in the workforce by $108,000 by the time they retire, to increase the pool of funds in superannuation by half a trillion dollars over the next 25 years, that doesn't come easy.
KING:
No, but that is still way down the track. Someone who's 30, they've got 35 years to go before they retire.
BOWEN:
Of course they do. But by the time they are looking to retire, they'll look back at that $108,000 and say, 'Well I'm pretty glad I've got it', and its only decisions we take today which have that impact on people retiring in 20 years' time.
And sometimes, big reforms, as I say, like the superannuation system itself; when Paul Keating introduced superannuation, people could've said what you just said: 'Well this isn't going to make any difference to me now'. Those people are now retiring and it's made a big difference to their retirement income.
KING:
Well Minister, as you know as well as I do, the way things are going now we'll all be retiring at 85 in 30 years.
BOWEN:
[laughs] Well, I hope to be retired. I suspect you will be too, Martin.
KING:
[laughs] Yeah.
BOWEN:
We are working longer, that's true, but we still need retirement incomes to look after us when we do retire.
KING:
Minister, the way Tony Abbott's talking today, you might be retired after the next election.
BOWEN:
Well, I know he's getting a bit cocky and a bit ahead of himself, and he uses that as an excuse to cover up for not having any policy, for being negative all the time and to divert from the fact that he's a great risk to the Australian economy because he doesn't understand economics. He showed that comprehensively yesterday.
KING:
Is Ken Henry depressed today?
BOWEN:
Oh, no, of course not.
KING:
But seriously, 138 recommendations and how many were adopted? Was it three, four?
BOWEN:
Well, look, a significant number were adopted and the report itself makes the point that a number of these recommendations were never meant to be adopted straightaway anyway. The report itself says, very clearly, that a number of these recommendations are long term recommendations and a number could only be implemented when the fiscal environment is different to what it is now. The report itself says that, and we've said there are number of them that we're still looking at: the simplification of the personal income tax system, for example, is one that we didn't make announcements on yesterday, but we're very attracted to. So they're the sorts of things that we have done. There are some that we rejected and, fair cop, if you want to have a go at us for rejecting some of the recommendations that's fine, we –
KING:
Which were the ones, Minister, that you wished had gone through? What was the one –
BOWEN:
Well, I'm happy with the package. The things that I argued within the Government we should do were done, so I'm very happy with the package because it's a big, long term reform.
But, you know, Tony Abbott comes out and says, 'Oh, this is gutless, they should've responded more fully to the report'. Well, okay, fine. If he thinks we should tax the family home, which was one of the recommendations, fine, come out and say it. If he thinks we should include the family home in the assets test for pensions, fine, come out and say it. If he thinks we should reduce the incomes of Defence Force personnel, that's fine. If that's his idea of reform, well, good luck to him, but we have different values and we make no apologies for rejecting some of those recommendations.
KING:
All of this may well be pretty academic though, mightn't it, because he says he's not going to support it?
BOWEN:
Well, he opposed health reform; he's opposed everything, in effect, that this Government's done. Fair enough, that's his right if he wants to be negative all the time and not come up with his own policies, that's fine.
KING:
What did he say –
BOWEN:
We'll argue it in the Senate and he'll need to justify his position. He'll need to justify his opposition to the small businesspeople who will benefit from the simplification. He'll need to justify it for all the people who are looking forward to their retirement incomes being improved, justify it to the people over 50 who want to catch up on their super payments and get that concessional treatment for those super payments that we've announced. He'll need to justify it to the low income earners whose superannuation we'll top up by giving them back, in effect, their contributions tax. He'll need to justify that.
KING:
But what about, Minister, why don't you justify these though: why didn't income tax get up, the recommendations to raise the tax-free threshold from $6,000 to $25,000, or this cigarettes and alcohol tax?
BOWEN:
Well, we've dealt with cigarettes, quite controversially, I might remind you, Martin. On income tax, the recommendation is a flatter, two-tier tax system –
KING:
And that didn't get up.
BOWEN:
But we've said we can see the merit in that.
KING:
It's yet to come?
BOWEN:
You can't do that until you could afford to do it. As I say, if you look through the report, there's a lot of recommendations in that vein where they say, 'This would be a good idea eventually, but you do it when you could afford to do it'.
KING:
But taxes on alcohol, Minister?
BOWEN:
Sorry?
KING:
Taxes.
BOWEN:
Well, that's another one we reject. We don't think that the environment is right for a big increase in the price of wine, for example, with a glut in the wine industry. No apologies for that.
KING:
A country full of massive drinkers; isn't that a walk-up start to tax them?
BOWEN:
Well, no, on balance we didn't think so. We've taken the big and controversial decision to increase cigarette tax. We didn't think an increase in the wine tax was appropriate with all the evidence we had in front of us.
KING:
But what I'm talking about are the decisions that affect all of our lives, that make our lives more enjoyable and easier, because isn't that what life is all about, getting better not worse?
BOWEN:
Absolutely.
KING:
Like the state of our roads.
BOWEN:
I think a boost to the retirement income of somebody on average weekly earnings today who is 30 years old of $108,000 will make their life easier. I think the simplification of –
KING:
Yeah, in forty years.
BOWEN:
Well, fine, but remember, you're dealing with retirement incomes. They're the sorts of timescales that you're looking at.
KING:
Well, what about a congestion tax? You rejected the congestion tax.
BOWEN:
Yeah, we don't think –
KING:
Why?
BOWEN:
Well, because we don't think that in the current environment a big change to the taxation of the way cars move about our cities is appropriate.
But you asked what have we done to improve people's lives. I'm making the point, for example, that the big simplification of our small business tax will improve the working environment of small businesses, improve their cash flow and massively reduce the paperwork they have to do. Getting rid of all the different depreciation pools that they have to currently deal with, giving them one depreciation schedule, which is a generous one, of 30 per cent. Dealing with a $5,000 write-off, so any goods that small businesses buy is immediately written off at $5,000. A very big difference to small business, so I don't think in fairness, Martin, that you can say that there is nothing in this package to improve things.
KING:
But you know, Minister, the general feeling is that the Federal Government, the Rudd Government, is gutless because the Government will not make courageous decisions before the election because we are having an election.
BOWEN:
I don't accept that's the general consensus Martin, but I would make this point: as I say, if you think that it's not serious reform to take a very controversial decision to increase the tax on mining companies, the tax revenue from mining companies –
KING:
But they're an easy target. They are an easy target.
BOWEN:
No, no, I disagree. If you think it's not a controversial and big decision to add half a trillion dollars to the pool of superannuation pensions in Australia over the next 25 years, I disagree. They are big, serious reforms which some people aren't happy with, but we knew that, and we don't mind arguing the case for them because good reform never comes easy.
KING:
Minister, thanks for your time.
BOWEN:
Good on you.