Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
FRAN KELLY: Mathias Cormann is the Federal Finance Minister and Deputy Government Leader in the Senate. Mathias Cormann welcome back to Breakfast.
MATHIAS CORMANN: Good morning. Good to be back.
FRAN KELLY: I will come to the banks in a moment. Let us go to Bill Shorten’s Budget reply speech and his announcement that Labor will shield low-income earners from the increase in the Medicare levy, you will hit them. Is it fair to jack up taxes on someone earning $22,000 a year?
MATHIAS CORMANN: It is precisely what Julia Gillard and the Labor Government that Bill Shorten was part of did some years ago. The thing when you apply a percentage on people’s income,, a 0.5 per cent percentage, the higher the income, the more you contribute, the lower your income, the less you contribute. For those Australians on very low incomes, they are completely exempted from the Medicare levy. So yes we believe…interrupted
FRAN KELLY: $22,000 is pretty low.
MATHIAS CORMANN: Well it is $36,500 for families with a further $3,500 or there abouts in additional threshold for every child. The point is, the lower your income, the less you pay, the higher your income, the more you pay. That is a fact. That is how it works when you apply a percentage. This is precisely what Labor did. What we got from Bill Shorten last night was just a lot of cranky political rhetoric, but there was no plan for economic growth, there was no plan for more and better paid jobs, there was no plan to get the Budget back into surplus in a reasonable timetable. And certainly, there was no plan to fully fund the National Disability Insurance Scheme, which we are committed to achieve.
FRAN KELLY: Well there was a plan, it is just one you do not like. I mean we had Bill Shorten on this morning…interrupted.
MATHIAS CORMANN: Well there was not actually.
FRAN KELLY: Let me just tell you because I asked him this specifically this morning. His plan is the combination of a limited Medicare rise for the top two tax brackets, those in those brackets and maintaining the Budget repair levy, the 2 per cent tax levy that the higher income earners pay currently. He says that would generate almost $4.5 billion more than your plan for the across the board Medicare rise.
MATHIAS CORMANN: Well Bill Shorten is dishonestly misleading the Australian people. If he was telling the truth he would release the Parliamentary Budget Offie numbers over the forward estimates, not just giving us Budget figures over an 11 year period. Incidentally, he is spending the money, the revenue that he says he will raise from making the tax increase on Australians earning more than $180,000 permanent, he is spending that money now a second time over. That is just not the way it works. That is why Labor gets our Budget into such a mess every time they get into Government.
FRAN KELLY: Have you done a back of an envelope costing on how much the Medicare levy just on the top two brackets and keeping the Budget repair levy would cost? Would raise?
MATHIAS CORMANN: Our numbers are in the Budget forward estimates and the Medicare levy proposal that we put forward will raise $8.2 billion over the forward estimates. But what we know is that Bill Shorten’s proposal to permanently increase personal income tax rates, he has already spent in the lead up to the last election. This was part of his pre-election costings in the lead up to the last election when he actually had to fess up to $16.5 billion in bigger deficits over the forward estimates. Yesterday he did not commit himself to bring the Budget back into surplus by 2020-21. His numbers do not add up. The deficit would be worse, debt would be higher.
FRAN KELLY: Well the Government had quite a confessional concession yesterday. That the money raised, the money spent rather, cost of the corporate tax cuts will be over $65 billion over the next ten years. $15 billion was added in one year, the eleventh year of your enterprise tax plan. How much is this going to cost in the twelfth year or the thirteenth year? Is this just going to keep going up and up this cost?
MATHIAS CORMANN: Well this is not a confession. If you reduce tax there is an ongoing impact and the impact is that we will be able to attract more investment, boost productivity, generate more jobs, better paid jobs because businesses across Australia will have the opportunity to be more successful, more profitable, hire more Australians and pay them better wages.
FRAN KELLY: You better hope so, $65 billion in business tax cuts. That is a lot to give away.
MATHIAS CORMANN: The problem is and Bill Shorten just does not seem to get this. He used to but he no longer does. He is the flip flopper extraordinaire. We have the United Kingdom going down to a corporate tax rate of 17 per cent, they are already down to 19 per cent. We have the United States going down to 15 per cent. We need to protect our economy from losing investments to lower tax jurisdictions all around the world. Our corporate tax rate is very high by international standards now at 30 per cent. Our proposal to reduce it to 25 per cent for all businesses over a ten year period is fair, it is reasonable, it is proportionate and it will help us secure jobs, it will help us boost jobs, it will help us ensure that businesses across Australia can hire more Australians and pay them better wages.
FRAN KELLY: Well the banks, they are suffering a tax increase. You heard Ian Narev there earlier from the Commonwealth bank, he says this $6.2 billion increase will be passed on ‘either prices go up or shareholders get less, there is nothing in the middle.’ How exactly will our banks be made stronger and fairer, which is the Treasurer’s claim if the cost is shoved through to customers and or shareholders.
MATHIAS CORMANN: Well firstly, the major bank levy is a bipartisan levy.
FRAN KELLY: Of course it is.
MATHIAS CORMANN: You know that both major parties support it and it will become law. That is because there is broad community support for it. The second point is yes of course, we do want strong and profitable banks and we do have strong and profitable banks and the very significant reason why we do have strong and profitable banks is firstly, because we have a very sound and strong and robust regulatory system. We also have the implied Government guarantee, taxpayers effectively provide the underwriting of last resort for those banks that are too big to fail. This is a reasonable contribution for the major, very profitable banks who generate more than $30 billion a year in after tax profits to make towards Australia’s Budget repair efforts.
FRAN KELLY: How reasonable is it and how much of is it just a tax grab. Because the banks were told yesterday by Treasury officials that they will have to cough up $1.5 billion a year regardless of how this tax is structured and Treasury apparently could not tell them yet how this tax is structured. It sounds like nothing more than a cash grab.
MATHIAS CORMANN: Do not believe everything that someone who does not want to pay more tax is telling you.
FRAN KELLY: They are lying? They were told?
MATHIAS CORMANN They were provided very straightforward explanations on the levy that applies in a very simple and straightforward fashion. There is nothing complicated about this. It is a very straightforward proposition. Yes, it will be $1.5 billion per year out of more than $30 billion in after tax profits.
FRAN KELLY: Mathias Cormann thank you very much for joining us on Breakfast.
MATHIAS CORMANN: Always good to talk to you.