COMPERE: Well the Federal Government has set its sights on reforming Australia's tax system with the Treasurer Wayne Swan promising reforms to establish a fairer tax regime. In a speech in Melbourne yesterday, Mr Swan identified superannuation tax breaks for high income earners as one area of unfairness in the existing system. Well for more now on what the Government has in mind for taxpayers Marius Benson is speaking to the Finance Minister Lindsay Tanner.
MARIUS BENSON: Lindsay Tanner, Wayne Swan says that the taxation system as it stands is not fair. What's the greatest inequity standing out in your eyes?
LINDSAY TANNER: Oh look I wouldn't nominate any single thing, Marius, I think we've got a real problem with complexity and just the kinds of things that have grown up over many decades of course mean there's a lot of scope there to simplify, to streamline the tax system but what you think about individual taxes very much tends to depend on whether or not you pay them or how much you pay so we've just got a very big long term challenge here for Australia to try and ensure that we get a better tax system that delivers better outcomes for the nation.
MARIUS BENSON: There has been one tax singled out which is the tax on superannuation in that the present arrangements, the present tax breaks that super attracts, very much favour better off people rather than other income earners. Is that an issue that needs to be addressed?
LINDSAY TANNER: This is clearly one of the questions that the tax inquiry needs to consider. It's always been a major problem with any mechanism for trying to encourage people to save is that first you're often rewarding people for doing something that they were going to do anyway and second it automatically tends to favour high income earners who of course have a greater capacity to actually save. But on the other hand of course it is a very worthwhile thing to try and ensure that we maximise the extent to which we save. Australians don't save as much as we'd like. We need to improve our savings performance so there's some very complex issues that need to be dealt with here and so it's entirely legitimate for the inquiry to be considering whether this is the best and fairest way of encouraging Australians to save.
MARIUS BENSON: Speaking of complex issues, what about the state taxes that are gathered at the moment? Do you think it would be a better world, a better Australia tax world if for example payroll tax was uniform across the states?
LINDSAY TANNER: The Government's currently in the process through the Council of Australian Governments negotiating completion of a uniform payroll tax structure so the boundaries of payroll tax and the processing will all end up being uniform across the nation but individual states will still be able to levy different rates. Now it's a matter of opinion as to whether or not that's a good thing. Some people would argue that having the states competing with each other and therefore competing to attract business by having a lower rate of payroll tax is not a bad thing so I think ultimately there's going to be some significant debates here. There are other state taxes which of course are smaller and more obscure that have been the focus of much debate as well. There's some difficult issues to work through on these questions.
MARIUS BENSON: Looking at the overall taxation reform process that Ken Henry's going to report on in just a month or so, is there a guarantee from the Government that tax reform as a whole will be revenue-neutral or could Australians as a result of tax changes pay more tax overall?
LINDSAY TANNER: The key guarantee that's in place Marius is that we will not increase the overall tax burden beyond the level that we inherited when we took office in late 2007 so the proportion of the economy that goes in tax via the Federal Government was 24.6 per cent when we took office. It's dropped very substantially below that as a result of the collapse of revenue from the global financial crisis. It's expected to creep back up a bit over the next few years but still to be significantly below that level. We've made a commitment that we will not allow it to go back over that level on average and that's a commitment that I think you can expect we'll maintain irrespective of where we head on the tax reform process.
MARIUS BENSON: And Lindsay Tanner the latest edition to the Government's economic team is Peter Costello the former Treasurer. Are you glad to have him on your side?
LINDSAY TANNER: [Laughs] Peter Costello was a good appointment for the Future Fund. He created it. He knows all of the details about its activities intimately and because it inevitably has a proportion of its investments in the international arena, his knowledge of the international regulatory environment, of other countries generally is obviously extensive. He's been Treasurer for 11 years. He helped us set up the G20 Finance Minister mechanism. Peter Costello will bring some very substantial knowledge and expertise to the Future Fund board. He's not engaged in making government policy. He's got a very specific function there. Obviously we have many disagreements with Mr Costello over a wide range of issues but he's entirely appropriate to fulfil this function. He'll certainly bring some genuine capability to the board which is already a very strong board and has got a diverse range of very high level expertise on it.
MARIUS BENSON: A couple of days ago Peter Costello announced he was taking up a position in the private sector advising on investments and some people have raised questions is there a conflict of interests between advising on investments and sitting on the Future Funds guardian board where you're involved in investing $60 billion?
LINDSAY TANNER: It is unavoidable if you want to have an expert board on a body of this kind that the people who will be on the board will have other involvements that are broadly in the investments sphere. So if you look across the existing board membership that was put in place by the former government and has been maintained by the Rudd Government you'll see that there are a number of people who are in exactly the same position. That's in effect unavoidable if you want the expertise because by definition somebody who has expertise in financial markets, in investment, and in the activities that the Future Fund is involved in, it is likely to be somebody who's currently got involvements of that kind. The key thing of course is managing those conflicts if and when they arise where there is a specific issue and that's ultimately the responsibility of David Murray the chairman. I have complete confidence in both his integrity and his capacity to deal with any of those issues. It is unavoidable that you are going to get issues of this kind on a board of the nature of the Future Fund in the same way that you can get them on other major boards. The real question is whether or not they're being dealt with properly.
MARIUS BENSON: Lindsay Tanner thank you very much.
LINDSAY TANNER: Thanks very much Marius.
COMPERE: The Federal Finance Minister Lindsay Tanner there speaking to NewsRadio's Marius Benson.
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