GILBERT:
I'm joined by the Small Business Minister and Assistant Treasurer, Kelly O'Dwyer, to turn our attention to tax and the debate. There are other options out there again this morning, the front of the Financial Review has one, The Australian with the other another. I want to look at both if we can. First of all the Financial Review suggesting that taxpayers would pay a 20 per cent reduction on their marginal tax rate for super contributions. That seems to make sense. It's in line with the argument made by Chris Richardson from Deloitte Access Economics. What do you think of it?
MINISTER O'DWYER:
Obviously the Government hasn't made any decisions regarding tax other than to say we need to have a better tax system that is going to be fit for purpose, that is fair, that encourages people to work more and be rewarded for their effort. We've got a system today where the average income earner is going to be in the second highest tax bracket next year. I've got to ask that question, is that fair? Is that working for us? Is that encouraging people to work more? Is that encouraging people to take on that extra day of work? The answer probably is no. We need to look at how we can best design our tax system so it is fit for purpose and encourages our economy to grow…
GILBERT:
…Before we look at the broader tax issue, on super specifically, this is suggesting that you would make this reduction in terms of the tax break for higher income earners on the money going in as opposed to the money that is already there. That essentially those that have saved their money already that won't be touched, it's this idea that you don't have the 15 per cent flat rate across the board. Is that a logical step here?
MINISTER O'DWYER:
A lot of people have been discussing different options and that is one option that has been discussed in the media. That is not the Government's option. The Government is considering what we need to do overall with our tax system. The first point I'd make in relation to our tax system is that we come from the premise where we want to lower taxes, not increase taxes. We need to make sure that we get the mix of those taxes right. When it comes to superannuation, the Government has already taken steps to make sure that those people who are going to be reliant on their superannuation system in their old age are going to be getting the best possible package for their retirement. That means we need to get the governance of our superannuation funds right. There have been two reviews at the moment. The Cooper Review conducted by the previous Government that said we don't have world's best practice when it comes to governance of almost $2 trillion worth of assets which is moving up to around about $9 trillion by 2040 and they said that we need a minimum of one third of independent directors on those boards to make sure that members' funds are protected.
GILBERT:
Obviously that is one element of reform you're undertaking but the big one is the concessions for higher income earners. It's going to blow out to more than the cost of the pension. Would you consider something like a cap on the amount that can be put into a super fund before the concessions are removed, that essentially a couple of million dollars or something to that effect?
MINISTER O'DWYER:
Already there are caps in terms of what people can contribute to their superannuation; there are already concessional caps on what people can contribute. This idea that people can amass multi-millions of dollars in their superannuation funds is just simply not correct, it's simply not correct to say that. We are looking at superannuation overall because we have to make the whole system work, we need to be very clear on our objectives for superannuation. David Murray said in his most recent Murray Review that we need to legislate exactly what we mean when it comes to superannuation and we need to be very clear and he put forward an option that it is an alternative for people from the age pension or even the part-pension. We need to make sure that we get that system right. At the moment we are being thwarted by the Labor Party who are not even prepared to look at better governance reform which is really just an integrity measure. David Murray recommended it, Jeremy Cooper recommended it, ASFA, a number of the consumer groups like Choice are recommending it and yet they are blocking it.
GILBERT:
Let's look at the tax issue that you alluded to earlier and the bracket creep problem - the silent taxes that the Treasurer calls it. If we took the step to lift the consumption tax in order to deal with bracket creep, does that have to happen every time, every time you have a problem with bracket creep do we have to find another revenue stream to deal with it in terms of taxation like an increase in the consumption tax?
MINISTER O'DWYER:
Well we need to look at our tax mix and that is why we are having this broader discussion around tax and having a better taxation system. That is not to increase our overall tax take because I don't think anybody is suggesting that if you put up a GST that that in and of itself is a good thing. I don't think anybody is arguing for that, I haven't heard anybody say that perhaps other than a few State Premiers. What we need to talk about is what are the problems that we actually need to fix and clearly bracket creep is one of those problems that is causing us to hold back growth. It is discouraging people from working and being rewarded for their effort, when you've got the average income earner who is going to be in the second highest tax bracket that is a problem. When you look at the fact 15 years ago…
GILBERT:
Company tax is what the Prime Minister referred to in the Coalition Party Room yesterday he clearly is of the view that that is uncompetitive too?
MINISTER O'DWYER:
When you look at the comparison between us and other OECD countries we have a higher company tax rate. That is why the Government made the announcement at the Budget to actually cut the company tax rate by 1.5 per cent for small businesses, a great boon for small businesses and for those that are unincorporated it is a five per cent tax discount. Already we are seeing the effect of that but do we need to do more? Well a lot of people are arguing we do need to do more in order to encourage growth in our economy and when we encourage growth we are going to overall increase the amount of revenue that the Government will take in.
GILBERT:
And you are not spooked by the scare campaign that is already well and truly underway because of the lack of sort of clarity as to what you are planning?
MINISTER O'DWYER:
I think it is very disappointing that you have got a Labor Party that are not even prepared to engage in this discussion and debate and that are not prepared to actually acknowledge that the Australian people are very intelligent people, they can have this discussion and debate, we need to explore all of the arguments and at that point that is when the Government needs to make the decisions and then take that to an election where people can ultimately decide.
GILBERT:
Assistant Treasurer and Small Business Minister, Kelly O'Dwyer thanks as always.
MINISTER O'DWYER:
Great to be with you.