31 March 2015

Institute of Public Affairs Q&A

HOST:           

Thank you Treasurer, while the microphone comes to the front for me to moderate the Q and A can I just say thank you very much for such a thought provoking address. I can assure you I have certainly heard of ASOS. I think my wife is responsible for at least one of those planes each week but this is the wonderful world that we live in where services are coming from all around the world and in our – in the IPA's view – fantastically without tax. But we'll resolve that later on. So, ladies and gentlemen, now is the time of the function as the great New Yorker cartoon says we will have shorter speeches disguised as questions. If you are going to make a speech please make it very short because the Treasurer's time is limited and we want to get through as many as possible. I know the first question is from a great friend of the IPA, Professor Ian Plimer

QUESTION:

For the Roy Hill iron ore mine in the Pilbara of Western Australia, excluding safety and sensitive environmental issues and aboriginal matters, some 4000 permits were needed to create thousands of jobs, which didn't previously exist. So, what's the Government going to do about reducing the costs and reducing the number of approvals, permits and licenses that contribute to the Pilbara being the highest cost mining area in the world?

TREASURER:          

Well, Ian it might surprise you but you're not the first person to raise that with me. Starting point is we got rid of the Carbon Tax and we got rid of the Mining Tax. The Carbon Tax was a tax on mining and economic activity and the Mining Tax of course was taxed on iron ore and despite Wayne Swan's best endeavours to destroy the industry, we've removed it. In addition, we've removed now 17,000 pages of regulation and legislation - 17,000 pages in 18 months. That's pretty good. I think that's a good start, there's more to do. Simplicity is the key. The third key factor is we've got to reform the Federation because a lot of those permits are in fact state permits or in some cases local government permits and the Prime Minister has started in conjunction with our tax paper, a reform of the Federation and now that we've got state elections out of the way – thank goodness, we can hopefully get everyone to cast aside their political biases and have a fair dinkum discussion about the Federation; how we can remove overlap – not reduce it – remove overlap and ensure that we can have greater simplicity that empowers individual Australians and let's them gets on with the job of making money.

HOST:

Question just up the back there, no? Fine. I know Chris had one, where's Chris, he was waving at me before. Sorry Chris, there you go.

QUESTION:

Yes, first of all, on what Ian Plimer said – I was the very first person to go to China to sell iron ore in 1972.

TREASURER:

Good on you.

QUESTION:

So, that's started something.

TREASURER:

It did it sure did. Can you get the prices up? Can you go back – I'll pay for your trip to go back if you can get iron ore prices up.

QUESTION:

Unfortunately that won't happen. They're still about four times what I was selling it for. The question I wanted to ask was tax fairness; In business, people who pay tax also end up being lumbered with not only the problem of preparing it but actually paying FBT. The thing that upsets me about FBT is that if we have to do it and we understand the Government needs money, why do we the people who drive the economy have to cover the cost of FBT and the not-for-profit section, which includes its trades [inaudible] doesn't? And I think that it's unfair that we as providers of the productive part of the economy have to cover the cost of FBT and those people in other areas – and I know that because I have friends in the not-for-profit sector and they always delight in telling me how they're able to organise their affairs.

TREASURER:          

I must say FBT is one of the most – not complicated taxes – but it is complicated from a compliance perspective and small business – and I come from a family of small business people – small business people rip their hair out trying to deal with the complexity of FBT. This is something – it's the first time in this tax discussion it's been raised. I warmly welcome it because I would love to have a much simpler FBT regime. We still have to raise it as you quite correctly point out, but there must be a simpler way of complying with it and it's something that we've been putting a fair bit of work into for our small business package which we're working on at the moment. We can only make incremental steps in a sense. We need a holistic approach to dealing with the reduction of red-tape in FBT and it's something I certainly want out of this tax paper.

HOST:           

There's a question on the aisle over there. [inaudible]

QUESTION:

Just a quick question – what are the benefits to taxpayers in ongoing retention of the ABC by the Government?

TREASURER:

Well there will be – there's no upside of answering this really. You’re from the ABC? You know, it employs a few people in my electorate and a lot of people in my electorate actually watch it. And look the ABC does provide an important service. We will from time to time have our differences with the ABC, as I might say we have our differences with other media organisations and some more vigorously than others I must say. But it does provide a hugely important service in a number of areas, I think particularly in radio in country areas. The ABC does a very good job – and it does in newsgathering. Now, everyone will have their grievance about the ABC and about different parts of it but frankly it's going to be around for a very long period of time. Now, just in case you get carried away, people say why don't you privatise it? It actually runs at a big loss and I've never seen anyone that wants to buy a company that runs at a big loss. So, it's not going to be privatised – in case you missed that, it's not going to be privatised – I speak directly to this audience, it's not going to be privatised and the ABC will be around for a long period of time.

HOST:

I think we've got time for two more. One in the aisle here.

TREASURER:

Sorry to disappoint the audience I might not get out of here safely.

QUESTION:

In England they've just passed, or is about to bring in about the diverted profits tax. I'm wondering why especially on the comments you made about planes landing etc, I buy a lot of stuff from Net-a-Porter, I buy a lot of stuff from Amazon – yes I use the internet, I usually keep it below $1000 for all the obvious reasons, sometimes I can't. However to me, that stuff's like pickpocketing when you've got so many overseas companies not paying tax. Nothing annoys me more to see any international company or anyone putting their hands in the cookie jar and taking out cookies for free. Now, I'm just wondering why we haven't really got to grips with this and brought in, if nothing else, a tax on turnover. I don't care what the percentage is, it could be worked out to be very fair or reasonable, it would be even fairer or reasonable for Australian businesses if it would capture every dollar that somebody spends in Australia. For example, in your speech you mentioned Uber; I would clobber Uber for every dollar of turnover they did. I would clobber Airbnb for every dollar of turnover, Net-A-Porter, all of them. Why can't we do that?

TREASURER:          

Well, the first thing is you know, this illustrates a challenge we have going forward, and it is the mobility of money. Now, we should celebrate that. For those people that believe in enterprise and freedom should celebrate the disruptive activity associated with new technology. I mean, anyone that has a licence today is seeing the value of the licence diminish, whether it be in broadcasting or taxis or banking – even banking – because of new technologies that enable money to move more freely outside of the regulated system. So, governments regulated for yesterday's economy. Governments actually are more and more constrained and government regulation is going to have less impact on tomorrow's economy – much less impact. So that from my perspective, I much prefer to empower consumers and have smaller Government. That's what I've always believed in my core. Having said that, you are absolutely right; everyone that earns a dollar in Australia should pay tax in Australia. And one of the challenges we have is that if they locate offshore and sell a product, particularly intellectual property into Australia, the question is how do you tax it? They say well we're supplying the product from overseas – no tax jurisdiction so [inaudible] and is the Australian consumer going to voluntarily say well I'll pay tax to the Government, no. So, how do we manage that? We need to get all the countries to agree on a fundamental principal, and that is that you pay tax where you earn the money. And Tony Abbott to his enormous credit started that when he first got elected in Davos, and then we led it in the G20. So, now the G20 – even the Americans have said we accept the principal – and most of the companies are American, and they pay tax in America but they don't pay tax in America on the worldwide profits. So, what we've all agreed in the G20 led by Australia is that everyone comes together and closes the loopholes, and that's exactly what we're doing. And in the case of the United Kingdom, I've been speaking to George Osborne quite regularly about this issue, which he calls the Google Tax. We do not want to be an outlier, because if one goes unless everyone goes then you're not going to have any impact. Having said that we have been working on some initiatives including new legislation, but importantly I asked the Commissioner of Tax to embed people from the Tax Office in those businesses operating in Australia to understand their business model. And because of that embedding we now understand how they make their money in Australia, and now can appropriately formulate the way to tax it for that activity in Australia. So, we're working on it, we are determined to do it. I see people who do not pay the legitimate level of tax in Australia as thieves. You described them as that; taking cookies from the jar without paying for them. Well, I see that. Because ultimately it means you pay more tax than you should, and I think that's unfair. That's unfair. So, we're on to it, and there's more action to come.

HOST:           

Just one last question up the back, over there.

QUESTION:

Treasurer, Steve Wright, Energy Resource Information Centre. I want to ask you a question about natural gas extraction; it's been a topic in the New South Wales state election. The Prime Minister's made big comments on the export potential that's coming out of Queensland now. My question is about what the Coalition can do, because as Barnaby Joyce found on Sunday, there's a fair bit of pressure on National Party MPs in parts of the country who are doing what they can to prosecute two points, which are the leading misconceptions pushed by activists. And that is one, that agriculture and natural gas extraction can't coexist, which is wrong, and number two, that the risks to aquifers and so on are grossly overstated. Is there anything the Coalition can do to try to help to get a better understanding of the science and the fundamentals in this area?

TREASURER:          

Well, this might not be popular, but I start by laying the blame at the feet of a lot of companies that started – by looking at ways to get access to farmers' properties without properly paying them for that access. Certainly in comparison with the United States where there is a different law. But what happened was, the farmers said, well, if I'm giving up this agricultural land and you're giving me this much money, and in the United States they're getting this much money – then hang on, we're paying a big price. So, automatically, at the very beginning, the debate was polarised. And there was an enormous loss of goodwill from farmers very quickly – very quickly. And then Government was expected to step in on behalf of those extracting the resources, because the state governments are the ones that obviously control the land use – and basically argue against their own constituents. And that's why it ended up in tears. It ended up in tears, particularly in Queensland, under the Newman Government. But also it was a major threat in New South Wales. So, the first thing you've got to do is bring everyone together. The second thing is where it is precious agricultural land and there is a potential threat to the environment, the precious agricultural land has precedence. It has precedence. And the best managers of land are the farmers. They know what is a threat to the land. They know what is a threat to the environment. The best environmentalists in Australia are farmers. And you know, from my perspective – so ultimately it is going to be up to the companies. Don't pass the buck to Government. It's up to the companies to work with the farmers to get the best outcome for the land and the best outcome in terms of use of energy. Now, we need the energy from our soil. We need the energy, because ultimately we are a very significant exporter of energy, but importantly, that export of energy helps to lift living standards all around the world and makes us much richer along the way. It can also make the farmers richer. But we've got to get the environmental balance right and I trust the farmers in that regard.

HOST:

Treasurer, thank you very much.