MELISSA CLARKE:
To look back over the Tax Forum I'm joined in the studio by David Bradbury who is the Labor Member for the seat of Lindsay, thanks for joining us.
DAVID BRADBURY:
Good afternoon.
CLARKE:
In Melbourne we're also joined by Scott Ryan the Victorian Senator, thanks for joining us too, Scott.
SCOTT RYAN:
Good afternoon Melissa.
CLARKE:
David we'll start with you, after two days of hearing about the Tax Forum, have we learnt anything we didn't already know? We've heard business groups argue for tax cuts, we've heard welfare groups argue for increases in welfare payments, the usual arguments. Did we really learn anything new?
BRADBURY:
I think that for each of the two hundred people that were present in the forum, most people would have learnt new things over the course of the last two days. I think the most significant lesson that is to be taken away from this Tax Forum is the need for us to have a broader conversation with the community about tax reform, the necessity for it, and the options that are available to Governments. I think that that is something that came through very clearly. There are some points of agreement, but I think it's important to have that broader discussion and I think this was a really important starting place.
CLARKE:
Hasn't this discussion come two years too late? Shouldn't it have been done on the back of the Henry Tax Review when it was released?
BRADBURY:
I hear people say that about the Henry Tax Review and my background was as a tax lawyer and I think it's instructive to look at big tax reform that has happened in the past. There was a report called the Asprey Report which was commissioned by the McMahon Government in '72 and handed down by the Whitlam Government in '75. Most of the reforms of the Asprey Report were the things that were delivered in Capital Gains Tax, Fringe Benefits Tax, Dividend Imputation and ultimately the Goods and Services Tax, 10, 15, 20, 25 years after that report. I think it's important to understand that the Henry Report will be very much to our generation what the Asprey report was to previous generations. This is a long process, but it's important to understand that the process has to begin somewhere. It has begun, and this is an important next step in the journey.
CLARKE:
Scott Ryan the Coalition has been very critical of this; they've described it as a talk-fest at numerous points along the way. What is wrong with a whole bunch of experts getting together and talking about really big important issues like tax reform?
RYAN:
Well there is nothing wrong with talking about tax reform Melissa. The point the Coalition has made has been that the Government has two big new taxes on the agenda, yet they were both specifically excluded from the discussion.
CLARKE:
Well they weren't excluded from the discussion; the Government just said they wouldn't be doing anything about it.
RYAN:
Well they were excluded from consideration then. The point is, one of them is the carbon tax. The Government keeps talking up its importance yet it was specifically excluded. What's interesting to me there is that David spoke about the Asprey Report, well I really hope this Government would have a reform agenda that is going to take somewhat less than 30 years before it's introduced. The problem with this Tax Forum has been the two big new taxes that have not been able to be seriously considered, because the Government won't listen to any complaints about them. When David talked about the need to have a conversation, the Prime Minister said that about the carbon tax before the election when she said she would not take action until there was a consensus. Yet, what we've seen since then, is this great big new tax, this one the Government keeps talking about the importance of, can't be considered and there is no consensus. There has been no conversation.
CLARKE:
Well the Tax Forum was one of the demands of the country Independents during negotiations with Labor to form Government. To see whether they were satisfied with the outcome, I spoke earlier today to the Independent Member for New England, Tony Windsor.
*AUDIO*
CLARKE:
Well one of the sessions at the Tax Forum today focused on personal tax and one of the most contested issues was raised in this session and that's negative gearing. This is something that we heard housing groups say, that negative gearing allows the supply of housing stock across the country to increase, while other bodies were arguing in fact it's making it more difficult for low and middle-income earners to get into the housing market. If I can start with you, Scott Ryan, is negative gearing something that really needs to be rethought? It's been in the system for some time. Is it time to perhaps put a time limit on negative gearing?
RYAN:
No, I don't think so at all, Melissa. Negative gearing enables people to invest in housing. It enables the investment in new housing and existing housing to provide rental stock. It is also an important vehicle for people to accumulate wealth. Not everyone has the capacity to actually use other investment vehicles. Negative gearing is quite popular for that as well. The Coalition has got no plans whatsoever to look at it.
CLARKE:
David Bradbury?
BRADBURY:
Well, the Treasurer made it clear when he responded to the Henry Review that this is not something on our agenda. The Treasurer has already ruled it out. I think the personal taxation session today certainly did focus on issues such as negative gearing, but there were many other issues that were also the subject of those discussions. I think that where the focus really was, was in large part on the interaction between the personal taxation system and the transfer payment system. I think that's a really important area that we need to continue to work to get right.
RYAN:
Melissa, if I could just add, housing affordability is an issue, but it's not driven by negative gearing. Housing affordability has been driven by population growth, constrained land release particularly in the last 15 years in our major cities and levies increasingly put on property developers which add quite a substantial amount to the price of a new home.
CLARKE:
But the criticism of negative gearing is tied up with also some of the criticism aimed at concessions when it comes to superannuation, and that is that when you have different rewards or different incentives and you get more from putting your money into the housing property and using negative gearing or into superannuation when you're older and you get better tax breaks, it actually favours that over other methods of saving money, by putting money in bank deposits, where there's a higher tax rate. Is it time to look at levelling out those so that there isn't a greater incentive for one form of investment over another? Or as someone in the session put it today, ensuring that you're not having the system reward borrowing and speculating over hard work and saving? David, first of all, you?
BRADBURY:
I think the question you've asked and the underlying premises and there are several of them, really demonstrates how complex our tax system is. There are so many elements and dimensions to it. In a sense, that's why I find it extraordinary this position that we've had taken by the Opposition where they say, because you didn't want to talk about the mining tax or the carbon price, therefore we won't participate. There are so many other dimensions to this. Getting the incentives right is an important part of that process. Sometimes there have been decisions taken, sometimes on an ad hoc basis, that have created all sorts of distortions and the wrong incentives. It's not an easy exercise to try and unwind all of that in one go. That's why this discussion is an important step along the way in that journey. There were a number of areas that were identified, some where there was greater consensus than others. But I think an important way forward is trying to identify those areas where there is some consensus, to try to bring about a better alignment between what are the personal incentives for individuals, along with what are the broader social objectives or financial objectives that we're trying to get out of the tax system as well.
CLARKE:
Scott Ryan, your perspective?
RYAN:
Well David, it's a bit rich to say we haven't participated because we weren't invited.
BRADBURY:
Well, you could have been involved. That's a bit cute.
RYAN:
On the superannuation issue, the point is that before the changes put through by the former Howard Government, there were multiple taxes on superannuation, depending on when it was accumulated. If I recall correctly, there was a pre-1983 tax regime, a post 1983 tax regime, and one that was even more recent than that. So sweeping away all of those was an enormous simplification of the tax system for superannuation, but it maintained the incentive for people being able to save for retirement. That was the reason for the tax concession. You can't take money out of superannuation to purchase something the way you can out of a bank. That's a very important incentive in our system.
BRADBURY:
I'd make the point, just to respond to an earlier point that you made, and that is to say that there was no consultation surrounding the decision that was taken in relation to those changes. So if consultation all of a sudden...
RYAN:
Well it didn't increase the burden on everyone, David.
BRADBURY:
There are no question these changes shift the burden from one particular category of taxpayer to another, particularly expenses.
RYAN:
No, they only do that if you increase taxes.
BRADBURY:
No, that's not true. If expenditure across the board continues to increase or to be maintained at existing levels, if you relieve the tax burden from one sector of the community, then you are by definition shifting that burden to someone else.
RYAN:
One can cut taxes, David.
BRADBURY:
Well, not if expenditure – no. I want to make this point, that is not correct if you maintain expenditure at continuing levels. I'd also make the point, since you want to make a point of this. We have maintained tax as a percentage of GDP at lower levels than were reached during the period of the Howard Government, and that that is the best measure of determining the overall tax burden that a Government imposes on citizens.
RYAN:
No, the best measure of determining the overall tax burden is what you tax people now, plus what you borrow because that is simply deferred taxation. You inherited a budget that was spending $260 billion a year. This year it will spend $360 billion. You can't simply say there are lower taxes when you're borrowing from tomorrow's taxpayers.
CLARKE:
We'll have to move on to the next otherwise we'll miss out because we want to talk about one of the other sessions at today's forum. That's one that focused on transfer payments. We first of all want to hear from some of the views expressed in that session.
*AUDIO*
As we saw there, community lobby groups used today's forum to argue for greater support for low-income earners. Dr Cassandra Goldie was one of those involved during the session session looking at welfare payments, and she spoke to our reporter Julie Doyle earlier today.
*AUDIO*
We heard there Cassandra Goldie from ACOSS say that really, people on unemployment benefits could do with a $50 a week increase in benefits. David Bradbury, is that something that the Government can afford to do?
BRADBURY:
I think you point to a really important part of that overall question, and that is how you fund it. That would be a very expensive thing to do. That's not to say that it's something that should be ruled out. But clearly when you have a look at this whole question of trying to ensure that there's an adequate amount of transfer payment available for people that are for people that are unemployed, but also retaining the incentive for people to make the transition into work, to ensure that they are provided with help to find work. I think we should also make the point that as a Government we've been very focused on trying to assist those that are most vulnerable through the carbon pricing compensation arrangements. We're looking to triple the tax-free threshold, which will provide a greater incentive at that end, and a massive investment over the last few years in social and public housing and for homelessness. We've been making real investments there as well.
CLARKE:
On the flipside, we have the Labor Government and Howard Government before that, both making cuts to income taxes when it comes to election time. To both David and to you perhaps first of all Scott, have politicians shot themselves in the foot by giving out income tax breaks and then finding when welfare benefits seem quite slim and not keeping up to pace with the cost of living, there's nowhere to turn?
RYAN:
I don't think so. We've still seen a net increase in taxation revenue, particularly under this Government. It's $30 billion more than when they came to office. Let's put in context how many people pay tax. I get a bit tired of ACOSS always talking about trying to attack so-called high-income earners. The top 5% of income taxpayers pay a quarter of all net tax. The top 25% of income taxpayers in Australia pay nearly two-thirds of all net tax. So cutting taxes for those who pay a great deal of it and making sure that bracket creep doesn't just give a boon in revenue to the Government, is actually something that the Government should aspire to.
CLARKE:
We have had Wayne Swan, in wrapping up the Tax Forum, announce that he's going to set up a business tax reform working group. David Bradbury, can you explain to us precisely what this working group is going to do?
BRADBURY:
A large part of the focus of this group, which will be headed by the current Chair of the Board of Taxation, will be to liaise with the business sector and to try to tackle principally the question of the patchwork economy and how tax measures might be better targeted towards assisting some of those companies...
CLARKE:
Do we need a review and then a forum and a working group, all sensibly working to the same objective?
BRADBURY:
I think if you want to get an outcome, you have to have a proper process. What we had today, and yesterday, was a really positive discussion around the issue. There were a number of ideas there as to how we might tackle that. I don't think there was one person in the room there today or yesterday that said, "Here's my blueprint, follow that and that will fix the problem." There were good ideas, some goodwill, now it's about harnessing the good ideas and goodwill to try to get solutions to the problems
CLARKE:
This morning Liberal Backbencher Jamie Briggs told ABC Radio if the Tax Forum were to be taken seriously, it needed to include discussion of the GST and whether it applies to food. That was rebuked by the Opposition leader Tony Abbott.
*AUDIO*
Scott Ryan, was Jamie Briggs speaking out of school when he spoke this morning?
RYAN:
Well, I read the transcript of what Jamie said, Melissa, and I didn't interpret it that way. The thing that struck me about this was, can anyone imagine Paul Keating or Peter Costello at their Tax Forums or summits coming out and attacking an Opposition backbencher? This attempt by Wayne Swan to divert attention from his own failures says much more about the Government. The Opposition will not be in any way considering a change considering a change to the GST.
CLARKE:
David, briefly.
BRADBURY:
He is the only person in the Opposition that has expressed a view on tax, so that's why he was attacked. I have to say that Jamie Briggs has done what so many of his colleagues dare not do, and that is speak and engage on this issue of tax. We heard from Scott a bit earlier with his ACOSS bashing, that when it comes to the interests of particularly those most vulnerable, and that's where Jamie Briggs' policy proposals would hurt the most, there's not a lot of consideration for the impact of tax reform on those people.
CLARKE:
We have to leave it there. That's all we have time for.