Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 14 March 2018
STEVE PRICE: So how do we explain this? Mathias Cormann is the Finance Minister. He is on the line. Thanks for your time this morning.
MATHIAS CORMANN: Good morning Steve. Good morning to your listeners.
STEVE PRICE: Is this bad policy?
MATHIAS CORMANN: It is just another tax attack by Bill Shorten on another group of Australians. As you say, he is here attacking those Australians who have worked hard all their lives, who have saved hard, who have made the effort, put themselves in a position where they can look after their own needs in retirement, or at least complement their part-pension with some additional investment income. He is imposing a massive additional tax. Whatever way he wants to dress this up and he is using his usual and typical Bill Shorten two-card trick. He is trying to make it sound like it is an attack on the undeserving rich. He is taking, supposedly, money from the undeserving rich while he is actually hitting low income earners. He is trying to bamboozle people with technical language, trying to suggest that somehow this is complicated. It is not complicated. He wants low income Australians to pay thirty per cent tax on their income from dividends through their shareholdings in companies. Where at the moment they get a tax refund, an income tax refund because if you are on an income of less than $18,200 for example, which half of the people who take advantage of this are, you do not pay any tax. Instead of getting an income tax refund in recognition of you having paid more tax through your shareholding than you should, he wants to confiscate that for Canberra. That is just not right.
STEVE PRICE: Have you ever looked at doing this?
MATHIAS CORMANN: No we have not.
STEVE PRICE: Treasury has prepared a paper on this in the past?
MATHIAS CORMANN: Treasury at various times looks at what is being talked about among various academics and others. We are always monitoring what Labor may or may not be planning to do. This is bad policy. It is not something that a Coalition Government would ever do. There are very good reasons for the dividend imputation system including the opportunity for income tax refunds for low income Australians. This was ... interrupted
STEVE PRICE: Well it was established wasn’t it, to not have something we all abhor which is double taxation.
MATHIAS CORMANN: Precisely. Dividend imputation is all about avoiding double taxation. In 1999 when the Howard Government introduced this change, where people who do not pay tax can get a tax refund for excess tax that has been paid on their behalf by the company they are invested in, when that was introduced by the Howard Government, it had bipartisan support. In fact, the Labor party at the time congratulated the Howard Government and said that it was in fact Labor policy which they had taken to the previous election and that it was a logical extension of what Keating had done when he introduced dividend imputation in the first place. Whatever way you cut this, Bill Shorten is proposing to whack retirees, many of them pensioners, self-funded retirees and pensioners who are invested in shares, with a $59 billion tax hit. This now takes the overall tax increase that Bill Shorten is proposing to more than $200 billion. If that was to be implemented, it would damage the economy, it would lead to less investment, less effort by people, because why would you work hard and save hard if the Government just takes it away from you? There would be less investment, less effort, less growth, which means fewer jobs and lower wages. We want people across Australia to have the best possible opportunity to get ahead, which means we need to do precisely the opposite. We need to encourage people to work hard, to save hard, to invest, to help grow businesses so that they can hire more people and pay them better wages.
STEVE PRICE: Am I right that there is no announcement in Bill Shorten’s announcement about there being any sunset clause or any phasing this in? That it is just going to go bang in their first Budget.
MATHIAS CORMANN: No. What he has announced is that this would come into effect from 1 July 2019 if he is elected Prime Minister … interrupted
STEVE PRICE: So doesn’t he have a problem on his hands, that point I mentioned there Mathias that we do know that if Labor wins the election they are going to scrap negative gearing on future property purchases. Won’t people flee the share market here and park their money in real estate, creating a false bubble and an effect on the share market?
MATHIAS CORMANN: You are quite right. What he has announced yesterday would create distortions in the market. If you make investment in shares less attractive, people will shift their investment. It will influence behaviour, people will shift their investment from shares into other asset classes including property. To the extent that there is a shift into property that would have an impact on property prices. What this just demonstrates is that he is getting more and more arrogant. He thinks that there is no limit to how much tax he can raise out of the economy without having any impact on his political fortunes. He is demonstrating quite a bit of hubris. As you say, he is targeting those who he believes are Coalition voters, who he demonises. He suggests that somehow, somebody earning less than $87,000 a year is rich. 97 per cent of the people that get these income tax refunds under the dividend imputation arrangements that he wants to abolish, 97 per cent of them earn less than $87,000 a year … interrupted
STEVE PRICE: Well I have got people sending me tax returns this morning. One, Kerry, early on, taxable income $47,600, franking credit refund $3,058.51, gone.
MATHIAS CORMANN: These are the people that Bill Shorten wants to target. It is quite outrageous. In terms of the broader impact on the economy, investment and jobs and opportunity, it is reckless and irresponsible. He is deeply ideological. He has shifted the Labor party further to the left than any Labor leader before. If he was to be elected it would have serious consequences to our quality of life in Australia, it would have serious consequences for our living standards.
STEVE PRICE: Did you get blindsided by this, did you see it coming?
MATHIAS CORMANN: I have to say, I was surprised that he would do something this bad. We have got used to the fact that he is a high taxing, high spending, irresponsible Labor leader. So we know that he has been pursuing a high taxing agenda. Such a blatant tax attack on low and middle income earners as this one, I did not think that even Bill Shorten would be capable of doing this. But he has made that announcement and people across Australia have the opportunity to show him what they think about it.
STEVE PRICE: Thanks for your time, appreciate it.
MATHIAS CORMANN: Good to talk to you.