HAMISH MACDONALD:
This is RN Breakfast. There are calls for radical changes to our tax system, including an increase in the GST, following the dark forecast contained in the latest Intergenerational Report, which predicts a bigger, poorer and more heavily taxed nation than we are today. The former Treasury boss, Ken Henry, describes the situation as an "intergenerational tragedy," and is calling on the government to urgently fix the tax system which overwhelmingly benefits older asset‑rich Australians. While the government has so far ruled out anything more than modest changes, Teal MPs are coming together today, calling for a more ambitious approach.
Stephen Jones is the Minister for Financial Services and the Assistant Treasurer. Good morning to you.
STEPHEN JONES:
Good morning. Good to be with you, Hamish.
MACDONALD:
The Intergenerational Report, as you know, shows a ticking tax bomb awaiting younger generations and, interestingly, over the weekend the Treasurer, Jim Chalmers, said that one of the measures your government is taking to address this is the Stage 3 tax cuts. Can you explain that?
JONES:
Well, the Prime Minister made a promise before the election and there’s been no change to our policy. On the Intergenerational Report – important thing to say here: it paints a story of what will happen and what will unfold over the next 40 years. It’s not the only story. It’s a warning to government and the population of the challenges, but also the opportunities we face. And yes, revenue is an issue, but we’ve also got a lot of things going our way. Our superannuation system, for example, is ensuring that we’re going to be smoothing the cost of retirement and ensuring that people have a longer, wealthier, more dignified retirement and without that, the pressure on the budget would be unbearable.
That’s just one example of the measures that we are taking to improve and ensure that we take a burden off future taxpayers. This government and other governments will have other challenges we’ll have to face too.
MACDONALD:
Respectfully, though, I’m not sure that quite answers the question. How do the stage 3 tax cuts deal with this intergenerational tax bomb, as it’s been described?
JONES:
Well, income tax is just one part of the overall tax and revenue system. We’ve also got a bunch of other areas that we’re focused on over the first term of this government. And we’ve made it quite clear that our priorities – multinational tax avoidance, ensuring we have greater compliance with the existing tax laws before we go to Australians and say, “We think you need to pay more.” I think every Australian needs to know we have got high levels of compliance with the existing laws. So, multinational tax avoidance, ensuring we have high levels of compliance – they’re our priorities right now. They’re our priorities right now.
MACDONALD:
I think we can all hear – I think we can all hear that you’re trying to take this conversation in a different direction, but I’m interested in this question of what’s being left for younger Australians. I mean, the stage 3 tax cuts will benefit largely those earning over $120,000, particularly those on more than $180,000. How many young people do you know that are going to benefit from those cuts?
JONES:
Very, very few. Stage 3 tax cuts benefit everybody over $45,000 a year – and before you jump into it, yes, I know the greatest benefit flows to the people on the highest income. No doubt about that, and ‑
MACDONALD:
So what are you doing to make life better for these younger Australians that are going to be paying this huge slice of the tax burden over the next 40 years? I mean, you’ve read the report. You’re acknowledging the problems. I’m just wondering what you’re actually doing as a government to help this generation.
JONES:
I don’t think anybody could look at what we’ve done over the last 14 months, Hamish, and say that we’ve been inactive on any area of policy. You’ve asked me what we’re doing in relation to improving the lot for younger Australians. Well, they’re the ones who are going to be inheriting the planet in 30 and 40 years’ time. Ensuring that we take meaningful action on climate change, ensuring that we transform our energy generation and transmission system, ensuring that we are fixing our higher education system, the work that Jason Clare’s doing on that – these are all measures designed to benefit young Australians. Yes, the tax system is a part of that.
MACDONALD:
Do you think it’s fair –
JONES:
Yes, the tax system is a part of that and we’ll –
MACDONALD:
Do you think it’s fair, minister, that they will pay the largest slice of the tax burden and at the same time probably won’t be able to afford to buy a home? Do you think that’s fair?
JONES:
Actually, I’m not quite sure where you get the claim that they’re going to pay the largest slice of the tax burden. We have a progressive tax system which ensures that the highest‑income earners pay more as a proportion of their income in those tax brackets than low‑income earners. So, nothing is going to change –
MACDONALD:
But what we're talking about ‑
JONES:
I’m just going to have to pick you up on your claim that younger Australians are going to pay the highest burden. That’s simply not true.
MACDONALD:
Well, over the next 40 years, they will be the generations that are paying the tax burden as Australia’s population ages. That’s what we’re talking about. That’s what the Intergenerational Report points to.
JONES:
Sure. And all of that assumes nothing changes over the next 40 years and, of course, there will be changes over the next 40 years. To your question on the stage 3 tax cuts, there’s a bunch of things that are involved in there. A whole heap of it is about bringing forward the bracket creep that has and is likely to occur over the next five to six years. So, a lot of talk about the stage 3 tax cut. A whole bunch of it is about bringing forward and addressing the bracket creep, which is a normal part of decision‑making over successive governments over the last 30 or 40 years.
So, do we constantly review our tax settings? Absolutely. But what are our priorities at the moment? Our priorities are multinational tax avoidance, improving compliance with the system, ensuring that we get a better take from tobacco excise, for example, ensuring we have stronger compliance with these areas. These are our priorities at the moment. Future things we’ll look at down the track.
MACDONALD:
So, that’s a no to considering any increase in the rate or changing the base of the GST?
JONES:
Sorry, that is not a part ‑ and the Prime Minister has made that quite clear ‑ that is not a part of our current plans.
MACDONALD:
This morning you’re announcing, Minister, the government will terminate the Modernising Business Registers program. It was supposed to create a single platform for businesses to register through a complex system, but the design or the idea was to make it easier for business. Does your decision to scrap this make it harder for business?
JONES:
No, the business experience won’t change. This is a story of negligence and incompetence. In 2019, we were promised a new modern system. It would be delivered in four years and it would cost $480 million. We’re four years down the track. We’re no closer to the completion of this program. We’re now told that the actual cost of this program is something to be more likely in the vicinity of $2.4 billion, so that’s five times what we were originally promised, with no certainty about date completion and no certainty that that will be the final bill for the cost of this program.
No serious government could countenance burning $12 million a month on a program with uncertain parameters and uncertain delivery dates. We simply cannot do it. We want to ensure that we have a stable, quality business registry system, but what the previous government has done is fit Australian businesses up with a dream that could never be delivered. They misled the Australian people. One of the first things that I was told when we came back into government was there were significant blowouts in this program. The previous government either knew this or was so incompetent that they didn’t ask the basic questions, and now the Australian taxpayers have been burning $12 million a month on a program that cannot deliver.
MACDONALD:
Of the money that’s been spent so far, are you able to tell us how much of that was spent on consulting firms?
JONES:
The majority of it. So, one of the findings of the review that I will be publishing today is one of the reasons for the cost blowouts is over‑reliance on consultants and external labour. At its height, employing over 500 people, a significant proportion of those being contractors and consultants – cost blowouts going through the roof. This is a program out of control. The previous government either knew it or should have known it and did nothing about it.
MACDONALD:
Can I clarify? When you’re saying the majority of the money spent so far was spent on consultants, what quantum are we talking about? Hundreds of millions of dollars?
JONES:
The cost of the program so far, around about $480 million. A proportion of that directly engaged employees. A significant proportion of that, outside contractors and consultants and service providers. We use the word “consultants” as shorthand. It will be IT service providers, it will be advisers. It will be the whole grab bag of external labour providers. And that is a significant part of the reason why this program is out of control and off schedule.
MACDONALD:
Do taxpayers have anything to show for those hundreds of millions of dollars that were spent?
JONES:
The silver lining in all of it is that the Director ID program, something that this government supported until the completion of in July this year, will now mean that we have a universal director ID system. What that means is that the regulators have a stronger capacity to chase down phoenixing and poor behaviour by directors ‑ to ban directors, to identify directors, to ensure that dodgy directors don’t phoenix and then start up and again and do the whole heap of – all the bad things they’ve done in the past without detection by the regulatory authority. So, yes there has been some uplift.
But let’s be clear, this was supposed to deliver the consolidation of 30 registries. It hasn’t done that. It can’t do that. We’re not going to stand by and see $12 million of taxpayer money frittered away on a program that cannot deliver what it was promised.
MACDONALD:
This is part of what ASIC does and one of the criticisms has been that ASIC essentially has too broad a brief and not enough resource to deliver on that. ASIC’s shortfalls are pretty well‑known. A 2014 Senate inquiry found that it appeared to miss or ignore clear and persistent early warning signs of corporate wrongdoing. Then obviously, in 2019, the banking royal commission was scathing of ASIC. I mean, the piece that you’re talking about today is a pretty small part of what ASIC does. Are you committed to implementing the findings of that Senate inquiry to broader reforms of ASIC?
JONES:
Let’s be clear: this program was transferred by the former government from ASIC to the Australian Tax Office, so whatever criticisms people may have of ASIC or its performance, this cannot be one of them. This was transferred to the Australian Tax Office to manage and deliver. And one of the findings of the independent review was that transfer of function has led to a breakdown in governance and communication, which has added cost and complexity to the system.
About ASIC and its role, it’s got a tough job, let’s be clear. It’s got a very tough job and it’s got the broadest remit of any corporate and financial service regulator in the world. Everybody’s got an opinion on how it should perform and how it should do its functions, but one of the things that this government is adamant is we have an independent regulator. We don’t try to do the regulator’s job for them and if there are adjustments that need to be made to the structure and the way the regulator does its job, we’ll do that. We’ll do that on the basis of evidence. But we are not going to sit here in the role of the – we are not going to sit here in Parliament and do the job of the police force or the corporate police force or the corporate regulator. That’s why we have independent institutions and we respect them.
MACDONALD:
Stephen Jones, thanks for your time this morning. Appreciate it.
JONES:
Good to be with you.