Sky News – PVO NewsDay

Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia






Company tax cuts, Budget, housing affordability

SAM MAIDEN: The Coalition is turning its tax attack on Labor this morning demanding Bill Shorten explain to business if it plans to repeal the tax cuts for small and medium business if it wins the next election. Labor has backed a tax cut for businesses only with a turnover of under $2 million. The Senate has of course delivered a tax cut to all businesses with a turnover of under $50 million a year. But there are serious questions of course too about just have many jobs and how much growth the tax cuts that passed the Senate will deliver. Joining me now live from Perth is Finance Minister Mathias Cormann.

MATHIAS CORMANN: Good to be here.

SAM MAIDEN: Thanks, now can we start with that question in relation to the tax cuts that passed the Senate? That is obviously a significant win for the Government. But do you have a forecast of how many jobs it will create?

MATHIAS CORMANN: We have a forecast which is reflected in the Budget that this will permanently increase the size of the Australian economy by just over one per cent over the long term. What the Senate passed on Friday is 100 per cent of our enterprise tax plan for the next three years. We remain on track to deliver our enterprise tax plan in full. We remain committed to the full ten year plan. We remain committed to deliver the full benefit of the ten year enterprise tax plan as reflected in the Budget.

SAM MAIDEN: But that one per cent of course is predicated on the whole $48 billion package getting through the Senate and that has not happened so far. Can you name the figure of what it would be if you are stuck at that $24 billion level? Essentially what actually passed the Senate on Friday.

MATHIAS CORMANN: Samantha, we do not intend to remain stuck at what was passed on Friday. On Friday we passed, the Senate passed, the first instalment in our ten year enterprise tax plan. We remained 100 per cent on track to deliver the full plan. We remain 100 per cent on the trajectory as set out in the Budget delivered in May last year. So we remain 100 per cent on track to deliver the full economic growth effect, the full benefit for jobs and growth and the full benefit in terms of increases in real wages over time.

SAM MAIDEN: Were you worried if the Senate negotiations that were to remain stalled at a turnover of $10 million, which a lot of people thought it was going to remain stuck at, that you were not going to get the benefits you needed? Isn’t there this argument that delivering tax cuts to small business does not really do a lot and that you actually need to get it higher up the chain if you want to create those jobs?

MATHIAS CORMANN: There was a lot of speculation as there always is on what the Senate may or may not do. A lot of people suggested we would not get anything. Some people suggested we would get to $10 million. The truth is, when it was all said and done, the Senate supported the first three years of the Government’s ten year enterprise tax plan in full. So the question now is for the Labor party. Having opposed it with tooth and nail for the last year and a bit, what is their intention now? Are they going to support it now or are they going to reject it? Are they going to increase taxes for business if they should be successful at the next election? So far all we have had from Labor is weasel words. It is quite unbelievable that having opposed it tooth and nail for the last year, that today they cannot tell us what an elected Shorten government would do should they be successful at the next election.

SAM MAIDEN: Well I mean obviously business needs certainty and I think most people accept the idea that business should not be planning ahead unsure of whether a tax cut is going to rolled back. Now you I assume would like Bill Shorten to announce this today or yesterday, but when must Labor declare its hand? I mean do you think it is sustainable if Labor was to try and get past the Budget in reply speech for example and say that it could not make up its mind on that night?

MATHIAS CORMANN: What is obvious is that Labor never really meant it when they said they were opposed to what we put on the table in terms of lower business taxes. If Labor is not prepared to oppose lower business taxes for businesses with a turnover of up to $50 million today, why did they vote against it on Friday? Having voted against it on Friday, was it all just politics? They didn’t really mean it? People are entitled to ask the question. What does Bill Shorten actually stand for? He is completely confused when it comes to economic policy. Anyone who is completely confused when it comes to economic policy is not fit to lead our country as Prime Minister.

SAM MAIDEN: Alright well let’s go to an area that’s sometimes a little confusing for people outside the Coalition. On the Budget the Treasurer yesterday was unable to rule out tax increases in the Budget. Are you happy to rule out tax increases?

MATHIAS CORMANN: We play this game every year in the lead up to the Budget Samantha. In every Budget, in every single Budget, there are measures on the revenue side of the Budget and there are measures on the spending side of the Budget. If you look at our track record, what you will find is that so far we have always been able to offset any decisions to increase expenditure with other decisions to reduce expenditure by more in other parts of the Budget. On the revenue side of the Budget, you will find that the effect of policy positions has actually been a net reduction in tax as a share of GDP. But there is going to be a range of conversations continuing between now and the Budget. The Budget will be delivered on the second Tuesday in May. As always is the case I would expect in the Budget that there will be measures on the revenue and on the spending side of the Budget. There is nothing remarkable or unusual about that.

SAM MAIDEN:So it that the test? That it’s okay if you increase tax in one area as long as you take it off somewhere else?

MATHIAS CORMANN: All I am saying to you is that since we have been in Government, we have focussed on making our tax system more growth-friendly. We are focussed on pursing reforms that have helped ensure that we can raise the necessary revenue for Government in a way that is less distorting and less impacting on economic growth moving forward. We have been able to do so without increasing the overall tax burden in the economy as a result of the policy decisions that we have made. That is always our intention, that we do not increase the overall tax burden as a result of the decisions that we are making, but that we raise the necessary revenue for Government in the best, most efficient, least distorting and fairest way possible.

SAM MAIDEN: Alright well let’s go through a couple of the areas in this upcoming Budget. Now I know that you want to take the deficit levy off high income earners, you pledged that you would, the time has arrived. But isn’t it still going to be a bad look if you are receiving a personal tax cut and the Prime Minister is receiving a personal tax cut of $3,000, $4,000, $5,000 in this Budget?

MATHIAS CORMANN: What you are suggesting there is quite wrong. We are not making a decision to reduce tax as you suggest. The decision that was made a few years ago is that there would be a temporary budget repair levy, which takes the top marginal tax rate for a temporary period effectively to 49c in the dollar. That was always going to be for a limited period. That period, as set out at the time, is coming to a close. I just note that Bill Shorten has a lot to say about adverse economic effects and economic modelling and the like. Where is Bill Shorten’s economic modelling on the adverse economic effects of his proposal to permanently increase the top marginal income tax rate to 49 per cent. Where is Bill Shorten’s economic modelling of the impact on the economy and jobs of his proposal to permanently increase the top marginal tax rate at 49 per cent.

SAM MAIDEN: And what about the Capital Gains Tax discount? When the Treasurer was being asked these questions on the weekend it was in the context of housing affordability. Now I know that a couple of weeks ago this issue flared and you said there were no plans, as politicians often do, to touch the Capital Gains Tax discount, but there are people within your Government who argue that you should address it for residential investment, that that would cool the housing market. Can you rule out any changes, at all, in the Budget for Capital Gains Tax?

MATHIAS CORMANN: Sam we went to an election, less than twelve months ago, where we made certain promises in regards to the Capital Gains Tax discount and negative gearing. I can absolutely assure you that our Government is a Government that keeps its commitments and that we will do so in relation to those issues.

SAM MAIDEN: So no changes at all to the arrangements?

MATHIAS CORMANN: We promised in the lead up to the last election that we would not be abolishing negative gearing in the way Labor suggested and that we would not be reducing the Capital Gains Tax discount in the way Labor was suggesting. That remains our position.

SAM MAIDEN: Yeah, but obviously the suggestion is not that you would adopt Labor’s policy, but that you might tweak it in your own way, that you might do something to Capital Gains Tax just for investors, just for residential property.

MATHIAS CORMANN: I know that journalists like you always like to look at every comma and every full stop and see if one word is in a slightly different spot than it was when we last uttered the same sentence. Let me just say it again. In the lead up to the last election, we were very clear. We were not proposing to reduce the Capital Gains Tax discount. We were not proposing to abolish negative gearing. Our position hasn’t changed.

SAM MAIDEN: And what about this idea of using superannuation to pay for housing deposits, to allow some sort of loosening up of that, to embrace the policy that Paul Keating thought was a great idea many, many years ago. What do you think of that idea?

MATHIAS CORMANN: Again I have been on the public record in relation to this on many occasions. Housing affordability is caused by the dynamic in the market where demand exceeds supply. You don’t improve the affordability, of anything for that matter including housing, by boosting demand. If you enable people to access their super in the circumstances you describe, you enable more people to enter the housing market more quickly, then you are boosting demand and to the extent that there is a housing affordability issue that would make the problem potentially worse, all other things being equal. The risk is that if you boost demand and you increase prices by more, then you end up with a wealth transfer, effectively, from people who are saving for their retirement to people who are selling their properties. I have long been on the public record in relation to this issue. There is a lot of speculation, there is a lot of discussion but don’t make the wrong assumptions.

SAM MAIDEN: Okay, if we could just end off where we began, on the company tax cuts, how concerned are you about the problems that business has raised, the concerns of the BCA, in relation to effectively having as two-tiered tax system? That there is basically a disincentive for some companies to grow.

MATHIAS CORMANN: We don’t want a two-tiered tax system. We want, under our enterprise tax plan every business to get down to 25 per cent. We think that we need to have, Australia needs to have, an internationally competitive business tax rate and 25 per cent is what we want to apply to all businesses. Incidentally, this used to be Bill Shorten’s position. I refer you to a speech that Bill Shorten gave as Assistant Treasurer in March 2011 at an ACOSS Conference. I strongly encourage your viewers to dig it up, where Bill Shorten very eloquently made the case that a lower company tax rates should not just apply to smaller businesses, they needed to apply to all businesses, because otherwise, as the BCA is saying today, it will provide an incentive for business to remain small, instead of continuing to grow. We want all businesses to end up on a 25 per cent corporate tax rate. We are on track to deliver that, having been able to pass the first instalment of our ten year plan through the Senate on Friday.

SAM MAIDEN: Okay, Finance Minister Mathias Cormann, thanks for your time today.

MATHIAS CORMANN: Always good to talk to you.


Senator the Hon Mathias Cormann, Minister for Finance, Perth