. AU TA[ IA
PRIME MINISTER
E. O. E. -PROOF ONLY
TRANSCRIPT OF INTERVIEW WITH MARK DAY -19 SEPTEMBER 1985
DAY: Mr Hawke, welcome.
PM: Thank you very much, Mark.
DAY:: The reverse to that question is can you sell them?
PM: Yes, I believe we can, Mark, because the guiding principle
of this tax reform package is fairness and equity. The ordinary
Australia), the ordinary viewer, the honest taxpayer has been
paying far too much tax because the tax rates have been pitched
at too high a level. Very largely that has been because of the
existence of avenues for avoidance which have been utilised by
high income earners. That meant they hadn't been paying the tax
that they should have been and so what we have done is
substantially to reduce the rates of tax that will be paid by
your ordinary Australians. And that's what they want.
DAY: you talk about fairness. We all know that the greedy
system have been able to either pay no tax or very
little tax. Now by dropping the top rate from 60 to 50q, are
those greedy going to say ' OK, I am willing to pay half'...
PM: No, no, what you missed there with that question Marl-, frthat
if that's all we did then the question would have som~ e
validity. But at the same time we have closed off the rort areas.
We have already done an enormous amount in finally putting to e
the papcr scheme Now we have gone to the areas of avoidan~ ce s3
that as you close those areas of avoidance, that means tP~ at te
will. be brought into the tax system. And it is appropriatec
fair to reduce the rates not simply for the sort of consitrat--' cr-.
you have been talking about but for fairness. People ought to be
able to feel as far as possible that when~ they earn that e:: tr~ a
dollar, they are going to be able to keep a substantial o: c. 7
it. Because if I could just put a couple of statistics to you
Mark, which are very important to, I think, your viewers.
In the early days, the beginning of the 70' s, the top rate wu
cut in at a person who was on about ?'-1l0,000. But because c:-f2&
has happened, that top rate of 60 is cutting in at $ 35,0U0.
that is just autotnate whole ste. It is tce-rrib1v
for the ordinary middle A7ustr, 1ian out thnre.
DAY: But you have lowered the rate, the tax scales stay h
same, your top tax rate will still come in at 1 times .' rc
weekly earnings.
PM: Yes, you see it is going to be a very very significant lowering
of'the rate. I mean it is a very great difference to paying 6Q( in
that marginal dollar and coming down to The other important
consideration Mark, in bringing the top tax rate down to 49 is that
the existence of that margin above the company tax rate meant that
there was an enormous incentive which was exploited by people, not
to pay tax because if they could incorporate themselves in one way
or another, they pay the 49 and not the top tax rate. Now, having
your top tax rate at the same as the company rate, that incentive
for avoidance by incorporation is going to be taken away.
DAY: Do you agree that if you get this wrong that it could cost
you office?
PM: Well, I just don't look at it in simple terms like that of just
one thing. I have always......
DAY: Before this whole debate got going you said you wanted broad
community support.
PM: That's right, I did. I believe very sincerely, and if I could
conclude the answer I was going to give which would have got us there
much quicker Mark, I am saying that I have a great faith in the
Australian people. I don't think they decide just on one issue. They
look at ithe things that government do as part of their whole approach
to government. They have seen Mark, that since we have been in
government we have turned this economy around from the worst recession
in 50 years to one where now we are growing and doing better than any
other economy in the world. Now I have told them and the Government
has told them that we have also got to reform the tax system if we
are going to look after the future economic development of Australia
and have fairness and equity. So they are going to, when we come to
the next election, say ' Alright, sure, what's this Government done
about tax'. They are going to make a judgment on it. I believe on tax
itself, they will vote in our favour, though I also believe that they
will look at it on the basis of the economic record with which we will
be going to the people. And it will be an outstandingly good record.
DAY: You have to date enjoyed pretty broad support from the business
community. Are you worried that it might cost you that support because
you have added to the cost of business, not only with the rise in
company tax, but also the imposition of the perks tax on business
rather than
PM: Well let me make a couple of points very quickly about that,
Mark. When we came to office, company profits and the share of
company profits had come down to disastrously low historical levels,
about-. 12% of the national income. Now under our economic policies
that has moved up to historically high levels. That has meant under
our economic policies that the profits of companies have increased
by several billion dollars. That percentage going up from 12% of the
national income and going up to over 15% has meant an enormous increase
in profits. Now we don't object to that. In fact, our whole policy
approach has been to restore that profit level, to lift it up, because
unless companies are profitLabie and Call inrvOe-t thiey don" t employ and
that change has been very significant. Now, what will be taking
from companies is very easily accommodatabie in this enormous increase
in profitability. But I also believe that the business community will
3.
look at this as a whole. It is true that they will have this burden
in the fringe benefit area imposed upon them. But we have given them
something that for 30 years conservative governments would not give
them. They have been crying out with justification against the double
taxation of dividends. Now, we have given them that. We have given them
that at a cost of about $ 250 million. I think that the business
community like yourordinary Australian taxpayer is going to look at this
as a whole and the business community is going to say well there are
a lot of benefits in this for us.
DAY: And in spite of goodbye free lunches, Mr Hawke, goodbye we are
out of time. Thanks very much for coming along.
PM: Thank you very much indeed Mark.