PEACOCK:
Treasurer, this new package, in effect you’re saying it’s the States’ GST , that’s a little bit cute isn’t it? You’re giving…
TREASURER:
It’s a reordering of Commonwealth/State financial relations. The States have said for some time they wanted access to growth revenue. This provides it. It means that they have growing revenues. They’re not reliant on Commonwealth Government grants. They’re abolished as a consequence. That allows us to abolish wholesale sales tax and reduce income tax rates, which I think is great for middle income earners.
PEACOCK:
Well now that’s the point of course, you’re financing these income tax (cuts), some of which are quite substantial, pretty generous ones, 43 per cent goes down to 30 per cent for example, but you’re doing that separate from the GST. Where are you getting the money from?
TREASURER:
Well the broadbased GST brings in revenue that isn’t brought in by the wholesale sales tax at the moment. It also brings in a lot of money from the cash economy and it also enables the Tax Office to improve the company tax arrangements so there will be less cheating there. We tightened down in relation to trusts and some of those areas where we think people have been getting unfair advantages and as a result of that we’re able to dramatically reduce income tax rates for middle income earners.
PEACOCK:
And you’re raiding the surplus as well. Is that correct?
TREASURER:
Well the budget will be in surplus right across the forward estimates. Having got the budget into surplus we’re going to keep it there. And we’ve still got our debt reduction program on track. But as I said, I think earlier this week, when your budget is in surplus, when you have a debt reduction plan on track, then you can give tax relief. And this is about tax relief. The average income earner in Australia, who’s on about $38,000 per annum currently is taxed at 43 cents in the dollar. We’re going to drop that to 30 cents in the dollar and that means for 81 per cent of Australian wage earners, they’re not going to pay more than 30 cents in the dollar tax. So if you want to do some overtime, if you get a promotion, the rate of tax that you’ll face is 30 per cent, less than a third. That’s where income tax rates should be.
PEACOCK:
Now you’re doing all that separate from the GST. What’s to stop Labor from doing the same thing without a GST?
TREASURER:
Well if Labor wanted to do the same thing they could have done it in any one of their last 13 years of government.
PEACOCK:
But they still could, could they not? Without a GST?
TREASURER:
Well the Labor Party can’t do the following. It can’t fix Commonwealth/State financial relations. It can’t fix the interplay between income tax and social security. We revamped the whole social security system here as well. Because they won’t introduce a broadbased indirect tax, they can’t crack down on the cash economy. They can’t get the improved compliance in relation to income and company tax that comes from our terrific reforms in relation to the Australian business number. They can’t do any of those things. And this integrated package makes it possible for us to help families and dramatically reduce income tax rates.
PEACOCK:
And how can you guarantee that this won’t, this rate won’t change? I mean you’re passing a law in Federal Parliament, why can’t you rescind that law in Federal Parliament, particularly in an election climate where you’re probably likely to have as equally a hostile Senate the next time?
TREASURER:
But you see if the rate is set by unanimous agreement between six States and two Territories, any one State can veto it. You’ve got to get eight Premiers effectively in a room and get an unanimous agreement.
PEACOCK:
Isn’t it still the Federal Senate though that makes the final decision?
TREASURER:
And then it has to be legislated in addition through the House of Reps and the Senate. Now this is the best protection that you’ll ever get against a tax rise. Eight Premiers in unanimous agreement, plus the House of Representatives, plus the Australian Senate before the rate can go up. Now at the moment of course what stops the wholesale sales tax rate going up? Nothing. This is a fantastic mechanism for making sure that the rate once struck is locked in.
PEACOCK:
And the final question. Everyone’s a winner, who’s the losers?
TREASURER:
Well people who are operating in the cash economy are going to be losers because they’re going to be brought into the tax system. People who’ve been operating fancy tax avoidance mechanisms will be brought in and pay a fairer share. Tourists who are coming into Australia are going to pay a share towards tax here in Australia. And that means the tax burden on decent hard working honest Australians can be reduced and it should be.
PEACOCK:
And is it the end of the family trusts, the sort of Senator Parer trusts?
TREASURER:
Well it’s a mechanism which will make it much harder for people to use complicated trust mechanisms to reduce their just tax liabilities. What we want is lower rates and everyone paying them and that means tax relief for everybody.
PEACOCK:
Treasurer, thanks for joining us.
TREASURER:
Thank you Matt.