2 November 2015
Transcript - #2015032, 2015

Interview with Fran Kelly, ABC RN Breakfast

SUBJECTS: Tax White Paper process; providing real opportunities for Australians who want to work, save and invest; superannuation

FRAN KELLY:

The Federal Treasurer, Scott Morrison, joins us now in the Breakfast studio. Treasurer, welcome to Breakfast.

TREASURER:

G’day Fran.

KELLY:

Can you confirm the Government is modelling scenarios around a 15 per cent GST?

TREASURER:

The Government wants a better tax system, we have made no secret of that. There's been work been done with the states and territories at their request now for some period of time. At the last meeting of state Treasurers we responded to a range of questions that they put around these issues and at our next meeting of state Treasurers we will be looking at a whole range of issues around state taxes. I have described it as being in a discovery phase and we are all working collaboratively together because we want to see a tax system that grows our economy and supports jobs.

KELLY:

Is it pretty fair to say that one of the options, the minimal change option, is called I think, is 12.5 per cent GST. That could be ruled out because it wouldn't allow the Government – wouldn't deliver the necessary revenue to allow the Government to provide for tax cuts, make it fair, compensate and be a boost?

TREASURER:

I think that is all commentary at the moment. At the moment we are looking through the whole…

KELLY:

You are the Treasurer.

TREASURER:

But there are a whole range of taxes at a state level as well and there is a range of taxes at a federal level and we need to see how they work better together to ensure our economy works better and for people out there working and saving and investing, we want to back them and we want a system that does that. I remember the last time I was on the programme, Fran, I said that next year if you are on an average wage you will be on the second highest tax bracket. Now, that is a big problem and that is the problem that we are trying to fix.

KELLY:

And I will come to that in just a moment but talking about all options on the table, which is what the Government has told us.

TREASURER:

It’s a pretty big table!

KELLY:

Yes, it’s a pretty crowded table. Does it include the plan put forward by your National colleague David Gillespie, the Member for Lyne, he has had the Parliamentary Budget Office run the ruler over the New Zealand model of a 15 per cent GST covering 97 per cent of goods and services. The PBO says that would deliver $65.6 billion in extra revenue – more than double the current GST take. Is that model also in the mix?

TREASURER:

I want to thank David, he has done a lot of work on this. He's gone out and consulted with people, he has made a submission to the White Paper process and this is a good contribution. It is not Government policy, it is not National Party policy.

KELLY:

Is that in the mix? That model?

TREASURER:

Technically everything is on the table, Fran, but this is something certainly at one end of the spectrum when it comes to the range of options that technically could be considered. There are very real and practical reasons initially when Peter Costello and John Howard introduced the GST that they didn't put it on things like health and education. They were practical implementation reasons. It wasn't actually about politics at all. So, as you work through any possible options, you have got to work through those issues but I stress again the process we are in is one in league and collaboration with the states and territories. We are working together on this. The only person who doesn't seem to be wanting to work together on these sorts of things is Bill Shorten. He is locking himself out of, I think, a very important and mature discussion on how we get a better tax system which can actually support growth and jobs in our economy. I mean, he's come up with two new taxes, combined they raise about $3.8 billion I think it is. Now, those taxes are based on estimates which you'd have to be concerned about, given this was the same group of people who gave us the mining tax which couldn’t raise revenue and they predicted it would raise billions. You raised an earlier question and that was if you are going to go and change the tax system then you need to go and engage, I think, in some pretty significant change because that is the only way you can get the outcomes that people would want and that is to have an income tax system which is fairer, an income tax system which rewards people who are out there doing everything they can to better their own situation of working hard, saving and investing – all of this. You have got to have a serious package of measures and that is why we are sitting down carefully with the states and territories.

KELLY:

That is exactly what Cabinet Secretary Arthur Sinodinos says, if you are going to do this you have got to do it properly. He says you have got to move early because you have to move quickly to give plenty of time for the discussion before an election.

TREASURER:

You have got to take people with you, Fran, and how quickly or as long as that takes really…

KELLY:

So, when will we see the tax package?

TREASURER:

We are still working through with the states and territories. I am interested in getting this right, I am interested in getting cooperation on it. I am not feeling under any pressure when it comes to how quickly something might be brought forward. When we bring it forward what's important is that we need to have communicated clearly why we are doing this. The what is obviously very important, but the why is even more important and why we're doing it is we want people who are working, we want people who are putting the effort in to be able to realise that their effort and the tax system at the moment is punishing them. We want to stop that.

KELLY:

And the why is important but unless you are talking about the what, people can't really focus on it, I would suggest.

TREASURER:

You have to explain the problem first, Fran, and I think that was a criticism that many made of us after coming to Government that we weren't explaining why we wanted to do things and why we want to do this is, as I say, we have got a tax system that is penalising people who are out there making a contribution in the economy. We want to back them and we want a tax system that backs them. We want to work with the states and territories to get that result.

KELLY:

How are you going on that front? Arthur Sinodinos, again, to quote him, as I say, he has got some background on this he was there alongside John Howard when he did it first time round. He was yesterday emphasising the need for collaboration with the states. He says, you have to make sure in the run up to an election that states are at least neutral on the issue of a GST as opposed to actively hostile. You certainly don't have that situation yet. Daniel Andrews, the Premier of Victoria, a blanket no on equity grounds. Have you tried to convince him yet?

TREASURER:

We're working with Tim Pallas and we are working with the Victorian State Government as we are with Queensland and South Australia.

KELLY:

And how is that going?

TREASURER:

I am encouraged by the good faith way states are engaging with us because it's not just about tax, it's about the payment system, it's about the compensation measures that potentially and would necessarily have to be involved in anything like that. You will notice in David Gillespie's own package that he has outline and gone through quite a number of the compensation measures. The Productivity Commission recently did some interesting work on the GST which showed that it was nowhere near as regressive as its opponents have laid out and that has implications too which shows it's far more achievable, I think, to put in place compensation measures these days which recognises those risks than it was previously. I think that is a good thing. The point is, Fran, we are talking and we are having a positive discussion about how we want to make the tax system better for people in this country. The Opposition has just jumped into bed, pulled the doona over its head and said, no, no, no, no and they're just carrying on like a petulant child on this. They should be part of the debate and be part of a change that we think could really improve the real outcomes for people in this country through the tax system.

KELLY:

Treasurer, the way you are speaking you clearly are opening up a debate on let's have a GST. That is your position. Let's have a GST as part of a tax package that gives income tax cuts to low and middle income earners that addresses the bracket creep and puts fairness into the tax system. That’s what you are saying.

TREASURER:

What I'm saying, Fran, is we have got a problem that we need to solve. We have a problem with our tax system which is actually retarding growth in our economy and it’s retarding the opportunity for Australians to be in jobs and to work more and to be able to save more and investing in new ideas. We want a system that does all those things. We don't have one at the moment. We are not getting locked into any one feature or any one system or any one answer. What we are doing is we are talking to people about it, we are working collaboratively with the states and territories in a very mature way and a very open way and a good faith way and I think at this point of the discussion there is no need to get too locked into these features because we are still trying to get an agreement on the top line benefits that we want people to be able to get from this exercise.

KELLY:

You have got to be careful calling it just a feature though, given that Labor is going to be pointing out that a 15 per cent GST would increase household budgets by $4,000 even before you broaden the base…

TREASURER:

Labor will always use something to be scared about.

KELLY:

But it is true.

TREASURER:

No, it is not true, Fran. If you put the appropriate compensation measures in place and if you have a package which deals with all the other issues that are relevant, Australians can be better off and that is the only reason why you do it, Fran. That is the only reason why you do it is to ensure that we have a better system where our economy is stronger, where people will have more opportunities for jobs, the jobs they're in that can be more secure. Now, of course Bill Shorten will want to give someone something to fear and someone to blame but he will never give anyone anything to believe if he keeps carrying on like this and I suppose that is why they have formed the view about him that they have.

KELLY:

To sell the GST increase you would have to persuade people that it passes the fairness test. Is the trade-off that you are thinking of addressing bracket creep, giving people tax cuts? Will you do as Bill Shorten says, you should cut back super concessions to the rich – is that going to have to be all part of this?

TREASURER:

We have already made it clear that we are looking very closely at superannuation and I have made a number of comments about that, particularly over the last week or so in setting out what the principles are on superannuation. Tax incentives for superannuation to ensure that people when they come to retirement age won’t be dependent on an aged pension. We want greater choice and flexibility for people as well. People over the course of their lives might have their work patterns disrupted because they are having children or they have had to care for loved ones – things like this. Superannuation changes aren’t about tax and trying to get more tax revenue. It is about having a superannuation system that achieves its purpose. Every time Bill Shorten and Chris Bowen talk about superannuation all they can see is the tax dollars that they can raise. We want a superannuation system that just helps people to be independent in their retirement and as focussed on those who are most at risk of not being independent in retirement and that is how we are looking at the system.

KELLY:

Scott Morrison, thank you very much for joining us on Breakfast.

TREASURER:

Thanks Fran, thanks for your time.