E. O. E. PROOF ONLY
TRANSCRIPT OF INTERVIEW WITH MIKE WILLESEE 4 JUNE 1985
MW The lurks, the perks, the 1ion-taxcable fringe benefits v-ould
go or stay if the companies could afford to pay taxc on them. Hiave
You asessed how many companies might go to the wiall on this popo-. al?
PM I don't believe any compan~ ies will go to tho wall un( c. er2 Ch i P
proposal Mike, its the sort of tkjing we have talked about with sxono
repesetatives of the busineal ' onmmunity. They have conved ou
that they think its the appropriate way of going about it. Its tho
& pproach that was adopted in Hew Zealand Mike, and we balicve that
it is a sensible way oi doing it.
DZI-Isn't it the easy way out?: Even cowardly to put tho burden
on the corapani-es?
P14 No, its neither easy or cowardly, -it is we beliova the
sensible way of doing it. There~ ll be a difference in reactions,
some will say they will absorb itt others will say well wo'll1 tran-. ate
into a cash benefit and you are coing to be in a situation v!
very significantly reduced mdrgina1 rates-for employees so they
C. will do better out of it,
Mil But in this particular one~ yuhv o h xilye otn:
benefits, and not paying tax on them. You say thats wr~ ong, rihouald
change, but they're not going to pay. The company will.
P14*~ Wl all I'm saying Michael, its not just something twe, conjur-cd
up~, and said Oh isn't this a cle~{ er idea, we had cliscussion-with
roprosentativaes of einployers, an4 there is not actuallytri~ ra
aprobation by employers, but we 0ave crt, inly had rprejentatives " r
c o I
employers saying to us they think'thiG is a sensible route to
follow. Its one that has been adoptod in Now Zealand aftcar very
serious consideration and discuss~ on over there, we belinve this iu
a fair and equitable way of handling it.
M11~ so its not just a m'atter of: emlployee5 having meore votcs than
company e s
PH4 N-Io, cortainly not.
IW Vell officially, politician~ of . course get the bast-taxz freae
porks of all. Woaild they still g6t them?
PM N~ o the same rule would applV to politicians as to othe! r cpe
I'm a little bit disapointed that' in the discussion that has devel. opnd
today, there ~ xsbeen some nuggebtion that via iight bz doing
it because there is some potentidi benefit for ourselves, I jus~ t
simply want to cay this, I had intended at an early stage to say it
and I say it now, that when Paul eating and I were discus. sing those
matters quite early in the piece, iwe saw that as a result of thp
bringing in of the package there gould be a, benefit to ourselveo
in reduction of the higher marginal rates, both Paul and I Ocided
that in regard to any net benefit that would accrue to us vwe wouY& n ' t
accept them. Any thing that woulc4 come to us would go to ca' 41tz ty
bacause wa, I'm not trying to qrai~ stand about that, I don't uant . i
issue in any way mnuddied by any suiggestions that you are trying to CD
something to beniefit yourself.
M What about members of parlitment and their electoral allowanucs
* which are quite substantial? V4ha
P14 Mhat's been said in the iihi e paper, is that where you have cu
arbitrated provision then that wi~. l be not covered by the: se pzroPoc:,:
and that will apply equally to ner~ ers of parliament as to Penyonie In
thn torkforce twho have that sort 6f benefit.
Wore
cont 3
IMW Doesn't that make it much ipre difficult to Cell this PrOocal
PH1-Xdn think so.
M1-When companies are disa vantaged, but politicians von't be.
PM N~ o, that'n not the right sort of comparison, what you are
Baying is that therc are a whole lot of people in the eom~ nun:. ty
I-ike who have arbitrated allowanoza,, they have been the result o f e
independent, arbitral decision ar~ d in those cases it it; Gaid, innd
ite appropriate not to touch thos'e. The ma~ jor haornorrha. rl f t
revenue system Mike is in the private sector ihere, and t his 16 wh,, at
the private sector itself tells you that they are malting up cneatiOn
in packages which are in part a sialary but then they have allth4: e
other things Thke* payment of edul'ation, housing, and* all that: GOrt
of thingo
b" 74-Yes, no doubt about that, here is no doubt at all, but Guxrely
the sa-me applies to politicians, btyou are now going to izitae
PM We are not differentiating,; I don't know how many timar, 1
to say it, I'm saying that exactfy the sam~ e rule will appl. y to PoliticUz,.
as t* o the rest of the community. Exactly the same rules.
F-0 The company says, well eitl cr I can afford to pay the e~ taand
I will pay it to keep these bett~ r paid executives happy or thcq
wion' t and they won' t get it and hey can make a decision as to %-whelaer
they stay or not.. Politicians w Lil get it.
PM Politicians will-have the cante rules applied to them as in z-he
rest of the community where therfe are arbitrated decisions wherc it
is simply not a question of an arbitrary decision, by some employor
but where there have been indepeftdent tribunals saying that in
respect of the employment of thi class of person, this sort of
allowance should be made, f-yhether' its a politician or any one b-lse
w-here thcore. has that independent: deci sion made, then the r,; amc
rules u ill apply to avorybody. i~ o-u I have setid thtat 3 n
Cont....
c6nt 4
I think that ought to be enough to establish the point.
U, -Prime, M~ inister v: hat do you think your proposal realljy ill do
to stop talt avoidance?
PM TWell there are these things' to be said. In the broaConing of tli
tax base, the direct tax base, th~ cre will be a closing of v a be
of sh~ elters w~ ll~ k~ h have been used for the purpose of tax avc.*. Canco.
The closing of oZ those shelteras 2ill meanl the enC: of avoio':. ncol IZ
those areas. The necond thing is: that if the broad based conslm, tis) n
tax is brought:' in -* hose increasing numbers of people in the coxmunity
who buy the usual clever lawyers. nd accountants have avoRi ed t hs
payment of any tax on their inco and also in the absence of a'
consumption tax aren't paying any, tax on the spending of that inccri
They will be caught up there by t~ ue 121410 consumption tax,,, t' * xcy % ilY
be paying taX so that's the second point.
V24 Can I just take it a p6int ~ t a tim3 because that is very
important. Are you conceding tha~ t if you .>~ J-catch tLhe.: a on the
tax they should be paying, at leapst get them for 12! j%,
PM That's not the only point, ' What 10m saying is that I 1helieve
that the ordinary Mr fMrs Austratia object to the point vwizere ' roi
so many of them are paying in recspect of the marginal Ooll,-r t11-. t
they earn that the* are paying vi-tualiy half of every inargineal
dollar out in tax. 46 cents in eVery marginal dollar. going. Ilhsre
we will be able to provide a net benef it for the majority o. C nunstralizinz
is. because of two things. I wie tAll be broadening the direct tax
base. Removing shelters and so oi so more revenue will be coming i
and secondly you'l11 be getting tl~ is dividend througlh the cozmu to'
tax from thosze people who at t! lie inoment don't pay any tax t all.
So from those two sources you'll' be anble to get the situation I : 1ic-
2
for the person on average earnin4s pw;: ducces this situation. They 11
got 31 dollars a week cut in taxc& 3, they will pay an ext: ca ~ 6J
because ok the increases in price's and associated2 Twith t'ie broad,'--_ cd
consuamption tax so in not telms, ithat average weekly ealm. inrg ' All La
$ 16 a weelk better of.' We're able to do those th~ ings eus
we are bringing in a tax on those' w%. ho currently are avo-!. C1i,. 1q it.
M1 Do you think you have a-ny Feal. 1stic proposition?
Gotting those people who are dodg'Ing the 60 cents ra2te or tha net, 1
cents rate, and picking them uonly the l21Aj:-Kte you po:~
Eyou have any realistic chance p'f piching them up cleanily and
malting them pay the lot?
PiA Well, I think to the exntent; that there is aSpart of
package a reduction in the fop marginal rate from 60 to 50 that: o'-
itself will tend to reduce evasioni and avoidanCe; it viillt not cut
it out entirely. L
Is that really your advice 11crom the businesu conrnuniAJ'y?
PMe Yes, that well, let me pu~ it this way, I mean J. the
mz'-) rginal rate is 90 cents in the 2ollar there is a very ve: 7y h i h
incentive to avoid, if its dow-n tob i0 much less. Sc) clen2zly I
think the ireduction in marginal rates on balance have an effect;' o-2
reducing the tendency to evacjion 1, ind avoidance.
Primre M~ inister there seem tobe somne anoinalies, in th3 cz o:
tax replacing o-ther sales tax wheke luitury goods nia rcome in
and basic necessities will be imore ex: pensive alnost you can get a
icheaper Rolls Royce and pay miore: for your mince neat and 1.-: cead.
PM But you will be having very' very much more in your pa. y pacP.-c k
or in your social welifare reccipt You' 1ll be having Paore w-onsy*
to pacy that increased price in nc ter-ms after you have pai the
increased price out of your higheIr pay packet or your h~ g,: zr
Cont 6
welfare packet. You will be bet cr of You and your treasuzr
have obviouily worked very hard Ito propose compensation for th2
poor who might be disadvajitaged V.' ndc'r this set of pro,-o! saln.
Would you consideor compensation orbusinersezs wh~ ich 1wiay be r-uied
as a result?
P--We don't belIieve businesses will1 be ruined. as a rc,-ult. There
ino evidence to suggest that tIhey will be. If 96u. have zat
System tihi?_ h isj more econoraid th-A'n efficient. and if you 3. ncrec-DSe
the amount of money which i. going to be available to the oralna 7y
taxA paVyer, the ones with the hichnt propensity to consumia theyj
will in fact, be able to buy maore poods and services in real tormc.
If the commrunity as a whole is pAt in that position, then in ecozomic
tenas thn busineos community will, bhe better of.
MWLets take an isolz -ed pockegt, say an up markcet restaurant0
which many people believe have e . isted on expens&:-accountsz. Noty
t-hey have got 121-% to add to thei Ir prices and they may have & toaically
decreased cuotomcrs.
Well, Mike if you're sayin4 that looking at the Australian
-tax system as a whole and trying 4to get a fairer system for avcragn
Mr M-r s Australia where they are, paying or every mvarginal doilzir
in tan, and where we are going tc; produce the situation vhere t~ kcy
are $ 14 a w-, eek better off where pensions and social security people
are going to ba better of that wp nhouldn't do those t~ lngG be-cauca
we might hurt a few up market r-eskiaurants I tell you where I CM-;. e
M N-o there iqs no suggestion o~ f that, I was asking if-you vo~ ild
consider compensation for any butsinesses,-esecially s~ mall bus inc
which you mnight out?
More
PH 1) don't balieve that wo. tiilL wipe out cmall buzsinL--sen0. E
in fact you've got the situation Theire those ulmarket restaUranto
have been able to operabte on the :, asis that Imir and I. Irs Lvzge
Australia is paying for their prop -ts through too much tax, and
the poople on expcnse accouAits agibning able to go along thezo. at
the cost to average Nr 1i-ro Aus ti: alia then, I bclieve, thzt the
people who go al6ihg to Lhese upp-' r Ix., acket restau-cants that you
tlUgabout tyill sitill b able o cvrvive be cauce oZ r-1,-
x-ant to go there as they still wa\ It to then they will pay. ~~ sr
in other countries where you have. , consumption tares and so on
taxes on nervices, you still ; iave& five star restaurants.
You propose a form of death~ duty, I know it vill bc very ailci
in the early yenrs,
K-Uell that's your assertion 1its not a correct one.
-W You are proposing that if silmeone dies there will be a ta~ n on
the gain
PI--I am scying that there f-rill ' be a capital gains tax w~ aich till
not be a death duty.
D I~ W Alright, I'll accept your wc rds, but if someone
P14 Its not just m~ y word, its 4clear uinderstanding of znyono
i nvolved in the tax system. * A ca ita1 gains tax on the part of : Zn
estate which is, may I remind youp not on the nominal value of the3
of whats going to bn subject to a ~ tax, but will be on real gainro, not
juttaxng fo inflatn, that inot a death duty.
Yes, look I urnderstand the jain, you are going to have a cu%.
off point and you say tihatever qainz there are after this, les
inrlation0that will be subjocted to this tax. A lot o'f peoL3iC
undarstaiid that, as a lot of people understood the asscets test, b~ it
U-you coul~ dn't dispel the spectre of the assets tes-t, how, will
you soll wha~ t will appear to inan people to be a form of Cdeath
duty? PM Well, it * iill only appcar fpeople like yourself who knbetter
keep referring to it as st ch. You knou its, iotr anad you
would do a great dervice to the o~ sponsible debate in the crufunitvif
it was described as a capita. : gains tax which it is, Wtts 1-h
proposal and not a death duty. . u t let rae say thio, I have faith
* in the capacity of the 21ustraliar community to loolk at this
package as a whole . Let me rem nd you that virtually every other
rmntry in the tWPqf-Prn 1* WrrMr hanI rajDital gains~ toy tllcW) I 1-iro i t
not basically as a form of great:~ n nrosreeu acn
but they have it bacause there i~ a realisAtion that it io c. necessary
instumet i yo ar gong to hi~ ve a whole armoury availabet
the coimunfty to help fight tax vodn( and evasion and its because
I believe the community wants to istamp out tax avoidance and] evasion
that they will accept that this ecry mild capital gains taX is
appropriate to protect the community as a whole. Particularl. y w' en
they know that it is not going tbe a capital gains tan which
applies to the private home.
11--Prime 14iiister its your qoxernment, this is what yourcyv:: ri
want. Do you bclieve it will ha pen?
PVI Well Mlichael, let me say t, is, that when I introduced this
process during the last election cam~ paign I said there were 9
princ.-3ples and the ninth and ina sense the most imyaortant
principle wias this, that no tax. eforn proposal could b3 r'rohc
into the community unless it had fairly broad co-.-vnunity acccptan!:. c.
We have initiated a process in which the comm0unity is going t. o hawl%
a great opportunity to be involv d in the debater the diccu!: sion,
culminating in the sum7fmit. Ibojaieve Lhat the Co,. i. iunity w, 1.111
6~ r 0
see thiG basic point Miko and t. L s c-. A'at I a3% eGryv c o1 o I~ lY
Vellow Australian ran and Womien tio cnderstand. Thc p2,-cnznt
tax system is in decay and the p odccs of decay is hurting avcK. co
E-Lr and l4Is Australia. A w-althyo Lcn person tho czan affodd tLo
taxc accountant, the tax law-yer tq dodge and avoid is the ono whici
is benefitd. Now I believe thaij oretinary t-fr A M Ao t~ aa Qnt.
1 fairer system and a more eff-i dient system. I bakiiov that t 1 Y
tiill reCpnd positively to this lproposal.
iz~ j in short you are saying th~ t yo believe that this will
rl -I helieve so because I do 1ave faith in the Australian pvublic.
K -J Than% you very much Prime rLinister
Than: you very much indeedjlichael
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