SPENCER: Senator Penny Wong, the federal Finance Minister, she joins us now. Senator, thanks so much for your time this morning.
WONG: Good to be with you Adam.
SPENCER: Give us some background on this summit. Where did the idea come from?
WONG: This summit was something that the Prime Minister agreed with the independents when we formed Government. But it also is something the Government is very happy to work on with business, with the community because tax reform is important. Were an economy thats going through a lot of change because of whats happening in the global economy as economic power goes east towards China and India and other nations. So tax is an important part of the reform process.
SPENCER: But honestly, if it hadnt been part of the deal with Rob Oakeshott would it be happening?
WONG: I think weve got a pretty strong record in tax reform actually. Weve delivered about $47 billion of personal tax cuts, were giving a tax cut to all 2.7 million small businesses in this country. We put in place the Henry Review and weve implemented some 32 recommendations of it. There are two points about tax reform, one is, its never finished youve got to keep working at it. And the second is, you do have to think through what are the priorities for reform.
SPENCER: The Financial Review editorial says today, anyone expecting the next two days to be a red letter day in the history of Australian taxation reform should probably brace for disappointment. The practical reality is the Tax Forum has an agenda with too many items, too many participants to be able to cut a deal on major tax reform. Should people not get too excited about what might happen over the next couple of days, Senator?
WONG: I think the next couple of days are a really important forum for people to put their views. And youve seen quite different views through the media from different stakeholders, different industry groups, community groups, business and others. And thats very useful. I hope also people can listen to what other people have to say. As the Finance Minister, I can say to you that people have come to me telling me whats good for their sector which is fair enough. What Government has to look at is whats good for the whole economy, whats good for the whole community.
SPENCER: But with that many participants over two days is it simply too broad an agenda to hope to achieve much?
WONG: Its always difficult isnt it Adam. If we had fewer participants, youd probably be asking me about who had been excluded. (laughs) I reckon its probably about right.
SPENCER: (laughs) So what is up for discussion?
WONG: Were happy to hear from people about what they think needs to happen in tax reform over the medium and longer term, as well as over the near term. We have put our views on a number of issues where the Governments position is clear but people are free to raise what they wish.
SPENCER: Yes, as long as they dont raise broadening or increasing the GST because
WONG: They can raise it.
SPENCER: But thats been thoroughly ruled out by the Treasurer hasnt it?
WONG: By the Government, the Government has said that is not our policy, and thats not unreasonable.
SPENCER: When Phil Lewis from the economics faculty of business, the head of economics at the faculty of business at University of Canberra says just about anyone who analyses Australian tax believes the Government is wrong to exclude the GST, apart from it being politically a very tough sell to increase the rate, why is the Government ruling out GST reform?
WONG: Because we dont believe that sending a bill to Australian households for tax reform is sensible reform. And I dont think everybody is suggesting GST should be changed. I think there are a number of community sector advocates who would not be supportive of that. And this is my point that I made earlier, people have got different views.
SPENCER: Your Governments carbon tax will send a bill to households?
WONG: The Governments clean energy reforms which include a price on carbon will also provide a very substantial set of assistance to Australian households, including through the tax system. So one of the reforms that is part of the Clean Energy package is the tripling of the tax-free threshold. That will take a million people out of the tax system and provide a tax cut to people earning under $80,000 a year.
SPENCER: But the states argue, the very thing the GST did when it initially came in was the GST came in and as compensation to everyone, a raft of inefficient and duplicative state taxes and levies were removed. Surely part of that ongoing process is we should consider raising the possibility of raising the GST if that meant the states could remove other inefficient duplicitous, duplicative taxes. Then theres your compensation and surely thats a smoother, more efficient system for everyone.
WONG: I like the duplicitous, that was good. That was funny. (laughs) Wed be very happy if the states would look to tax reform of their own taxes. There are quite a number of inefficient state taxes, and it is open to the states to consider how they would make more efficient changes within their revenue base. But for the reasons weve outlined, were not going to be increasing the rate of the GST, nor extending the base.
SPENCER: Im talking with Senator Penny Wong, shes the federal Finance Minister. Minister youve said that you have a great track record on tax reform, theres been a lot of tax reform in the years of the Labor Government since 2007. But in the big areas of tax reform, the carbon tax has been virulently opposed in sections of the community, its extremely unpopular. The mining levy in its various forms, your Government were said to have capitulated when there was strong opposition to it and passed a much weaker version of that tax. So wheres the proof that anything gutsy, anything ambitious is going to happen over the next couple of days?
WONG: Come on Adam, you reckon its not gutsy to put in place a price on carbon that is so violently opposed by the Opposition? You dont think its gutsy to put in place a mining tax which will fund a tax cut for small business and other companies around Australia which is also completely opposed by the Opposition?
Mr Abbott wants to tax miners less; he wants to tax small business and manufacturers more. When we are confronted with this sort of economic irresponsibility what the Government will do is continue to hold to our reforms.
SPENCER: But in the face of a $20 million advertising campaign by affected groups, your Government made changes to the mining tax that has seen anything up to $60 billion lost over the next decade. So that makes it very difficult, despite any ability that you might have, to really think about ambitious tax reforms. Someone only has to run a TV commercial for one three-hundredth of the amount involved and those concessions are made.
WONG: I dont agree with you. This is a very substantial reform. It is a reform that remains very bitterly politically opposed but the Government will implement it. Its a reform which for the first time will provide a better revenue stream for Australians from our commodities - from our resources sector given the prices that we are currently getting for these resources. We will invest that revenue into lower taxes for other companies, lower taxes for small business who will get a head start, and higher superannuation contributions for Australia.
These are very important reforms Adam. And they are precisely the sort of reforms that you want to have in a economy where you are seeing a mining boom but other parts of the economy are not growing as strongly. They are precisely the sort of reforms that are in the national interest.
SPENCER: Youve given your thoughts on the way the Opposition has opposed tax reform that youve attempted. You do get the impression that these days you only have to describe something as a tax in the media and you can turn a lot of people against it in general. Is it going to be difficult for the Federal Government to ever take in more tax than it does now? There are some people arguing with the ageing demography and if you want, real social reform in this country, some people argue the Government actually needs to bring in more money. For decades, weve had both sides of Parliament proudly trumpeting how theyve slashed the taxation haul by the Government. Is it ever conceivable that the Government could increase its tax tape?
WONG: Id make a couple of points. The first point Id make is we are actually taking less tax out of the economy than Peter Costello did. And thats one of the commitments we made when we put money into the economy as a result of the global financial crisis. We said were not going to raise taxes beyond that which we inherited. In fact we are taxing less, significantly less.
SPENCER: But whether they can achieve it or not Joe Hockey has boasted theyre going to tax less than you when you eventually go into opposition, you promise youll eventually tax less again. Some people say at least the Government should have the guts to go were going to tax a bit more and do something the money.
WONG: Joe Hockey is a joke, hes a bloke whos got a $70 billion black hole. Hes never got his costings right once since he became shadow treasurer. And he wants you to believe that he can fund a tax cut. The issue you raise is a very important one, which is the fiscal gap. That is, if we dont change how we deliver services, if we dont grow our economy, if we dont increase participation, the ageing of the population in the decades to come will obviously put greater pressure in terms of Government spending. And one of things that I want to try and encourage people to do at the forum today is to think about the fiscal context, that is, the budget. How we fund we fund health, how we fund aged care. Think about that, not just in the near term but in the longer term.
SPENCER: Enjoy the tax summit in the next couple of days, Minister.
WONG: I will.
SPENCER: Senator Penny Wong, the federal Finance Minister kicks off the tax summit today and tomorrow.
ENDS