30 March 2015
Transcript - #2015065, 2015

Interview with Neil Mitchell, 3AW

NEIL MITCHELL:

Treasurer Joe Hockey, good morning.

TREASURER:

What a great morning. I’m just [inaudible] lots of lovely people around, beautiful sun.

NEIL MITCHELL:

Imagine if you could tax it?

TREASURER:

I wouldn’t want to do that. I don’t want to tax happiness.

NEIL MITCHELL:

Okay, well you’re taxing everything else. You’ve got this discussion paper on taxation; is the bottom line with taxation that we have to pay more – you’ve got to take more? No matter how you do it, you’ve got to take more?

TREASURER:

Well, if spending keeps going on its current trajectory, yes, but we’re going to increasingly going to become uncompetitive and it becomes a bit of a downward spiral at that point because we are competing against nations that have less tax but also have less services. So, somehow we’ve got to do more with less and we’ve got to have a tax system that copes with the future, Neil. You know, when you think about it, how the world has changed so dramatically, as I said in my speech, which I gave a little while ago: Airbnb is the biggest hotel operator in the world but doesn’t have one hotel room. Facebook is the biggest media company in the world and doesn’t employ one journalist. Uber’s the biggest taxi company in the world and doesn’t own one taxi. Everything’s changing and so, we’ve got to have a tax system that’s built more for the 2050s than the 1950s.

NEIL MITCHELL:

But is the aim of the rewriting of the tax law to give more money?

TREASURER:

No, the aim is to have a system that delivers us what we’re already collecting and over time, doesn’t in anyway cost people their jobs or makes us so uncompetitive that businesses just lay off Australians and go and employ people in other countries.

NEIL MITCHELL:

But what’s wrong with the tax system at the moment? What do you think? Is it unfair, what is it?

TREASURER:

Well, there are lots of different pressure points. It’s interesting, two per cent of personal income tax payers pay 26 per cent of all income tax. So, the top two per cent pay 26. So, the suggestion that, you know, richer people do not pay income tax is wrong. They pay – the top two per cent pay 26 per cent.

NEIL MITCHELL:

So, is that unfair though? Because they make a lot of money.

TREASURER:

No, it may well be fair. That’s the point. It may well be fair but what I’m worried about is that sooner or later that two per cent decide they want to go and live in another country where there are lower taxes and we have 12 companies that pay a third of all company tax – just 12 companies. So, if we have a takeover or if we have, you know, a massive fall in the commodity prices or something, and one of those or two of those companies suddenly aren’t making the money they were once, then that completely undermines our ability to pay for the essential services to help those most vulnerable in the community.

NEIL MITCHELL:

What about rorts? I mean, we keep hearing that there are rorts within the tax system; if you’ve got enough money, you can buy the right accountants and lawyers and everybody and rort the – is that true?

TREASURER:

I think less so now because governments – Labor [inaudible] same in ourselves, have done everything we can to crack down on those rorts but money is more mobile than ever before. This is the thing – and the way consumers are behaving has changed. You know, the fact now that you can buy over the internet a good – a parcel, a toy, and you pay no GST, you buy it over the internet, 24 hours a day, seven days a week. It gets delivered to your home three days later and it might come from the United States, it might come from Singapore, it might come from – but it’s not likely to have come from the local toy shop. So, that changing consumer behaviour is changing the way our economy operates and it’s changing the way our tax system operates.

NEIL MITCHELL:

I’d like to get to that in a moment but [inaudible] well take a call. Alan, go ahead, please?

CALLER:

Yeah G’day Mr Hockey, I hear about GST going up. I hear nothing about family trusts and the last thing that I heard was that, you know, it could be worth $7 billion a year. It’s the rich people who are hiding it. You know, Gina Rinehart’s big family fortune is really hidden in a family trust. They don’t pay as much tax – if any at all…

NEIL MITCHELL:

I don’t know if that’s [inaudible]

CALLER:

…and you were going to rewrite – you raised the issue about three years ago and you got shouted down. If we’re going to have a discussion about GST and everybody paying, and I’m a person who earned $300 last month – that’s all I earned…

NEIL MITCHELL:

So, what’s your argument? Look at the family trust first?

TREASURER:

[Inaudible] we have to get rid of the family trust issue that’s hiding taxes.

NEIL MITCHELL:

Alright, thanks for calling. Treasurer?

TREASURER:

Well, I hear what Alan’s saying. The proceeds of trusts are usually taxed in the hands of individuals when the trust distributes the money. Now, there has been some change in that regard but trusts are very important particularly in maintaining ownership – family ownership of farms through the generations, in particular, and some small businesses. As for sophisticated taxation arrangements, there are some people that have incredibly sophisticated taxation arrangements and what government does is when it finds out about rorts – and usually we do and Labor did this as well – we try and close down those rorts. But the big difference between now and what happened five, 10 years ago, is that people can move. They can move to another country and still provide services or goods in Australia because of the internet. Now, the question is: how do we ensure that anyone that earns a dollar in Australia, pays tax in Australia and it comes back to the basic principle: how do we ensure that anyone who earns money in Australia, pays tax in Australia and that applies whether they’re located overseas earning money in Australia or whether they’re actually residents in Australia.

NEIL MITCHELL:

We’re going to take a break and come back with some more for Joe Hockey – GST specifically in a moment.

[Ad break]

NEIL MITCHELL:

The Federal Treasurer is with me. Mr Hockey, it seems – most experts are saying that the best and cleanest way to do – to have real tax reform, is to increase the GST, broaden the base and do away with some other taxes. That can’t happen, can it because the states won’t agree?

TREASURER:

Well, it’s not only the States won’t agree. Every dollar of the GST goes to the States and you need to properly compensate the lowest-income households for the imposition of the GST because inevitably as a proportion of household income, lowest-income households spend more on GST than higher-income households. So, you’ve got to get the balance right and the compensation right. Plus, the GST is being increasingly challenged again, I emphasise, by people buying things over the internet overseas…

NEIL MITCHELL:

So, the GST isn’t the answer – increasing the GST…

TREASURER:

I don’t see the GST necessarily as the answer. I think you’ve got to look at the whole tax system and it’s easy, Neil, for people to say, ‘just increase the GST; just broaden the GST’. The lowest income Australians are going to pay a heavy price for that and you’ve got to have very significant compensation for them if you’re going to do that and that needs to be negotiated with the states.

NEIL MITCHELL:

So, is the GST ruled out?

TREASURER:

No, we’re not going into rule in rule out about individual taxes. I’d be here for the rest of your program but we want everyone to carefully consider what the future looks like and then look at how we’re going to raise the revenue to pay for services that the community expects.

NEIL MITCHELL:

Is superannuation on the line?

TREASURER:

No, nothing’s on the line. I love your turn of phrase – ‘is it on the line? Is it ruled in or ruled out? Superannuation, you know, when Paul Keating designed the system in 1992, life expectancy was 72. Today it’s around 82 and by the middle of this century it will be around 100. What I despair at is when I hear of people that have participated in the superannuation system and then they’re running out of money because they’re living longer. That’s unfair. I see that as unfair. It’s also unfair that there are a lot of people out there that have retirement investments and live off the money from those investments – they pay tax on those investments and people who participate in superannuation may be getting an income where they pay no tax at the moment. So, there are an enormous number of discrepancies and also discrepancies involving the age pension system. So, this is something we’re thinking very deeply about. It is a very, very complicated area of public policy. Importantly, we need to provide stability and certainty and we need a bipartisan approach. So, that’s something we’ll have more to say about.

NEIL MITCHELL:

Just to wrap up, when will it be done? How urgent is this?

TREASURER:

This paper is released today for discussion. If people go to bettertax.gov.au they’ll be able to get all the information they need. We will work in conjunction with the states on the federation – the reform of the federation. I don’t think – it’s the same taxpayer whether you’re paying commonwealth, state or local government tax. So, we’ve got to work in that regard. By the end of this year, we’ll have an options paper and then we will take any proposals to the next election.

NEIL MITCHELL:

New South Wales election result; Tony Abbott now safe?

TREASURER:

I didn’t see Tony Abbott as unsafe…

NEIL MITCHELL:

But he’s hardly stable.

TREASURER:

Well, he is stable but I’d say to you: the election result in New South Wales proves the point that you cannot in politics have no agenda. You actually have to have a policy agenda and you have to take it to the electorate and I think it heartens everyone that believes that Australia needs to change in order to maintain the status quo. It heartens everyone that believes in that, that someone with a courageous policy agenda got re-elected.

NEIL MITCHELL:

And you’re meeting the State Treasurer while you’re in Melbourne to discuss East West Link or is that just one of the issues?

TREASURER:

It will be one of the issues but the Commonwealth Government stands ready to help fund the East West Link…

NEIL MITCHELL:

It’s not going to happen though, is it?

TREASURER:

[Inaudible]

NEIL MITCHELL:

The question is whether you provide the money for something else.

TREASURER:

The question is what else is there? I mean, what other project of that scale, that employs between seven and 10,000 people, and is ready to roll-out now; what other project is there [inaudible] I mean, I know there are a number of much smaller projects including road upgrades and so on, but nothing on a scale of East West and I’m worried about the jobs here in Victoria.

NEIL MITCHELL:

[Inaudible] those smaller projects together [inaudible] it equal East West Link?

TREASURER:

No.

NEIL MITCHELL:

So you won’t fund them?

TREASURER:

Well, the smaller projects – the Victorian Government hasn’t put any smaller projects to us but we know they’ve got some available but certainly they wouldn’t be on the scale of East West.

NEIL MITCHELL:

And you’ve spent $10,000 on a party I believe – taxpayer’s money? I thought that would set you [inaudible] post-Budget party - $10,000. Cigars, cigars?

TREASURER:

No, no, it wasn’t. It was 160 people who work on the Budget and they give up their weekends. They work through the night and as Wayne Swan, as Peter Costello, every other Treasurer before me did, you host drinks on Budget night. It’s not a soiree, it’s not a wild party, I can tell you and you just thank the 160 people for what they did and it was the right thing to do.

NEIL MITCHELL:

Thank you for coming in. Enjoy this – you went to the cricket last night. Is the MCG the best stadium in the world?

TREASURER:

It is. It is, without doubt. I sat with John Key and he’s a great guy, you know? John Key, the Prime Minister of New Zealand is a really fabulous human being.

NEIL MITCHELL:

[Inaudible]

TREASURER:

He was sort of gracious. Those Kiwis [inaudible] don’t go up do they? They’re fantastic.

NEIL MITCHELL:

No, magnificent.

TREASURER:

They are fantastic and there is nothing better than beating New Zealand in sport.

NEIL MITCHELL:

Thank you for your time. There’s a sausage available and a cake if you’re eating these days?

TREASURER:

I’ll go for the sausage more than the little cake, I think? No, no. I’m getting a dirty look [inaudible]

NEIL MITCHELL:

[Inaudible] Thank you for your time.

TREASURER:

See you mate, thank you.