Sky News - AM Agenda with Kieran Gilbert

Senator the Hon Mathias Cormann
Minister for Finance






Iraq, Budget, Tax obligations of multinationals

KIERAN GILBERT: One of the members of the Cabinet, the Finance Minister Mathias Cormann, Senator Cormann, thanks for your time. I guess you’re not going to pre-empt the Prime Minister either. But in the broader scheme of things it is not entirely a surprise that Australia would team up with New Zealand as part of an effort to bolster the Iraqi forces. 

MATHIAS CORMANN: Australia has been involved for some time now in a very important mission in Iraq, international efforts to fight the ISIL threat. It is an evolving situation. We continue to be engaged in regular conversations with our friends and allies around the world and also with the Iraqi Government. No doubt, if and as announcements are to be made, they will be made by the Prime Minister and the Defence Minister. 

KIERAN GILBERT: As I understand it, the Prime Minister will take it to the party room this morning. We will have full coverage of that story right throughout the day. On to matters of your responsibility, the Business Council of Australia are suggesting that there would be a 10 year plan in the Budget, not short term fiscal tightening. This is quite a shift from the peak business body? 

MATHIAS CORMANN: We agree with the Business Council of Australia. In last year’s Budget the situation we inherited from our predecessors, the 10 year trajectory that we were on, was to $667 billion of Government debt and rising. As a result of the decisions that we have made so far we have been able to reduce Government debt within the decade by nearly $170 billion and falling beyond that. So we totally agree that the focus ought to be on putting Australia on a stronger foundation over the medium to long term. If we were to continue to add to debt it would over time detract from economic growth as rising public sector debt crowds out private sector investment. So from our point of view, that is exactly what we are trying to do. 

KIERAN GILBERT: Has enough been done in the Budget I guess, in the context of $170 billion that you referred to across the decade yet we also have to consider the $116 billion I think it is that has not passed according to the Parliamentary Budget Office, that’s how much the measures that have been blocked in the Senate would have saved over the next 10 years.  

MATHIAS CORMANN: We have made significant progress. We are in a much stronger position now than what we would have been if we hadn’t progressed some of the savings we have progressed so far. Again last night, another $740 million in savings were ticked off by the Senate. The last sitting week of the Senate, $1.3 billion savings were ticked off. So bit by bit we keep adding up to it. But you’re right, we have got to continue to press ahead, to ensure that we are on the best possible trajectory for the future, so we can strengthen economic growth, create more jobs and to make sure that help for families, Government help for families is affordable and sustainable over the medium to long term. 

KIERAN GILBERT: But are you going to move forward I guess with a concession that those savings, upwards of $110 billion over a decade, that they won’t eventuate. So you have basically got to start from where you are now in a political sense, and all of that gets basically, a concession you’re not going to secure that? 

MATHIAS CORMANN: I don’t agree with that blanket statement at all, because if you look at the way things have been progressing since the Budget, we progressively have implemented saving after saving. About $10 billion in savings connected to the repeal of the mining tax, $50 billion of savings over the decade and we have added, every sitting fortnight, we have added more savings to it. As I mentioned last night another $740 million worth of savings were passed by the Senate with the passage of the Tax and Superannuation Laws Amendment Bill No 5. We will continue to press ahead. Some things, some of the more difficult structural reforms, will continue to be subject of a national conversation I am sure, about the best way forward and there may be an adjustment here and an adjustment there and these announcements will be made at the appropriate time. 

KIERAN GILBERT: Is it fair to say it will be more incremental now from the next Budget, the next Hockey Budget? Is it incremental as opposed to the big cuts, because that seems to be what Jennifer Westacott and the BCA are suggesting?

MATHIAS CORMANN: With the benefit of hindsight, the Prime Minister, the Treasurer and myself, we have all said it, there is no doubt that with the benefit of hindsight last year we tried perhaps to do too much at once. We tried to bite off more than we could chew and that is to a degree why we have been having some of the difficult conversations over the past year or so. But the fundamental task remains and that is to repair the Budget situation that we inherited in order to put Australia on a stronger economic foundation for the future, to ensure that we can create more jobs and make sure that everybody has the best possible opportunity to get ahead. 

KIERAN GILBERT: Well part of that I guess is revenue as well, Government revenue and there is $45 billion a year in tax concessions in the super space, the superannuation space. Is this something that needs to be tackled once and for all? 

MATHIAS CORMANN: The issue that you are raising here is whether or not we should increase taxes on people’s retirement savings. In the lead up to the last election we made a very clear commitment which we will keep. That is that we won’t make any negative, unexpected changes, adverse, unexpected changes to superannuation tax and policy settings in this term of Government. There is a conversation to be had right across Government on how we can ensure that over the medium to long term our policy settings are sustainable. That conversation is best had as part of the Tax White Paper review process. 

KIERAN GILBERT: Do you think there’s a risk if you did tackle super like Labor’s hinting it’s going to do in terms of the tax concessions for the wealthy, that those individuals will simply put their money elsewhere, that the revenue won’t come in anyway?

MATHIAS CORMANN: It is certainly true to suggest that somehow by putting the top marginal tax rate in place across the board, it is certainly true that would have behavioural impacts, which means it doesn’t just follow that you would be able to collect all that revenue in one full swoop. That is certainly not something that I would suggest anybody seriously consider. The truth though is that it’s a matter of balance and the best vehicle to pursue this issue really is through the Tax White Paper review process. From the Government’s point of view, any proposal out of that process that we decide to adopt we would take to another election so that people across Australia would have the opportunity to pass judgment on that.

KIERAN GILBERT: The Medicare co-payment is going to go as we understand it. The Prime Minister drawing a line in the sand, he’s copped too much political flak over this and he’s not willing to cop any more. 

MATHIAS CORMANN: The Health Minister Sussan Ley has been conducting consultations with the medical profession and a range of other stakeholders as we said we would do. She has reported to Government the findings of those consultations and has made recommendations on a proposed way forward. That discussion is going into the party room today and no doubt there will be announcements soon after that.

KIERAN GILBERT: As Finance Minister though, are you comfortable with where this is at, given you’re the one who has to make the numbers add up?

MATHIAS CORMANN: As Finance Minister and from the perspective of anyone in Government, our focus is on making sure Medicare is protected for the long term, that Medicare is sustainable for the long term. It is important that we continue to head in the right direction in making sure that happens. There were some issues with the proposal that we put forward in the Budget last year. We need to go back to the drawing board when it comes to making sure that any price signal is structured in a way that works in the best possible way. 

KIERAN GILBERT: So you’re still committed to a price signal though?

MATHIAS CORMANN: What we’re committed to is making sure that Medicare is protected for the long term. What we’re committed to is to ensure that vulnerable patients, pensioners, concession card holders, children and the like are able to benefit from bulk billing arrangements over the medium to long term. What we’re committed to is to ensure that timely and affordable access for patients to high quality healthcare is also affordable for taxpayers. 

KIERAN GILBERT: Does that have to be a price signal to achieve all of those things?

MATHIAS CORMANN: In the context of growing demand for healthcare services as a result of the ageing population in particular, we do need to ensure that the limited resources available from taxpayers are deployed in the most efficient way possible so that they can stretch as far as possible, so they can in a sustainable fashion, give access to pensioners and concession card holders and the like to bulk billing arrangements as they are currently in place.

KIERAN GILBERT: This has been the subject of a lot of complaints from the backbench. One of the key gripes I suppose with the leadership. Getting rid of this, do you think that the Prime Minister is now safe in the job for the foreseeable future?

MATHIAS CORMANN: The leadership of the Liberal Party was settled a few weeks ago when we had a vote on the spill motion. The Prime Minister received the clear support of the party room and so, from where I sit, it’s onwards and upwards and we’re all focused on the job we were elected to do and that is to put Australia on a stronger foundation for the future. 

KIERAN GILBERT: On the Labor plan for multinational tax avoidance, to try and crackdown on that. Why doesn’t the Government adopt that? It seems to make sense. If you’re going to generate an extra $2 billion in revenue over three years.

MATHIAS CORMANN: Firstly Labor is blocking around $30 billion worth of savings. Even if what Labor is saying is true, it’s a very small amount in the context of what Labor is currently blocking. Secondly, Labor talks a lot about what they want to do in terms of addressing multinational tax evasion. When they were in Government, they made lots of announcements but they didn’t actually legislate a lot of them. 96 unlegislated tax measures we were confronted with when we came into Government. The particular measure in relation to multinational tax evasion that Labor initiated in Government, Treasury told us on coming into Government was un-implementable. The announcement that Labor made yesterday based on the advice that we have available would actually hurt legitimate business activity and as such put jobs at risk in Australia. We are committed to fighting tax evasion wherever it occurs. We have already passed legislation, we are pursuing further measures through the G20 and the OECD to make sure that every business that generates profits in Australia pays their fair share of tax in Australia. 

KIERAN GILBERT: Because it is a problem, Chris Jordan from the tax office suggesting yesterday that $1 billion alone in e-commerce. 

MATHIAS CORMANN: Chris Jordan is working very hard with his team at the Australian Tax Office to ensure that every last dollar that is owed to the Australian people from businesses generating profits in Australia is collected by the Australian Tax Office. We are always looking at ways that we can do things better, but it is important to get the balance right. It is important that whatever we do doesn’t hurt businesses pursuing legitimate business strategies to grow their business and create more jobs. 

KIERAN GILBERT: Minister, thanks for your time. 

MATHIAS CORMANN: Always good to talk to you. 


Senator the Hon Mathias Cormann, Minister for Finance, Perth