PM Transcripts

Transcripts from the Prime Ministers of Australia

Transcript 10892


Photo of Howard, John

Howard, John

Period of Service: 11/03/1996 to 03/12/2007

More information about Howard, John on The National Archive website.

Release Date: 13/08/1998

Release Type: Speech

Transcript ID: 10892


Ladies and gentlemen, welcome to the launch of the Government's

tax plan for Australia's future. This is a very important day

for the economic future of Australia. The plan that is being launched

today represents the biggest single remake of the Australian taxation

system since Federation. It involves some historic changes in relations

between the Commonwealth and the States. It lays the groundwork

for Australia going into the 21st century growing more

strongly, generating more jobs and being able to compete more effectively

on world markets. It also involves a very major remake of Australia's

social security system, which will do two very important things.

It will remove many of the poverty traps that now exist in the social

security system and will provide incentives for work and thereby

continue the policies of the Government whereby we have sought to

rebalance the incentives within the Australian community towards

work and away from welfare dependency.

The Government is particularly proud of the changes that are involved

in the relations between the Commonwealth and the States. For as

long as any of you can remember one of the least ignobling characteristics

of government in this country has been the annual begging-bowl pilgrimage

to Canberra by the States. For the first time ever a Commonwealth

Government has tackled this full-bloodedly head-on. We are giving

the States the entire proceeds of the goods and services tax revenue.

It will be their tax administered by us on their behalf. They will

pay for its operation, they will get its full proceeds. It will

not be possible for the rate to be varied without the total support

of the governments of all of the States and Territories, the Federal

Government and the Senate and the House of Representatives.

In other words, I don't think it is going to happen, because

to get an agreement at all of those levels is indeed a mammoth task

and something that I think more than anything else guarantees a

long period of time for the rate, and indeed, works very strongly

against its change. What that particular change will do will be

to give the States far greater freedom and far greater resources

over time. On our calculations rising to about $25 billion more

cumulatively by the year 2010 over and above what they would be

likely to get under the operation of the present system through

to the year 2010. It will therefore give to the States greater resources

to do the things for which they are constitutionally responsible.

It will probably lead to the end of the annual Premiers conference's

and some of you may well be disappointed about that but there will

be others who may not be so disappointed about that development.

So that does represent a very, very important shift and a very,

very significant and historic one as we approach the centenary of

the Federation. Not only will we have a new State for a new century

but we will have a new tax system and we will have a new arrangement

between the Commonwealth and the States for a new century. And the

historic importance of that should certainly not be underestimated.

I said when I announced that there will be taxation reform that

there would be five principles that would guide that reform. And

if you go through the plan you will find that at every point those

principles have been faithfully honoured. To start with, there will

be lower tax collected under the plan. This plan reduces overall

tax collection. There will be a $13 billion reduction in the area

of personal income tax cuts and on top of that the additional family

initiatives are worth about $2 billion.

I am immensely proud of the fact that under this plan the top marginal

rate paid by 81 per cent of Australian taxpayers will be 30 cents

in the dollar or less. In other words, you can pass from $20,000

of annual income to $50,000 of annual income without going into

a higher tax bracket. You can almost call it the "bracket creep

abolition provision" of the tax plan because if you look at

the working, the income profile of so many low and middle income

earners to pass from $20,000 through to $50,000 would be the experience

of their working life and probably no more. And 81 per cent of people,

we must always remind ourselves that 81 per cent will be on 30 per

cent or less and that is a particularly important change. We have

changed the rates at every point except the top rate. What we have

done with the top rate is to alter the threshold but to keep it

at 47 cents. We have increased the tax-free threshold from $5,400

to $6,000. We have dropped the bottom rate from 20 to 17. The 30

cent rate cuts in at $20,000 and carries you through to $50,000

and then there is a 40 cent rate between $50,000 and $75,000. So

the benefits for low and middle income earners are enormous under

this package. The incentive for doing more overtime, the incentive

for extra effort and the incentive for harder work is very self-evidently


We have, of course, included in the plan a number of things that

have not been widely speculated about or even thought of outside

a very narrow range of people. I am delighted to be able to announce

that as part of the plan provisional tax will be abolished. And

that will be of enormous encouragement to many people in business,

many self-employed people, and it will be a very great advantage

to many self-funded and retired people. Very importantly for that

group also we are introducing a system whereby we are going to fully

refund imputation credits. And that is very, very important to people

on modest incomes who hold shares who will get dividends franked

to the tune of 36 cents, which is the company rate, and they might

be on 20 and they can't get the other 16. Well under this system

they'll get the other 16 as a refund on the franked increment

from the Taxation Office.

We have gone to very great care to ensure, as I outlined in the

five principles, that low and fixed income and modest income people

including pensioners will be fully protected. On July 1 pensions

and other benefits will rise by 4 per cent and the proposals contain

a guarantee that at all stages there will be a real increase of

1.5 per cent in the pension over and above CPI increases. And that's

a very, very important cushion, a very, very important additional

protection. We are also increasing the retired persons' rebates.

We are introducing special untaxed payments – one of $1,000

for all people 60 and over who have investment income and a further

one for self-funded retirees of and above pensionable age of $2,000.

There will be full eligibility for that; $20,000 a year and under

and phasing out to $30,000. And importantly also, not only for this

section of the community but for the entire community, the plan

involves the introduction with effect from January of next year

of a 30 per cent tax credit or rebate on the cost of taking out

private health insurance. This will be for 80 per cent of the Australian

community as valuable or more valuable than full tax deductibility

of the cost of taking out private health insurance. This benefit

will be available to everyone. It will not be subject to an income

test and it will represent a very significant further incentive

for people to take out private health insurance. That is important,

not only for the contribution that private health insurance makes

in its own right to the aggregate health system in Australia but

also for the load that it will take off the public hospital system.

And, of course, it follows the decision of the Commonwealth Government

to inject a further $915 million over five years into the public

hospital system, representing real increases over the five year

period of the new Medicare agreement of 17 per cent at a time of

virtually zero inflation. So we are particularly pleased about the

contribution that that initiative is going to make.

This is an extremely good tax plan for the bush. Country people

will benefit enormously through the massive reduction in fuel costs.

The reductions in fuel costs are worth about $3.5 billion a year.

That involves something in the order of a net reduction in relation

to diesel of $2 billion and the additional capacity of people to

get a rebate because it is an input cost of the cost of other forms

of fuel. So the benefit of this for the bush and the extent to which

the economic consequences of what has long been described as the

tyranny of distance in this country, those economic disabilities

will be ameliorated by this package are really quite enormous. And

the benefits in relation to diesel fuel will not be restricted to

farmers, they will flow through to people like ferry and marine

operators and will be of particular benefit to many tourist operators.

And will also be of benefit particularly to the State of Tasmania

which in recent times has been experiencing a very significant boost

in its tourist industry as a result of changes that have been made

by the Federal Government in other areas.

The package, of course, as widely predicted, includes the introduction

of a 10 per cent Goods and Services tax. It will, of course, be

known as a Goods and Services tax, or a GST, and that 10 per cent

will be introduced to replace 10 other taxes. And those 10 taxes

are, of course, the wholesale sales tax, which will be abolished

in its entirety. And there will be Commonwealth and State taxes,

the Financial Institutions Duty, the bank account debits tax, stamp

duty taxes on business conveyancing, on mortgages, on shares and

marketable securities, bills of exchange, cheques, promissory notes,

bed taxes, which will be abolished, it's part of the deal that

they must go by the 1st of July in the year 2000. So

it does represent a very straight-forward, simple, clearly defined,

well put together, broad-based, consumption tax. The exemptions

are minimal but important.

Local government rates and water and sewerage charges are exempt

and we are going to use the description of ‘GST free'

to describe something that was previously described as zero-rated.

And health and education, childcare and a number of other things

that are listed in the document, including regulatory charges such

as motor vehicle registration fees, will be free of the GST. And

there will be another category that will be ‘input tax'

which is the new description that we are bringing in instead of

‘exempt' which is the equivalent description under an

earlier document.

We think the Goods and Services Tax is a modern, fair tax. One of

the great advantages of the introduction of the Goods and Services

Tax is the way in which we can increase the dividend for honest

taxpayers out of the black economy. And you can't do that without

a GST. You can't get $3 billion out of the black economy over

three years without a GST.

And the GST's introduction has also paved the way for the introduction

of new and simplified methods of collection of business

reductions and the like, which are described in detail in the document.

The Goods and Services Tax will, of course, come into operation

on the 1st of July in the year 2000 and, simultaneously

with the introduction of that tax, of course, the personal income

tax provision, which I've outlined.

I've already had a number of preliminary discussions with the

Premiers and Chief Ministers and it would be the intention of the

Government, if returned at the next election, to convene an early

meeting of Premiers and Chief Ministers at which the Treasurer and

I will outline in more detail the proposals that we have.

In the area of business tax we have made a number of decisions and

we have set down a number of goals and objectives. The first thing

that I should say about this package, so far as business is concerned,

is that it reduces the cost burden of Australian business by an

annual amount of $10 billion. What a lot of people still don't

understand is that the cascading effect on business cost of the

existing wholesale tax and indirect tax system, you can't get

them back – once you pay the taxes, you can't get them

back from the Tax Office, they go into your cost base. The advantage

of a Goods and Services Tax is that you can get it back.

Could I just give you a simple illustration I have that will resonate

with everybody in the room and that is that the savings for business

in relation to petrol is worth seven cents a litre. Because seven

cents a litre is the per cent, per litre equivalent of the 10 per

cent GST. You can't get that back now but you can with a Goods

and Services Tax. So that is of an enormous benefit to business.

There's a $4.5 billion cost saving for Australian exporters.

And at a time when this country has, more than ever in its history,

a need to do well by exporters, it is imperative that we take the

load off the backs of exporters. And one of the tremendous advantages

of this proposal of the Government's is the way in which it

reduces those business costs.

The Treasurer will be outlining to the Business Council tomorrow

the way in which we intend to handle and review consultative mechanisms

that are alluded to in the document with the business community.

We have the goal of moving towards a company tax rate of 30 per

cent. Obviously in moving towards that there needs to be a consideration

of some of the trade-offs that might be involved between achieving

that goal and the maintenance of some of the tax preference arrangements

that exist under the present legislation. And, quite plainly, different

sections of the business community have different views on how that

might be achieved.

We have indicated in the document our intention to move to an entity

system of taxation, and that's very important for the future

of trust arrangements. We have outlined in the document some proposals

whereby trusts, in effect, from the 1st of July, 2000,

will be taxed in the same way as companies. Now, those changes are

subject to certain provisions which strike, I believe, a fine and

correct balance between the need to prevent the abuses that are

occurring through the use of trusts but, by the same token, to acknowledge

the contribution that those arrangements have made to the viability

of many rural and other businesses throughout Australia. And the

document details that balance that has been struck. And, in addition,

the Treasurer is announcing today some specific measures which are

targeted at particular tax avoidance practices using trusts. And

we believe that those measures alone will enhance the revenue and

make a very significant contribution.

We've also, in the document, outlined some of the goals that

we have in relation to reform of the capital gains tax, that they

once again will be brought up in the review consultation mechanism,

about which the Treasurer will have more to say tomorrow. I might

also mention in that context that one specific announcement that

has been in relation to capital gains tax that will further liberalise

the rollover provisions in relation to capital gains tax.

Ladies and gentlemen, it is neither possible nor desirable in a

presentation such as this, with all of you having the full amplitude

of the documentation available to you and, no doubt, a very keen

desire to return to it, and also with what I can assure you is an

excellent PowerPoint presentation that you are about to receive

from the Treasurer, I don't think it's appropriate for

me to go on any longer.

I am especially proud of so many features of this tax policy. It

does, importantly, build further on the additional assistance to

families which was contained in the Government's Family Tax

Initiative which we announced before the last election and which

we introduced on time, in full, without deduction from the beginning

of 1997. It will greatly enhance the choices available to Australian

parents about the caring arrangements for their children. There's

a lot of debate about this issue and there are a lot of false notions.

The philosophy of the Government and the personal philosophy of

the Prime Minister in this area has always been that maximising

choice is the desirable thing. It is not the role of the Prime Minister

or the role of the Government to stereotype a particular pattern

of family behaviour or to say what families ought to do in relation

to the arrangements of their infant children. It is the responsibility

of the Government, within the bounds of fiscal capacity, to give

maximum choice. And one of the features you will find as you absorb

the detail of the new arrangements regarding family payments is

that not only are they more generous, not only will we be achieving

the consolidation of 12 payments down into three, not only will

we be simplifying their delivery to the public by the establishment

of a special family office, but they will particularly enhance the

choices available to parents in relation to their young children.

And they will capture the need that many of us are very familiar

with, of having a tax and welfare system that allows people to go

from a situation of two parents in full-time work to one for a period

of time and then one of those back to part-time work and then one

of those, over another period of time, back into the full-time workforce.

And what we've tried to do with these changes is to maximise

the choice, not to dictate stereotype but to maximise the choices

that are available to parents in relation to those arrangements.

And I think they will make a very healthy and a very welcome and

a very positive contribution to achieving that particular goal.

Ladies and gentlemen, this is an immensely visionary taxation reform.

We have confronted the need for root-and-branch change. We have

not squibbed any of the difficult issues. We do not underestimate

the extent to which our opponents will try to conduct a fear campaign.

We take a positive, hopeful, optimistic view about Australia's

future. We believe that properly explained, the Australian people

will embrace a tax plan that is good for Australia and fair to them.

They are the two criteria, the two great tests. And applying those

criteria and applying those tests, I believe that this plan passes

both of them with flying colours. It will give Australia a new system,

a better system for a new century. It will boost growth, it will

boost jobs, it will improve fairness, it will generate greater incentive,

it will improve the business climate, it will reduce the operating

costs of business in country Australia. It will simplify and make

more humane and sensitive the interaction between the tax system

and the social security system, it will give a much needed boost

to private health insurance. Overall, it is a tax plan for all Australians,

and a tax plan that will be of enormous benefit to the future of

our country and before concluding I would like to personally record

my gratitude to my colleague Peter Costello, to the fine work that

he has done in relation to the compilation of this package. Like

all of these things they are team efforts, and as many of you know

here, many of the things that I've canvassed this morning are

issues to which I have committed in terms of policy change more

than half of my political life, and I find in the launching of this

plan this morning the achievement in a personal sense as well as

in a political sense, a lot of the things that I've wanted

to do. But you can never do those things alone, and I do appreciate

immensely the commitment and personal skill that Peter has brought

to the effort and I'd also like to take the opportunity of

warmly thanking the members of the Treasury taskforce chaired by

Dr Ken Henry who's seen many a tax package from both sides,

and he's handled himself with enormous professional flair and

skill and also many others, Michael L'estrange and David Stevens

from the Cabinet Policy Unit, and of course the irrepressible Arthur

Sinodinos who is the head of my office and who has a great economic

understanding. So to all of those people can I express my immense


It is a moment of great excitement for me. It is a moment of immense

satisfaction that we have been able to put together a plan that

is good in the long term for the future of our nation and that is

what public life is about, that is what doing things in politics

is all about, and we are than happy to go the length and breadth

of the country which I will start doing tomorrow to explain to the

Australian people the benefits of this plan. We believe in it, we

believe it is good, we believe it is fair and we believe it will

deliver a better and a stronger and a happier Australian community.


Some of the States say they won't cop this....?


Well I look forward to campaigning in the State of Queensland if

Mr Beattie opposes this package. I can't see that a State with

it's vast distances and its heavily decentralised population

and its significant areas of strong provincial business, I can't

think of a State that will benefit more as a result of the transport

measures that I've announced today than Queensland. The effect

of these measures will be to reduce transport costs by an average

of 6.7%. The impact of the diesel changes and things associated

with it will massively reduce the cost of transporting goods over

long distances. And that in Queensland, given the structure of Queensland,

is more important than any other.


What if they just say they don't want it?


Well, I'm sorry I didn't hear your question.


What if they just say they don't want it?


Well I think they will. And can I tell you what will be happening.

We will be going to the public with this plan and if we get the

support of the public whenever the election is held, and I make

no comment about that, we will expect the opposition parties in

the Senate, whoever they may comprise, to let the plan go through

because if ever an election campaign is going to have as a really

major issue, the next election will have this tax plan as a major

issue. It will be no side bar mandate issue. This will be right

there slap bang in the middle.


Transcript 10892