CARABINE: Penny Wong, good morning.
WONG: Good morning, good to be with you.
CARABINE: Minister, were having a Tax Forum because Rob Oakeshott wanted it in exchange for his support for a minority government. But dont we already know what tax reforms are needed, such as the removal of inefficient state taxes?
WONG: I think tax reform is an ongoing process. The Government has already put in place a lot of tax reforms: some $47 billion worth of personal tax cuts. Weve got a mining tax which will fund a lower company tax, and a head start for small business and more superannuation for Australian workers, just to name a couple. And weve implemented some 32 of the Henry reforms. But it is a very useful thing, I think, to have people from all over Australia different industry groups, community groups come to Canberra and put their views about what their priorities for tax reform are.
CARABINE: But the process of tax reform has been underway for some time now. You have the Henry review from a few years ago. Doesnt that give you the blueprint for the type of tax reform this country needs? Whats another two-day talkfest going to tell you about the flaws and inefficiencies in the system?
WONG: The Henry Review did lay out a very extensive set of recommendations. As I said, the Government has picked up some 32 of those. Different people have different views about which aspects of Henry are the priority, and theres some disagreement from some quarters, from some parts, of what Dr Henry recommended. I think, given where our economy is, and given the sorts of changes were seeing a very significant and structural shift, because of whats happening globally this is a good time for us to come together and have the discussion about what are the important priorities around tax reform, and what lies ahead.
CARABINE: But, talking tax, The Australian is reporting today that changes to corporate tax made last year have had some unintended consequences. Companies involved in takeovers will be able to claim tens of billions of dollars in losses stretching back nearly a decade. Is that the case, and, if so, whats the Government doing about it?
WONG: I think theyre called right to future income provisions actually date back quite some time. The original provisions were introduced by the Howard Government in, I think, 2002, and
CARABINE: And you did the amendments last year.
WONG: There were bipartisan amendments subsequently. I understand that there have been issues raised, the Government has asked for advice, and is working through the response to that advice with industry. So, obviously well do that, well do that properly, and I wont be pre-empting our response until weve done that.
CARABINE: But what could be the effect on the budget bottom dollar? Could the Government be inundated by claims for billions of dollars of tax deductions? Wont that put even more pressure on your forecast surplus, budget surplus, for next year?
WONG: Im not going to get drawn into what might or might not happen. Issues have been raised. Minister Shorten is working through those issues, first with the Board of Taxation, and also with different parts of industry, and the Government will respond in due course.
CARABINE: Are you concerned about the Governments exposure here?
WONG: Im always concerned about public finances, Alison, but I didnt need that issue to be concerned about them thats the job of the Finance Minister.
CARABINE: Well, no doubt that you are concerned about money, because your Department is warning of an $80 billion shortfall by the middle of the century. Thats because revenue collections wont be keeping up with Government spending, especially with the ageing of the population. But the GST is off limits at todays forum, the Government wont be entertaining any changes to the GST settings. Isnt it the case that, sooner or later, the Government will either have to increase the GST rate, or extend the base? As we heard earlier on Radio National Breakfast, you cant have serious tax reform in this country without looking at the GST.
WONG: I dont agree with that last comment. I mean, that is a view, but we dont believe that that is the only way you can look at tax reform. And as Ive previously said, we dont think that sending the bill to Australian households for the tax reform some people want is a sensible proposition.
But, in terms of the issue you raised, I think that comes out of a report I released. And I wanted to release that because I thought it was very important that this debate, and all policy debates, are conducted not just in the context of whats fiscally sustainable now, but also fiscally sustainable down the track. Now there are lots of things you can do to try and address those issues. For example, you can grow your economy more, you can increase your productivity, you can increase participation, you can deliver services more effectively. All of these things are important
CARABINE: And thats going to make up $80 billion?
WONG: Well thats a figure absent any policy change. The reason I wanted to put that out is, I think it is important that we have a discussion, not just in the context of tax, but more broadly, about what we know that the ageing population will mean and work out how we address that. Ive no doubt we can, but it does mean we have to do things like putting in place the mining tax to get that revenue, make sure we increase our participation rates, thats an important thing.
CARABINE: But isnt it the case that the government is gun-shy of proper, worthwhile tax reform, because of the public reaction to the mining tax, and, in particular, the carbon tax? The GST is low by international standards. Why should it be immune from any change, apart from the obvious political reasons?
WONG: Well, no, I think theres a policy reason, and thats fairness. Is it fair to say that were going to fund our tax reform by simply asking Australian households to pay more on consumption? Is that a sensible way to go? I dont agree with your construction, I think the Government has been quite courageous in the sort of reform it has undertaken. And lets remember, some of the reforms you just talked about are very bitterly opposed by Tony Abbott not that he has an alternative proposition, other than just say no but we are implementing these reforms because theyre right, theyre in the national interest, not because theyre easy, and certainly not because theres any consensus around them.
CARABINE: Wouldnt it also be in the national interest for the Government to compensate the states for getting rid of some of the inefficient state taxes, such as payroll and stamp duty? And today the manufacturing unions are also targeting payroll tax. They dont believe that the struggling sector should have to pay the tax. Do they have a compelling argument?
WONG: I think that the sort of pressure we see on manufacturing as a result of the dollar being at higher levels than it has been previously, which
CARABINE: And they need help?
WONG: Is one of the challenges the country has. And the question is, how do we respond to that? We need to respond to that in a way that supports competitiveness, supports productivity. Things like the $3 billion were investing in skills, thats very important. Things like reducing the company tax rate, funded by the mining tax.
CARABINE: So theyll be no push on by the Federal Government to accommodate any winding back of payroll taxes?
WONG: Well, in terms of state taxes, wed obviously welcome the states looking to how they might improve the efficiency of their tax base. And Id make the point that the GST take has substantially increased over the last 10 years, and as you know, I think its close to double. The states have been the recipients of that.
CARABINE: And finally and briefly, Minister, will the Government be using the Tax Forum to announce any extra tax relief for companies hit hard by the Australian dollar? Will they be able to claim back losses posted in previous years?
WONG: One of the things that the Treasurer has said quite clearly, as has the Prime Minister, is that we do want to see if there are ways in which we can help support the sort of change that is going on in the Australian economy. And we certainly open to listening to people about that.
CARABINE: Is that a yes or a no?
WONG: Were on the first morning of the Tax Forum. What Im saying is, these are policy issues that we want to consider.
CARABINE: Penny Wong, happy Tax Forum.
WONG: Thanks very much.
ENDS