Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
DAVID SPEERS: The Finance Minister Mathias Cormann joins me now. Minister, thanks for your time this afternoon.
MATHIAS CORMANN: Good to be here.
DAVID SPEERS: It sounds like Senator Storer is still some way from backing these company tax cuts.
MATHIAS CORMANN: In this fortnight we have made a lot of progress. We started the fortnight with 33 Senators supporting the Government’s plan to ensure our businesses are not disadvantaged compared to businesses in other parts of the world. At the end of the fortnight we have 37 Senators formally locked in on the public record. Yes, as I told the Senate yesterday the Government has to do some more work. There are some more conversations to be had. We continue to engage in those conversations with all remaining crossbench Senators that have not yet been persuaded.
DAVID SPEERS: You are right in terms of progress on the numbers on the crossbench, but you only get the company tax cuts through when you get all of the votes you need.
MATHIAS CORMANN: I understand the maths. Believe you me, I understand the maths.
DAVID SPEERS: Tim Storer says he remains to be convinced. He is talking about, this needs to be a broader discussion about tax reform. Is there scope for that broader discussion?
MATHIAS CORMANN: We always have a broader discussion on tax reform. As a Government, we always focus on making sure that our tax system is as growth friendly as possible, as efficient, the least distorting in the economy possible and as equitable as is appropriate. That is, always in the lead up to every Budget we have a conversation about what reforms can appropriately be pursued in the Budget context. We do believe that the need for business tax cuts phased in over a ten year period is urgent and is important, because countries around the world have reduced their corporate tax rate in recent years ... interrupted
DAVID SPEERS: But to what he is saying couldn’t you…interrupted
MATHIAS CORMANN: …There is an urgent and immediate need that we will continue to pursue, because in the US earlier this year they have reduced their business tax rate to 21 per cent. In the UK, they are going to 17 per cent. Even France has decided to go from 33 to 25 per cent. If we do not take action now, giving a perspective to businesses in Australia now that we will reduce the business tax rate in Australia to make it more competitive, we will put our businesses at a disadvantage, which would send investment and jobs overseas. That is not something that any of us want to see.
DAVID SPEERS: But broader tax reform does include things like income tax. You have already said that you are going to be announcing something in the May Budget, will that take effect soon?
MATHIAS CORMANN: We have pursued a range of tax reform proposals in recent Budgets. We have substantially reformed superannuation taxation arrangements. We have delivered income tax cuts for middle income earners in one of our previous Budgets. We have abolished the mining tax and the carbon tax. The mining tax was one of the proposals out of the Henry tax review that we believed was against our national interest. That is why that is one of the recommendations out of the Henry tax review that is not being pursued.
DAVID SPEERS: There are many tax reform areas you won’t touch, aren’t there? GST, mining tax, negative gearing, capital gains tax. There is a lot you are ruling out.
MATHIAS CORMANN: We have considered various things and we have made judgements in the national interest that they are not in our interest. In relation to the GST. It is a matter of public record that we assessed the proposal that pops up from time to time from various sectors. We made a decision that it was not in our national interest, it was not in our economic interest to pursue that particular proposal…interrupted
DAVID SPEERS: That remains the case?
MATHIAS CORMANN: That remains our position, absolutely.
DAVID SPEERS: He also says I have doubts, the decision to reduce company tax for all companies is prudent to undertake in the face of our Budget deficit and debt. To this point and he is not the only one to make this point, given we are still in deficit, how do we pay for these company tax cuts?
MATHIAS CORMANN: The company tax cuts are paid for. Do not take my word for it, the independent Parliament Budget Officer made that point very clearly. They are reflected in our Budget bottom line and indeed our Budget bottom line shows that we are projected to return to surplus in 2020-21 and to remain in surplus all the way through the medium term. The Labor Party argues that they are not funded and they are not affordable and then they turn around and spend the money on something else. They cannot argue at the same time, the Labor Party cannot argue at the same time…interrupted
DAVID SPEERS: Let’s leave Labor off for the moment.
MATHIAS CORMANN: No, but this in an important point. They cannot argue at the same time they are unaffordable and then spend the money on other priorities.
DAVID SPEERS: Okay, but is it best to say the way you are paying for this is through the growth dividend from the company tax cuts?
MATHIAS CORMANN: No that is not right. The way Budgets are put together and the way revenue forecasts are put together is that you do not take second round effects in to account. We have not included a growth dividend in our revenue assumptions…interrupted
DAVID SPEERS: So it has been paid for through…interrupted
MATHIAS CORMANN: It has been paid for through policy decisions in other areas that have been reflected in our Budgets in the past, including the changes that we made in relation to superannuation taxation arrangements. The bottom line is that the cost of our business tax cuts is fully reflected in the Budget bottom line and that our Budget is projected to return to surplus by 2020-21. Furthermore, if you look at actual company tax receipts, if you look at the actual company tax receipts for example since the mid-year economic and fiscal outlook in December, they are picking up. $3 billion above what was forecast at the half yearly Budget update just in the first two months of this year.
DAVID SPEERS: Tim Storer just before we leave him, is also clearly saying there might be better ways to spend that money that is going on company tax cuts.
MATHIAS CORMANN: If I can pick you up here, we are not actually spending the money. What we are doing here is we are saying we are going to leave business with more of the money that they have generated so they can reinvest it. It is a very important distinction… interrupted
DAVID SPEERS: I will just use his words here “I am mindful of other uses of Government revenue”, let us put it that way “that can generate prosperity and enhanced fairness, well-targeted social and economic programs with business R&D measures, innovation, industrial transformation” and so on, he even talks about education and health spending.
MATHIAS CORMANN: Conceptually we agree with all of that. We are of course in favour of well-targeted social and economic programs and we do pursue well-targeted social and economic programs and we do pursue public infrastructure investment to record levels, we have significantly boosted funding for health and education… interrupted
DAVID SPEERS: But with this revenue?
MATHIAS CORMANN: If we do not lower Australia’s business tax cuts, our economy will be harmed. We will lose investment and we will lose jobs to other parts of the world. We cannot continue to put our businesses at a competitive disadvantage by imposing higher tax rates on them than what is faced by their competitors in other parts of the world and think that there will not be any consequences.
DAVID SPEERS: It sounds like you are still a fair way apart though.
MATHIAS CORMANN: People a few weeks ago used to say that there is absolutely no way that we would get anybody else other than the three crossbench Senators that were with us from the beginning. Well that was obviously false. I continue to engage positively and constructively with all of my Senate colleagues on the Crossbench. I am very grateful for the way they are engaging with me. We continue the conversation and we continue to explore opportunities to find a consensus to ensure that this very, very important piece of economic reform legislation can successfully pass the Senate.
DAVID SPEERS: Will there be measures in the Budget that will appeal to Derryn Hinch and Tim Storer?
MATHIAS CORMANN: The Budget will be delivered on the second Tuesday in May…interrupted
DAVID SPEERS: Do you think you will have a better chance after the Budget of winning them over?
MATHIAS CORMANN: We will continue the conversation between now and when the Parliament returns. We would have liked to have secured passage of this legislation through the Senate this week, that is no secret. We worked pretty hard at it. We made significant progress, but we have had to conclude and we have had to accept that there was more work to be done and that work will be done over the next few weeks until we get back in May.
DAVID SPEERS: But it is a period in which the Budget is going to be delivered? Will it make it easier for you to win them over?
MATHIAS CORMANN: You may as well say that there are mountains in Switzerland and Monday follows Sunday.
DAVID SPEERS: My question is will this Budget make your negotiation easier?
MATHIAS CORMANN: We will do in March and April, well March is nearly over. We are doing right now and into April what we do every year and that is putting the Budget together. As we do every year, the Treasurer will deliver it at 7:30pm on the second Tuesday in May.
DAVID SPEERS: Let me ask you finally about the BCA’s draft letter that Labor of course have been focussed very heavily on today in which they have floated commitments that they have obviously not been willing to make finally. They include things like pay our tax and show our commitment by singing the ATO’s tax transparency standard, be in a stronger position to avoid offshoring of jobs. This was not helpful to the Government today was it?
MATHIAS CORMANN: Firstly, what I would say is and I said this last week, the public intervention of our most senior business leaders and our biggest employers last week to point out that the need for business tax cuts is urgent and vital to our economy and that the Senate should pass it and if the Senate passed it, they would increase investment, which would lead to more jobs and stronger wages growth was a very significant and important intervention. It was very succinct, it was very clear and it was important. Now, I do not know the status of that document, I have seen that it has been circulated, I do not know what conversations go on on the inside of the BCA… interrupted
DAVID SPEERS: Not very helpful though is it?
MATHIAS CORMANN: What I can say to you, as far as payments of tax is concerned, well that is actually the law and the law has been significantly strengthened.
DAVID SPEERS: So they should be able to (inaudible)
MATHIAS CORMANN: I am aware what they are referring to there. What they are referring to there is additional transparency measures that were developed by the board of taxation. The board of taxation… interrupted
DAVID SPEERS: They should sign up for that shouldn’t they?
MATHIAS CORMANN: And the BCA has signed up to that, that is the whole point. But it is currently a voluntary code and there are some opportunities there to strengthen some of these arrangements further. Let me just say, we have got some of the toughest anti-avoidance provisions when it comes to tax in the world and we have progressively implemented all of the relevant OECD recommendations against base erosion and profit shifting. We have got some of the toughest anti-avoidance provisions in the world.
DAVID SPEERS: Before I let you go, you will bring this to a vote in the Senate, these company tax cuts in May?
MATHIAS CORMANN: That is absolutely our intention. We continue to work. We do not control the numbers in the Senate. We have been very open and transparent. We started on 33 at the beginning of this fortnight, we are on 37, we need to get to 39. We need to convince two more crossbench Senators of the merits of our argument and that is what we will continue to try and do.
DAVID SPEERS: And if you cannot, you will take it to the next election?
MATHIAS CORMANN: That is absolutely our commitment, yes. Let me just answer this very clearly this way too, our business tax cuts were important in the lead up to the last election. They are even more important now because since the last election, the US has reduced its business tax rate from 35 per cent to 21 per cent, that has a massive impact on us and if we don’t act swiftly, we will be hurting businesses in Australia, we will be hurting jobs in Australia. Since the last election, France has decided to reduce their business tax rate from 33 per cent to 25 per cent and Emmanuel Macron, the President of France. He is hardly a right wing ideologue. He was the Economy Minister in the socialist administration of François Hollande. Even the former socialist Economy Minister, centre left President of France can see that it is important for France to reduce the business tax rate to 25 per cent. Bill Shorten knows that we need this for Australia. He has made a political decision and he is selling out working families around Australia because he knows that working families around Australia will be hurt the most if we keep company taxes too high.
DAVID SPEERS: Finance Minister Mathias Cormann, thanks for joining us this afternoon.
MATHIAS CORMANN: Always good to talk to you.