Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
KIERAN GILBERT: Now the big story of course for us in Canberra today is the Budget. With me the Finance Minister Mathias Cormann joins me. Finance Minister thanks very much for your time, a lot to talk about. First of all, this tobacco tax modelling, the Government is going to adopt a tax, increase in the tobacco tax excise, that’s right?
MATHIAS CORMANN: We are. It is the same increase on the same terms as what Labor has previously announced. What it shows is that Labor had a $20 billion black hole in their costings. What it shows again is that Labor just doesn’t know how to manage money. They spend money before they have raised it. They spend more than they can reasonably expect to raise. This is just another example where they can’t add up their sums.
KIERAN GILBERT: But it’s actually the Parliamentary Budget Office that did their modelling on their behalf, at arm’s length.
MATHIAS CORMANN: They have never released their Parliamentary Budget Office costings. They have never showed us the qualifications that the Parliamentary Budget Office may have put around those costings. The Parliamentary Budget Office earlier this year already revealed that Labor used outdated information to base their costings on. We said that earlier this year ourselves. What Labor should do is release their costings, release the assumptions and show us what the basis for their $20 billion black hole actually is.
KIERAN GILBERT: Further to their suggestion that they had it done at arm’s length by the Parliamentary Budget Office, they also make the point that after each Budget update, that you recalibrate the numbers in your estimates, in your models. Isn’t that fair enough?
MATHIAS CORMANN: Kieran, they estimated $47.7 billion worth of revenue. That is a massive recalibration given that Treasury says that this measure would raise just $28.2 billion. That is a $19.5 billion difference. A $19.5 billion recalibration. The truth is that Labor doesn’t know how to manage money. Their sums don’t add up. This comes on top of a $50 billion black hole because of Labor’s promises that are completely unfunded. Bill Shorten so far, has made more than $50 billion in unfunded and unaffordable promises. This $20 billion black hole comes on top of that.
KIERAN GILBERT: You’re obviously not that critical of the tax itself because you are adopting it.
MATHIAS CORMANN: Indeed, we think it is a sensible part of our overall economic plan, which is focussed on driving stronger growth and more jobs, which is focussed on helping to secure our successful transition from resource investment driven growth to broader drivers of growth in a diversified economy and which is part of our plan to put the Budget on a sustainable foundation for the future. For us it is part of an overall plan. We have sensibly and accurately costed the effect of this measure.
KIERAN GILBERT: We are going to hear from the Treasurer shortly, but I want to ask you though, if you can reflect though, you’re not going to confirm some of the detail, but my understanding is that the Budget will include a tax cut for medium sized businesses, up to a turnover of $10 million a year down to 27.5 per cent company tax. Why, as I say I don’t expect you to confirm it this morning given it will be in the Budget tonight, feel free to if you want to, but why is that the priority? SMEs the small and medium sized enterprises as opposed to the bigger companies. Wouldn’t the bigger companies and tax cuts at that end drive greater growth and sooner?
MATHIAS CORMANN: I am not going to go into the specifics of the Budget tonight. I will leave it to the Treasurer Scott Morrison to release and deliver the Budget tonight. What I would say, is that as a team, we very carefully considered all of the opportunities to make our tax system more growth friendly. This is part of our overall economic plan to strengthen growth and to create more jobs. We want to ensure that we raise the necessary revenue for Government in the best, most efficient, least distorting way in the economy. In that context, we have looked at opportunities to encourage and drive increased investment, encourage and drive increased job creation. What we have done on the enterprise tax front will be a reflection of that.
KIERAN GILBERT: And it terms of the broader ambition though, I’m told that there will be glide paths, as the Government is going to call it, for big and small companies to effectively both end up at the 25 per cent rate.
MATHIAS CORMANN: Again, I’ll leave the specifics to the Treasurer in his Budget speech tonight.
KIERAN GILBERT: Let’s look at a few of the other matters around. The multinational tax measures, the so called ‘Google Tax’ or profit shifting to prevent multinationals from restructuring their companies into lower taxing jurisdictions. Can you reflect on that initiative in the context of your other efforts to try and attract more tax from multinationals.
MATHIAS CORMANN: There will be additional strong and effective integrity measures. The Government’s focus is on making sure that every business which generates profits in Australia pays their fair share of tax on those profits generated in Australia. The Treasurer will have some more to say about that in his Budget speech tonight.
KIERAN GILBERT: And on income tax as well, personal income tax. We’ve heard a lot about bracket creep, but what’s your retort to Labor when they will continue this line that it’s not fair if you’re not helping the very lowest paid when the vast bulk of taxpayers less than that $80,000 threshold.
MATHIAS CORMANN: What is not fair is Labor’s proposal to impose more than $100 billion of new taxes over the next decade, which will hurt economic growth, which will cost jobs and which will make it harder for people across Australia to be successful and to get ahead. That is not fair. What we have set out in this Budget is to ensure that the Budget is both fair and economically effective. What we want to ensure is that as a result of our economic plan, more jobs are created, growth is stronger, that we continue to make a successful transition from resources investment driven growth to broader drivers of growth in a diversified economy. That our Budget is on a sustainable foundation for the future.
KIERAN GILBERT: And will you argue as well that those at the lower end of the income scale benefit from tax relief back in 2014 in a Budget where the compensation for the carbon tax was kept, but the tax was removed.
MATHIAS CORMANN: In this Budget, when it comes to tax cuts, we’ve done as much as we could sensibly afford. Our instinct always is always is to deliver the lowest possible taxes and to raise the revenue for Government in the most efficient, least distorting way in the economy and in a way that is also fair. The specifics will be in the Budget tonight.
KIERAN GILBERT: And finally, I want to ask you about the broader parameters, and this is in the context of the recent debate about the AAA credit rating. Is there still going to be some ground made up in terms of the bottom line.
MATHIAS CORMANN: What our Budget will show is that the Budget bottom line is improving year on year, both in dollar terms and as a share of GDP. What our Budget will show is that we have continued to control expenditure. That wherever we have been required to spend more on things like additional funding for schools, we have more than paid for that by spending reductions in other parts of the Budget, not by tax increases, not by increasing the overall tax burden in the economy, which as I said would hurt growth and cost jobs.
KIERAN GILBERT: Minister, thank you very much for your time. Appreciate it on the big day.
MATHIAS CORMANN: Always good to talk to you.