Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
Date: Thursday, 24 November 2016
DAVID SPEERS: Alright the Finance Minister, Mathias Cormann in the thick of it there in the Senate today and he is with me now. Thanks for joining me.
MATHIAS CORMANN: Good to be here.
DAVID SPEERS: Right, just on the point there from Penny Wong. She said this five year freeze now on the passenger movement charge, you can’t bind a future Parliament on this can you?
MATHIAS CORMANN: It is now going to be enshrined in the law, because we have agreed to a request by One Nation Senators to amend the passenger movement charge legislation, the Act, to ensure that the increase ... interrupted
DAVID SPEERS: It can be changed though by next Parliament?
MATHIAS CORMANN: Any law can be changed.
DAVID SPEERS: Exactly.
MATHIAS CORMANN: The commitment that we have made is to amend the Act to specify in the Act that the increase to $60 will be fixed for five years. The Government has put that commitment clearly on the record.
DAVID SPEERS: Until the next Parliament wants to do what you’ve done and find a few dollars.
MATHIAS CORMANN: We have made a very clear commitment. It will be reflected in the legislation. In the end, if somebody in the future wants to change that, they would have to get that through the Parliament.
DAVID SPEERS: Now the backpacker tax itself, you want a 19 per cent rate. Labor, Jacqui Lambie want a 10.5 per cent rate. In fact the Senate has voted for a 10.5 per cent rate. What is wrong with 10.5 per cent rate?
MATHIAS CORMANN: The current rate is 32.5 per cent. If the legislation doesn’t pass the Parliament in the Government’s preferred form, then that will be the applicable rate, 32.5 per cent. That is the rate that Labor, under the then Treasurer Wayne Swan put in place. Foreign residents have been taxed from the first dollar earned since 1983-84. So that is not new. Initially the rate was 29 per cent. Wayne Swan increased that to 32.5 per cent. We are suggesting that a good compromise here is to reduce it to 19 per cent.
DAVID SPEERS: So, what is wrong with 10.5 per cent?
MATHIAS CORMANN: It costs a lot of money to the Budget. It would mean that we would cut taxes for foreign workers and we would increase the burden on Australian workers to either pay more taxes or to accept deeper cuts. When we have a Budget that is in deficit, we are suggesting that when it comes to spreading the burden to repair the Budget, it is not inappropriate to ensure that foreign workers in Australia do their fair share.
DAVID SPEERS: Say it is interesting that your argument there is about the revenue and the Budget bottom line, which is a fair argument to make. Do you also make the argument that some of your colleagues have that this would also see foreigners pay less tax than Australian workers.
MATHIAS CORMANN: What I would say to you is that firstly it is a tax arrangement for foreign workers in Australia that is very competitive internationally. If you look at the circumstance in New Zealand, Canada, the United Kingdom, you will find the take home pay for foreign workers here in Australia on similar conditions, is actually if anything slightly better than it would be in those other countries. The truth is there has been an arrangement in place in Australia since 1983-84, where foreign residents pay tax from their first dollar earned and don’t have the benefit of the income tax free threshold.
DAVID SPEERS: And it may be competitive with foreign countries, but your colleagues the Treasurer in particular and Barnaby Joyce have been arguing in the House this afternoon that is about ensuring that Australian workers don’t pay more tax than foreigners, than backpackers.
MATHIAS CORMANN: What they are saying is that they are being critical of Labor and others that are suggesting that we should cut taxes for foreign workers and then impose higher taxes on small business and Australian workers.
DAVID SPEERS: Under Labor’s 10.5 per cent rate, as you say the backpackers would be paying from the first dollar. So they still would be paying more tax than an Australian.
MATHIAS CORMANN: But this is the situation since 1983-84. Recent court decisions have provided very clear certainty that holiday makers in Australia, that backpackers who come to Australia are foreign residents and not ... interrupted
DAVID SPEERS: What I am getting to, is that do you agree that under a 10.5 per cent rate, foreigners would pay less tax than an Australian.
MATHIAS CORMANN: What I argue is that we cannot afford to cut the tax that applies to foreign residents further. We are already cutting it from 32.5 per cent down to 19 per cent. That puts Australia on an internationally competitive position when it comes to foreign residents ... interrupted
DAVID SPEERS: Let me ask it the other way, do you accept backpackers would still pay more tax than Australians, with the 10.5 per cent rate?
MATHIAS CORMANN: Foreign residents have paid more tax, because they pay tax from the first dollar earned since 1983-84. That hasn’t changed... interrupted
DAVID SPEERS: They still would under a 10.5 per cent rate.
MATHIAS CORMANN: ...Wayne Swan increased that to 32.5 per cent. We are proposing to reduce it to 19 per cent.
DAVID SPEERS: But under the 10.5 per cent rate they would still pay more tax.
MATHIAS CORMANN: We are not prepared to reduce it to 10.5 per cent, because we believe that instead of providing an additional tax cut to foreign workers, with an eye on our Budget bottom line, we need to ensure that we keep the compromise in place at the 19 per cent rate, which is appropriate.
DAVID SPEERS: The Treasurer told Parliament, they would be paying on average, an Australian worker $132.65 a week in tax. A foreign worker standing next to them would be paying $99.65 a week. Do you know where he gets those figures from?
MATHIAS CORMANN: The Treasurer is responsible for the revenue side of the Budget. I trust entirely the figures that the Treasurer puts out into the public domain.
DAVID SPEERS: Have you seen the figures?
MATHIAS CORMANN: I haven’t seen those particular figures. But what I can say to you is that the arrangement that we have put forward in the Parliament is the most appropriate arrangement. It is an arrangement that has been negotiated with relevant stakeholders. It is an arrangement that is internationally competitive. Holiday makers do not just come here for the tax arrangements. I came here as a holiday maker just over 20 years ago. I came here on a holiday and I ended up staying as it turns out. I can assure you, I came to Australia because of what a wonderful country Australia is. I did not sit there in my study and look at whether the tax rates in Australia were different to the tax rates in New Zealand or Canada and the United Kingdom. I decided to come to Australia because this is where I wanted to come, because of what a fantastic country it is. I think we have to have a bit of perspective in this debate.
DAVID SPEERS: Sure, but I am just trying to get to this, the main argument from the Treasurer, Barnaby Joyce, the Prime Minister this afternoon was backpackers under Labor’s plan would pay less than Australians. That is not right is it?
MATHIAS CORMANN: I am going to...interrupted
DAVID SPEERS: Unless the backpacker worked for a full year or something.
MATHIAS CORMANN: I am going to let the Treasurer and the Deputy Prime Minister talk for themselves. What is very clear is that Labor is arguing...interrupted
DAVID SPEERS: Is this the argument that you are using in the Senate, that you are prosecuting in the Senate ...interrupted
MATHIAS CORMANN: You have asked me a question, so let me answer it. What Labor is arguing is they want a further tax cut for foreign workers, that they think it is better to have either higher taxes for small business, higher taxes for Australian workers or deeper cuts for Australian workers in order to make up for a further tax cut... interrupted
DAVID SPEERS: Okay that is a fair argument to make but with respect. You are the Finance Minister. You have carriage of this in the Senate. Is it your belief that foreign workers would pay less tax than Australians?
MATHIAS CORMANN: My belief is that we should absolutely make sure that foreign workers do not pay less tax. My belief is that we should not deliver a further tax cut to foreign workers ... interrupted
DAVID SPEERS: But do you think they would?
MATHIAS CORMANN: Labor is proposing a further tax cut for foreign workers, which is something we do not support.
DAVID SPEERS: Would they pay less than an Australian?
MATHIAS CORMANN: You can ask the question, whichever way you want ...interrupted
DAVID SPEERS: I have tried it many times.
MATHIAS CORMANN: And I have answered it the best way I can. Labor wants to ... interrupted
DAVID SPEERS: Is it a yes or a no?
MATHIAS CORMANN: Labor wants to deliver a further tax cut for foreign workers. We are not in favour of further tax cuts for foreign workers. We do not believe as Labor does that taxes for foreign workers should be cut even more. We do not believe like Labor does that taxes on small business should be higher than what we are proposing ...interrupted
DAVID SPEERS: And I know that, but I am just trying to get a yes or a no on whether foreigners would pay less tax than Australians.
MATHIAS CORMANN: Under Labor’s proposal foreigners would end up paying less tax than they would under our policy settings ... interrupted
DAVID SPEERS: Of course, but under your policy proposal?
MATHIAS CORMANN: Our position is very clear we do not believe that there should be a further tax cut for foreign workers.
DAVID SPEERS: We are in a stalemate on the Government and Labor on the rate. You want 19 and they want 10.5 per cent. Have you spoken to anyone in Labor about a compromise? 15 per cent?
MATHIAS CORMANN: In the Parliament we have conversations all the time. I have never made a habit of talking about these sorts of matters. I never conduct discussions through the media. I do not think that is something I should start... interrupted
DAVID SPEERS: But there are conversations going on?
MATHIAS CORMANN: There are always conversations going on. We have got a final and firm position. Our position is that 19 per cent is as low as we are prepared to go. Under Labor... interrupted
DAVID SPEERS: 15 per cent? No chance?
MATHIAS CORMANN: Under Labor the rate is 32.5 per cent. If the Senate ends up rejecting our bill, the rate is 32.5 per cent. We are prepared to reduce it to 19 per cent ... interrupted
DAVID SPEERS: But no further?
MATHIAS CORMANN: No further. If it ends up at 32.5 per cent it will be on Labor’s head.
DAVID SPEERS: And you would not go to 15 per cent? Rule it out.
MATHIAS CORMANN: We have gone as far as we can. We have gone as far as we can responsibly go. That is right.
DAVID SPEERS: Finance Minister Mathias Cormann, we will see how this plays out. Thank you very much for joining us this afternoon, appreciate it.