PETER STEFANOVIC:
Let’s return to Canberra now and talk about one of our top stories – and that is the stage three tax cuts and whether or not they’re going to go ahead. Joining us live is the Assistant Treasurer and the Financial Services Minister, Stephen Jones. Minister, good to see you. Thanks for your time this morning. So, are you walking away from the stage three tax cuts?
STEPHEN JONES:
No, we’re not. We’re obviously trying to frame a budget in a very difficult set of circumstances – the trillion dollars’ worth of debt that we inherited, significant pressure in the budget over the forwards in the areas of defence, the national disability insurance scheme, health care, aged care and, of course, the interest payments on that trillion dollars’ worth of debt that are going up and up and up. So, if that wasn’t enough, very, very rocky international environment with the US and Europe looking like they’re slipping into recession. Big troubles in China as well as they continue to chase COVID‑zero. So everywhere we look, it’s trouble, it’s difficult, but that’s the job we’ve been given – framing a budget in these very difficult circumstances. We’re looking to ride through these difficult set of circumstances and set Australia up for the medium term. That’s our job.
STEFANOVIC:
Okay. Well, that’s a negative tone that you’ve got there. Does that mean you will at least amend those stage three tax cuts?
JONES:
Look, you say it’s a negative tone, but I’m actually optimistic about the medium term. I’m deeply concerned about the impact that high inflation is having on household budgets. We know that the independent Reserve Bank has got a strategy to bring those down, and that’s what’s behind the interest rate rises. But as a government, we’ve got to focus on ensuring we don’t make the situation worse and we have a strategy for the near term.
STEFANOVIC:
Okay.
JONES:
Now, you asked me about the tax cuts. We said – we announced our disposition on those, our policy on those, before the election. And that remains our policy.
STEFANOVIC:
Sounds like there’s going to be some movement in that area, though. So can you rule out at least amending them?
JONES:
What I’ll rule out, Pete, is ensuring that we don’t add to or make a bad situation even worse. We have got to deal with the cards that we’re dealt. We’ve got to ensure that as we’re putting together this difficult budget we don’t make a bad situation worse.
STEFANOVIC:
Okay.
JONES:
So that’s what we’re looking at. The Expenditure Review Committee is meeting every day this week and into next week as well. We’ve got a tough job ahead and that’s the job we’ll be doing.
STEFANOVIC:
It sounds to me from those answers, though, and Jim Chalmers’ answers yesterday, that you’ve got your eyes on those stage three tax cuts.
JONES:
We’ve got our eyes around repairing the budget, ensuring that we don’t make a bad situation worse and ensuring that we try and put some sustainability into the budget moving forward.
STEFANOVIC:
Okay, right.
JONES:
That’s our job.
STEFANOVIC:
So you won’t leave them as is?
JONES:
Pete, you can ask the question a dozen different ways, mate, and I don’t blame you for that. But you’ll forgive me for answering it in the same way. We’ve got a tough situation. I’m not making budget announcements here on your program, as much as I enjoy your conversations.
STEFANOVIC:
Okay.
JONES:
We’re going through the budget planning process now as we speak.
STEFANOVIC:
Would you be prepared to break an election promise if you have to?
JONES:
Look, I’m not even going to contemplate that, Pete. We’ve got to deal with the situation that confronts us here and now. So I don’t want to get into a speculation situation.
STEFANOVIC:
Okay.
JONES:
We’re doing the planning around all the challenges that we have here at the moment. And, of course what’s gone on in the UK over the last week is very much in the front of our mind.
STEFANOVIC:
Okay. I’ll get to that in a sec. But have any divisions within the Labor Party emerged over stage three tax cuts?
JONES:
One of the good things about the Labor Party is there’s lots of really bright people with strong thoughts and opinions. You’d be surprised if there wasn’t differences of opinions on just about every issue. But one thing we’re united on is ensuring that we hand down a budget that looks after the interests of Australians and doesn’t make a bad situation even worse by adding to the flames of inflation.
STEFANOVIC:
Right, okay. Is it true the reports suggesting that the right of the party don’t want the stage three tax cuts changed, but the left do?
JONES:
This is not a left-right thing, mate. You’ll find strong opinions on this on every side and every different flavour. And in my experience of our party over in excess of thirty years, mate, those sort of left and right things really don’t hold up when you’re dealing with difficult and challenging economic policy questions. They don’t normally, and they don’t today on this issue.
STEFANOVIC:
Okay. You referred to this over in the UK. The new leader, as you know, binned her tax cuts which refreshed this whole argument. Isn’t that a false comparison, though, as the UK’s was centred on its highest tax bracket?
JONES:
Look, of course there are differences between the situation that they face in the UK and the situation that we face here in Australia. But there are some similarities, too. We’ve both got budgets in deficit, we’re both trying to tame the inflation beast, and we’ve both got structural deficits reaching out over the decade, and we have to implement policies that are going to reign in the deficits and bring the budget back into structural stability.
STEFANOVIC:
Okay.
JONES:
We’re not there yet, and that’s what the story that the Treasurer will tell and the policies we’ll implement in a few weeks’ time will be all about that, Pete.
STEFANOVIC:
Okay. Well, another potential change that’s being mooted – franking credit system. Are changes to the franking credit system back on?
JONES:
We’ve got a piece of legislation out for consultation at the moment. Important thing about this legislation is it’s actually the policy of the former government. It was announced in 2015, initially drafted and circulated in 2016-17, a part of their mid-year economic and financial outlook. Like so many things, they talked about it but never did it. It’s about tax integrity. That’s what it’s about. It’s ensuring that franked dividends are used for the purpose they’re intended, and that is ensuring that people don’t get double taxed. They’re not about allowing companies to use them as an asset effectively to - in a washing machine of capital movements - to raise new capital using franked dividends essentially as an asset.
STEFANOVIC:
Right.
JONES:
They’re not about that. The Tax Office warned about it in 2015. The former government said they’d do something about it in 2016. We are going to do something about it. We’re consulting with the affected stakeholders at the moment.
STEFANOVIC:
Okay. I mean, already – and I know this is very complicated for people following this particular angle at home, so I’ll keep it brief – but, I mean, there’s already been blowback from thousands of shareholders.
JONES:
Let me explain it to people.
STEFANOVIC:
Yeah.
JONES:
I think you’re right, Pete. Let me explain it really simply: franked credited dividends are about ensuring that mum‑and‑dad shareholders don’t get taxed twice. If the company has already paid tax, then mum‑and‑dad shareholders shouldn’t pay tax on that when they get a dividend adding to their annual income. So there’s a tax credit there to ensure that mum‑and‑dad investors don’t get taxed twice. Franked dividends are not about enabling a company to say, “Oh, well, we’ve got some of those franked dividends we haven’t distributed. Let’s use those for a new capital-raising, so that we can get new capital in the company effectively free by using that franked dividend as an asset.” That’s about – that’s not about ensuring removing double taxation. That’s effectively using franked dividends for a purpose they were never intended. So this is about an integrity measure to ensure that every taxpayer is paying no more but also no less than they are supposed to.
STEFANOVIC:
Okay. Just a quick answer here to wrap up, Steve: and so critics want a deadline for submissions on an exposure draft extended. Are you at least open to that?
JONES:
Look, this has been out there since 2015, Pete. Do we want another seven years? Is that what – look, frankly, the –
STEFANOVIC:
Okay, that’s a no then.
JONES:
The critics don’t want this to happen. That’s the honest answer. They don’t want it to happen. We’ll consult genuinely but not endlessly.
STEFANOVIC:
All right.
JONES:
And we’ll listen seriously to the stuff that we’ve got back on the exposure draft.
STEFANOVIC:
Stephen Jones, good to have you with us, as always. We’ll talk to you soon.