12 April 2018
Transcript - #2018041, 2018

Interview with Tom Elliott, 3AW

Subjects: Australian Taxation Office; immigration; infrastructure; GST; superannuation; Turnbull Government’s crackdown on multinational tax avoidance; Aussie anthems

TOM ELLIOTT:

Mr Morrison, good afternoon.

TREASURER:

Hey Tom.

ELLIOTT:

Firstly, on Four Corners on Monday night the ABC had this story about the Australian Tax Office, the ATO, saying they have really been giving small business a hard time. Now, I run a number of small businesses and I can tell you we used to live in fear that the ATO would change its mind about policy. I mean one of the policies is, for example, people who work as contractors and have an ABN and they bill per job that they do and then the ATO comes in and says 'no you are not a contractor you are an employee and we are going to take away your ABN and by the way you owe us $50,000 in tax.' Are you going to look into this?

TREASURER:

Yes, Kelly O'Dwyer has already set up a review which Treasury is doing into the matters that were raised in relation to the ATO the other night and obviously the things that are related to that. Let's not forget there is an Inspector General of Taxation that was set up back in 2002 under the Howard-Costello Government. That was upgraded again by our Government when we came in 2013. There are oversight powers over the ATO in addition to the Minister and Treasurer and so on. The ATO have an important job to do. They have to implement tax law but they also have to do it with the right tone and the right attitude and we don't want that to a brake on how small businesses in particular get on and do their business.

ELLIOTT:

They call it the gig economy these days. People aren't having just one employer that the work for, they work for a variety of people. I mean I do that for example. So, you have to set yourself up, usually as a company or something like that, and you have to get an ABN and you charge GST and so forth. But if the tax office turns around and says, no you are actually an employee and they do it after the fact it can make life very, very difficult for people.

TREASURER:

The tax system has got a lot more difficult with things like the gig economy. We are not the only country that is having to deal with this. The way people work is different now. The way these companies are structured is different now. In some cases what we are doing is trying to update our tax laws so that would actually make the job easier for both the small businesses and the individuals [inaudible] and the tax office as well. So, we have got to get the balance right here. I know that is something a politician will say, but it is true. There is the law which needs to be implemented but we also don't want that to be followed through in a way which we think unfairly penalises Australians and small businesses.

ELLIOTT:

Without going over all the details because some of it is quite complex, one of the allegations made in the story is that tax office employees are incentivised to use management speak word, to extract as much money as possible out of people. So, they get remunerated extra if they can have a win against a taxpayer, an unwitting taxpayer. Is that culture alive and well?

TREASURER:

No, that is not how the public service operates. It is not a company. It doesn't have bonus pays for these sorts of things.

ELLIOTT:

Really? So no one in the tax office gets a bonus?

TREASURER:

No. And I would be horrified if they were. I would be horrified if they were. It is their job to go about the job of collecting the revenue of the Commonwealth in the most fair and efficient and judicious way that they can.

ELLIOTT:

But do organisations like the tax office understand what it is like to run a small business. Do you have small business people employed in there?

TREASURER:

Of course, we have a lot of people who have come into that. Chris Jordan for example, he is the tax commissioner, we didn't pull him from the public service. He was recruited from outside the public service and has come in and made a lot of changes which I think has improved things. While I do think the program the other night did highlight a number of issues, fair enough, and they need to be looked at. But equally I think we need to acknowledge the work that Chris Jordan and his team has done to actually improve things in a lot of other areas. I mean for example, they are very effective in ensuring multinationals pay their fair share of tax and the new laws that we gave them to that means we have some $7 billion of sales revenue which has now come into the tax net as a result of their good work.

ELLIOTT:

So why go after small business so much?

TREASURER:

Well, everyone should pay the tax that they have to pay. I believe taxes should be lower and that everybody should pay them.

ELLIOTT:

Good. Well, we will look forward to that. Now, immigration, there has been an on-again off-again discussion in the last few days about whether or not senior people in the Liberal Party are discussing immigration. Peter Dutton apparently has urged a 20,000 person reduction in our annual immigration targets. This has been denied by other people. Is it being discussed? Are we going to see a change in policy on immigration?

TREASURER:

Every year, as Immigration Minister when I was in that job, there is a cap that is set every year. It's been the same since 2012. It's 190,000. It's a cap.

ELLIOTT:

Are you talking about capping it at a lower level – say 170,000?

TREASURER:

No we are not because it is as far as it can go. Last year it was 183,000. It has actually fallen over the last few years since we have been in Government.

ELLIOTT:

But are you talking about dropping it further?

TREASURER:

Well, there is no need to lower the cap if it doesn't matter if you don't reach the cap.

ELLIOTT:

Well, why is Peter Dutton talking about it?

TREASURER:

Well, Peter has actually said today that what the Prime Minister said yesterday was correct. We are talking about population growth. What is important to understand is that population growth is the difference between obviously how many people are here sitting on trams, trains, and buses at one point in time of the year, a 1 July and 1 July the next year and how many people that grows each year is not just a function of permanent immigration. In fact…

ELLIOTT:

About 60 per cent is immigration.

TREASURER:

No it's not. A third is permanent immigration for that overall increase in population growth.

ELLIOTT:

Ok, but here in Melbourne for example you have a massive temporary but still present student population.

TREASURER:

Absolutely.

ELLIOTT:

And 55-60 per cent of the increase each year is coming from overseas.

TREASURER:

It is coming from students, it is coming from tourists, its actually not coming from skilled visas. We have actually done a lot of work to tighten up the temporary skilled visas. In fact the number of people who are here on skilled visas now has actually fallen. So, Tom, this is the point. If you want to control population growth it is not permanent immigration that is driving it up. It is actually what is happening with increasing numbers of students and others who are coming on temporary visas. Let me tell you what would happen if you actually reduced the cap on permanent immigration. Let's say you took it from 190,000 let's say to 150,000. Those 40,000 people would still be here. They would just be on temporary visas.

ELLIOTT:

Why would they still be here?

TREASURER:

You know who the biggest loss of permanent visas are in Australia? When people apply for a permanent visa – they are already here. They are already on the bus, they are already on the train, they are already on the tram.

ELLIOTT:

Why don't you limit the overall number of visas and say we are just going to have less people coming in?

TREASURER:

Well that is a very different proposal, I should say. What you are suggesting is that the number of international students that come, and study in Australia and pay their full freight on tuition, which actually makes it more affordable to provide university places to Australians, which actually, the international education industry here in Victoria is massive. It is in the billions and generates thousands upon thousands of jobs. Are we going to say to all of those out in regional Australia who depend on tourism we are going to cap the number of tourists who come? Because Tom, these are the things that are driving population numbers up. So what do we have to do about it? We have to build infrastructure.

ELLIOTT:

The people who are here…

TREASURER:

That's what we have to do.

ELLIOTT:

That's a separate issue.

TREASURER:

Well, no, it's the same issue.

ELLIOTT:

It's the other side of the coin. But if for example you are saying righto there are these temporary visa holders who are here in their tens of thousands and having been a temporary visa holder they say, look I love Australia, I want to stay here. What if we said, well there are only now 150,000 places, we will pick the best 150,000 then we stop.

TREASURER:

Sure and those temporary visas would still be here.

ELLIOTT:

No, they leave. Their time runs out and they go home.

TREASURER:

No, they would stay in the queue. They would just stay in the queue onshore. That's what happens Tom.

ELLIOTT:

But you can't stay in the queue if your visa runs out.

TREASURER:

That would come two, three, four years later.

ELLIOTT:

But it would happen.

TREASURER:

No, my point is if you did that to the permanent immigration intake, the biggest source country for people applying for permanent visas in Australia are people who are already in Australia. It's actually Australia. So, the reason I am so focussed on this is I am not going to go out there Tom and tell people who are worried about how many people are on the roads, or how many people are on the bus or on the tram and tell them a lie which says if we just reduce the permanent immigration intake all of those problems would go away. In fact nothing would change because there would be just as many people sitting on the bus and the train and the tram…

ELLIOTT:

For a short while.

TREASURER:

No for years Tom.

ELLIOTT:

Ok, let's say you took it back to zero. No more permanent immigrants for the next five years eventually those temporary visa holders would have to go home.

TREASURER:

Who is suggesting that?

ELLIOTT:

I'm not suggesting that but you are saying it can't be changed it can be changed if you want to have …

TREASURER:

If you want to deal with the rising population growth the thing that you have to control is how many people are coming here on student visas, how many people are coming here as tourists…

ELLIOTT:

And how many people are staying here permanently.

TREASURER:

Well, that number, as I said, has been falling.

ELLIOTT:

And are you discussing dropping it further?

TREASURER:

No because it will fall on its own.

ELLIOTT:

Well, then why do we keep seeing all these news stories saying that Peter Dutton is discussing dropping the number.

TREASURER:

You would have to ask the people who are writing those stories, mate.

ELLIOTT:

So, Peter Dutton is not talking about it?

TREASURER:

No, he actually supports the policy that we have and has said so.

ELLIOTT:

Ok. Leadership, never far from any discussion with you or any other senior member of the Government. We have had Tony Abbott say that Malcolm should go by Christmas. We had Barnaby Joyce giving the same sort of helpful advice. Are there going to be any moves against the Prime Minister in the next six months?

TREASURER:

No, and those other deadlines are just rubbish. It's just trouble making and rubbish.

ELLIOTT:

We heard that Josh Frydenberg and Peter Dutton both have leadership ambitions. Are you in that list as well?

TREASURER:

Look, I answered the same question the same way they did and when people ask you that question you answer it honestly but the point is it is irrelevant because all of us support Malcolm Turnbull because he is the right Prime Minister for Australia, not just now but beyond the next election. And there is only one alternative and his name is Bill Shorten and he would be a disaster for Australia. So, anyone who is working against Malcolm Turnbull is working for Bill Shorten.

ELLIOTT:

Would you like in some way to stop Tony Abbott and Barnaby Joyce from the backbenches saying all these things about the leadership, about sniping?

TREASURER:

That's just not how we operate. They made their own commitments in terms of what they said they would and wouldn't do and others will judge them based on what their own words were.

ELLIOTT:

Very quickly the Budget. How is preparation for the Budget going? That is only four weeks away.

TREASURER:

Mate, it is going really well and particularly well from the point of view of what we have been looking at here in Victoria. It goes very much to what you and I were talking about a few minutes ago…

ELLIOTT:

Infrastructure?

TREASURER:

Infrastructure. We know that there is a lot more work that we need to do here in Victoria. Sure it is frustrating that we have already sent the state government $2.6 billion that they are still sitting on and haven't got on with the projects but that said, and the Snowy Hydro purchase that we bought off the Victorian Government that has freed up an additional $2 billion on top of that…

ELLIOTT:

How has that freed it up? I thought you had to give the Victorian Government $2 billion?

TREASURER:

Yeah we did. We bought their share of Snowy Hydro for $2 billion and the condition on that was that they would spend it on productive infrastructure. So, it has worked like an asset recycling program. They sold us the asset, they got $2 billion and they have got to spend that on infrastructure and we think that is great. But we know there is a lot more work to do on infrastructure here to deal with the congestion and other challenges here in Victoria and so we have been working hard on that for this Budget and we will have some announcements to make about that maybe sooner than people think.

ELLIOTT:

Tax cuts?

TREASURER:

Well, we have said that we are going to provide middle income tax relief in this Budget. We have been saying it since November.

ELLIOTT:

Will they will be ones that the federal Parliament will actually pass?

TREASURER:

I would certainly think so and I would certainly expect so but I should stress this about them, they will be responsible, they will be affordable, they will be things that enable them to do that and allow Australians who have worked hard to achieve the growth that we have seen in the economy in recent years and what we expect in the years ahead to be able to be the first to share in the proceeds of that growth.

ELLIOTT:

Your chance now to ask the Federal Treasurer Scott Morrison a question. Peter, you're first, go ahead.

CALLER:

Thank you Tom, thank you Mr Morrison for taking the call. I would like to know when Victoria will get its fair whack of GST and stop subsidising the other states. We are the fastest growing state in Australia and yet because there is a Labor Party down here, the Liberal Party seems to hold back on their rightful money and we are all going to be paying the big price for it and not having our infrastructure done properly because you are not giving us all the money.

ELLIOTT:

Well, Peter, let's let Mr Morrison answer. I think there was quite an important development about this from Victoria's perspective just a few days ago.

TREASURER:

There was last week. Now, first of all the GST is not decided by the Commonwealth Government it is actually split up on a formula which is done by an independent Commonwealth Grants Commission…

ELLIOTT:

I thought you just sat there and said we don't like Daniel Andrews so we won't give him anything.

TREASURER:

That's not how it works. There is an independent formula and that is how it is distributed. But the good news for Victoria is that last week when that formula gave us the numbers for next year, their increase for the GST was about $1.9 billion and now they are basically on about parity. So, for every dollar that is collected or thereabout from Victorians is coming back to Victorians next year. Victoria has been traditionally what has been a donor state like New South Wales, the bigger states tend to collect more revenue and that is given to the smaller states like South Australia, Tasmania and the Northern Territory.

ELLIOTT:

So, you're right, Victoria is now going to get 99 cents to the dollar. I spoke to the State Treasurer Tim Pallas last week. Does that mean, because there are these other grants that you dole out to the states, so, if the GST money is redistributed and Victoria gets more of it do you just then give Victoria less of other grants because we have more GST?

TREASURER:

No, the other grants are all taken into account in the formula. So, all of the money that goes through and occasionally some of those payments may be exempted but that is pretty rare. So, spare a thought for Western Australia, they only get less than 50 cents in the dollar of what is collected there and it has got a lot less than that in previous years and we have had to top them up for that reason because that was a bit ridiculous.

ELLIOTT:

One of the reasons they always have these rumblings about succeeding from the rest of the country. Bill, go ahead.

CALLER:

Yes, Mr Morrison, just in reference to the pension, with the previous, when Mr Abbott was in, they reduced the Centrelink payment purely based on how much you had in your super and it was $1.145 million I think it was and they dropped it down to $823,000 and the assets themselves went from $150 back to $3.

ELLIOTT:

So, Phil, what is your question?

CALLER:

Are they going to review it and give back to the pensioners some release because a lot of pensioners, even like myself, will run out of super.

ELLIOTT:

I think what Bill is asking is will you change the assets test to allow more people to get the pension?

TREASURER:

These are changed from time to time. It was actually increased back in 2007 when there was $20 billion in surplus and $40 billion in the bank and that was changed when Tony Abbott was Prime Minister, I was the Social Services Minister at the time. It was brought back to where it was before basically, before that change. So, it was just returned to that level. One of the things we did do, importantly, was when that happened, people who had previously been on the pension, the state government would not then give them the discounts on rates and things like that. We have had that changed and so if you had previously been getting those from the state government them we change the rules because we hoped the states government were doing the right thing…

ELLIOTT:

You committed to me a few weeks ago, and to our audience, to stop fiddling with super.

TREASURER:

Yeah we are not changing super.

ELLIOTT:

No more changes.

TREASURER:

The only changes you would make were ones that I am sure people would be happy about. So, none of those other changes. I think we made the changes we needed to because of what was sustainable. We have got a population that is getting older. I'll tell you one thing we won't do and that is something the Labor party is proposing to do, if you get a tax refund from the shares that you own…

ELLIOTT:

The franking credits.

TREASURER:

The franking credits and you put them in a self-managed super fund. Even if you are a pensioner in the future, Bill Shorten will steal your refund. He will take it back. And we are certainly not going to do that.

ELLIOTT:

Phil go ahead.

CALLER:

I just wanted to ask the Treasurer why overseas companies operating in Australia aren't taxed on their revenue?

ELLIOTT:

Well, that is a good question because I think trying to tax companies on their profits are difficult because profits are a rubbery concept but tax on revenue is a much more concrete thing.

TREASURER:

First of all, the GST is a revenue based tax and we have ensured that GST now applies to digital services. So, things that are provided over the internet, so Netflix and things like that…

ELLIOTT:

So, if I buy a song on iTunes, which I do…

TREASURER:

Yes, you'll pay GST.

ELLIOTT:

I'm paying GST and if I buy a program on Netflix I now pay GST.

TREASURER:

Which you didn't before and on top of that from 1 July this year what used to be GST exempt on things that you bought overseas online, so I don't mean Netflix or things like that, you know buying a pair of socks or something. I don't know how many people buy socks online maybe not a lot of people do but if you went down the main street and bought your socks there you would pay GST on it but the foreign company that is selling it to you over the internet you don't. So, we are evening that up from 1 July. This actually increased the GST overall pool for all the states. Last week I was able to say that about $1.8 billion of the increase which was more than half in the GST pool had come from the Commonwealth Government making sure, particularly overseas companies were paying their fair share of GST. Now, on top of that we have introduced the multinational anti avoidance legislation and that is already generating billions of dollars in extra tax revenue from these multinationals. But you raise a very good point about revenue and it is this. The new economy, the digital economy, the gig economy – call it whatever you like – what it has meant all around the world is that where money is paid, where profits are earned has gotten very, very fuzzy. I was at the G20 meeting with all my counterparts from other countries. France and India and places like this. They are all dealing with the same problem. These profits, where they sit in these companies, it's like water going through your hands, and all of these countries are trying to work together to ensure that we can tax this the right way so they pay their fair share. If we can do it all together then that minimises the downside risk to any one country.

ELLIOTT:

Well, good luck with herding all those particular cats. Now, we mentioned songs before. Last night Prime Minister Malcolm Turnbull looked a bit silly because he was with some Commonwealth Games Australia athletes and they played Johnny Farnham's You're The Voice and while everybody else sang along Malcolm Turnbull didn't seem to know the words. Now, we ae just going to give you a small test here Mr Morrison. I have got some songs, our audience believes you should know what these songs are. First up have a listen to this... Ok, song and artist.

TREASURER:

Cold Chisel – Khe Sanh

ELLIOTT:

Ok, how about this…

TREASURER:

Holy Grail – Hunters & Collectors.

ELLIOTT:

You're quite good at this aren't you?! That is a song that for years was associated with the AFL and you're more of a rugby man.

TREASURER:

I am a rugby league guy and a rugby guy but I used to love listening to Hunters & Collectors. I listen to them occasionally now. Throw Your Arms Around Me is my preferred song. I can even play it on the ukulele.

ELLIOTT:

Can you?

TREASURER:

I can.

ELLIOTT:

Alright, so this was a big hit in the early 90s…

TREASURER:

Horses – Daryl Braithwaite.

ELLIOTT:

Daryl Braithwaite will be so pleased.

TREASURER:

Howzat?

ELLIOTT:

I'm going to give you a slightly heavier song here…

TREASURER:

He's just said the name of the song [laughter].

ELLIOTT:

I'm trying to make it easy for you.

TREASURER:

AC/DC –It's a Long Way to the Top.

ELLIOTT:

Long Way to the Top and finally what about this…

TREASURER:

INXS – New Sensation

ELLIOTT:

Well, ok, so you knew all of those and I assume you probably knew John Farnham's You're the Voice as well – should you be the Prime Minister?

TREASURER:

Not based on that. The person who should be Prime Minister is the person who is sitting in that job and I don't care how well Bill Shorten sings – and I suspect it's not that great – that wouldn't qualify him for that job, let alone any other criteria you'd care to name.

ELLIOTT:

Will you do an Aussie playlist for Malcolm Turnbull so he can listen to some of those songs?

TREASURER:

I have got one on my Spotify which I listen to belting up and down the road from the Shire down to Canberra which I enjoy very much and there is a fair bit of Tina Arena in there as well.

ELLIOTT:

Scott Morrison, thank you for joining us.

TREASURER:

Thanks a lot Tom.