21 August 2015
Transcript - #2015172, 2015

Interview with Kieran Gilbert, First Edition, Sky News

KIERAN GILBERT:

Mr Hockey thanks so much for your time this morning. There’s an expectation that the threshold - the $1,000 threshold for GST applicable to online purchases - will be scrapped today. The truth of it though is this should really be the start of reform on the GST, isn’t that right?

TREASURER:

Well, to remove the $1,000 tax free threshold on products that are purchased from overseas is as much an integrity measure as anything else Kieran. It is patently unfair that Australian businesses have to charge a GST on a product or service under $1,000, but if you buy it from someone overseas you don’t have to pay it. That’s unfair to Australian businesses. That’s unfair for Australian jobs. I think the states will agree to the change, unanimously, it needs to be unanimous, and that’s one of the outcomes from today. I think we’ll be also having a very serious discussion about tax reform more generally. We need to have a tax system that is ready for this new 21st Century economy, and all the states are coming to the table in a constructive fashion today, I know that after our discussions last night.

KIERAN GILBERT:

So are you confident of some sort of grand bargain here? Because the reality is that the GST is an efficient tax with appropriate compensation, you might be able to start to eat into the bracket creep which is causing problems in terms of the marginal tax rates which are way too high in terms of the OECD and other comparable countries.

TREASURER:

Well, we do have to lower income taxes over time, that is absolutely essential. Because if with rising wages people fall into higher tax brackets, it’s a disincentive to work and we need Australians to have the opportunity to work, to earn more money, to have greater prosperity. If the Government just takes a bigger and bigger piece of the pie from people as they get rewarded for that hard work, then it’s a disincentive. So we need to fix that, there’s no doubt about that. It needs to be a cooperative effort between the states and the Commonwealth. Importantly, we need to ensure that we have the sort of revenue base that will pay for services that Australians expect into the future.

KIERAN GILBERT:

But don’t you have to, you know, convince the electorate that this is the right [inaudible] and stare down what is inevitably going to be a scare campaign on this, by saying look there would be appropriate compensation, but this is the right way forward. This is the most efficient approach. Even Jay Weatherill seems to be open to it.

TREASURER:

Well, that’s right - major tax reform would need to go to the electorate, there’s no doubt about that. The Australian people would decide. In the interim, any changes to the GST as they do usually, they require the unanimous agreement of the states and the territories because ultimately they get all the money from the GST. But, there’s no doubt in my mind that the only way you could ever have an increase in the GST is if you had a very significant compensation package that covered the cost of lower and middle income Australians.

KIERAN GILBERT:

But the idea that you raise the Medicare levy, this sounds like it’s just a flat out increase in tax rates. That hardly improves the competitiveness of the system, does it?

TREASURER:

Yeah, look an increase in the Medicare levy and certainly at the scale that is being suggested is simply an increase in the tax rates and that harms the economy, there’s no doubt about that. Ultimately it slows down economic growth and quite frankly, it would be a band-aid solution. Having said all of that, we are prepared to discuss all the issues and work them through with the state treasurers. I think in this environment it’s hugely important that everyone is fully informed, that they’ve got all the information about international comparisons, and about the economic impacts of individual tax changes, so it will be a lengthy discussion on that. It’s also the case that there’s a lot of goodwill. In a dinner last night, when we’d gone behind closed doors, all of the treasurers, state treasurers whether they are Liberal or Labor, everyone came to the table with goodwill because we all know that it’s in the national interest to get this right.

KIERAN GILBERT:

Mr Hockey I know you’ve got a busy morning, a couple of quick questions to finish. Why is the Cabinet agenda so thin right now?

TREASURER:

Well it’s not.

KIERAN GILBERT:

You deny the reports that there is little being addressed or legislation being approved by Cabinet?

TREASURER:

That’s complete rubbish, that’s just complete rubbish. I mean for example, we spent around one and a half hours discussing the impact of the Federal Court decision on the Adani Carmichael mine in Cabinet this week, and then introduced legislation two days later. So quite frankly, we’ve had an incredibly busy agenda. This week I introduced legislation to increase the fees and put in place civil penalties for breaches of the foreign investment rules. So, I mean there’s been a large amount of legislation introduced this week. So frankly Kieran, I wish the gallery would get away from all the gossip and innuendo and look at some of the major and significant policy initiatives that are being dealt with by the Parliament and by the Government.

KIERAN GILBERT:

Well we’ve spent most of the time looking at the tax reform this morning, just one other bit of gossip which…

TREASURER:

And good on you Kieran for doing that, good on you for doing that.

KIERAN GILBERT:

This gossip starts with your own colleagues though as you know, some of these leaks, it’s ugly isn’t it?

TREASURER:

There’s always going to be gossip in politics. It just seems to be more often reported these days. But look, you and I know there’s a lot of substantial work being done in a lot of areas. I mean, you’ve even got for example on the front of the papers today real stories about very significant national security issues in Syria. So these are the things that actually affect real people and of course our agenda on jobs, and creating more jobs and greater prosperity is being rolled out and that’s a hugely important step…

KIERAN GILBERT:

It must frustrate you then to have the distractions?

TREASURER:

Well, that’s why I get back to talking about the big things Kieran and I know you will too.

KIERAN GILBERT:

Thanks for talking, appreciate it.