T H A . IA
PREME MBI STER
E. O. E. PROOF ONLY
TRANSCRIPT OF INTERVIEW WITH KEN BEGG ON 11AM 20 SEPTEMBER 1985
BEGG: Good Morning Prime Minister, welcome to 11AM.
PM: Thank you Ken.
BEGG: It would seem on the face of it that this is a package
that gives more than it takes. Is that right?
PM: Very much more. every cent that will be raised is raised
from those basically who in one way or another have been avoiding
their tax payments and we are giving that back and more so that
the average taxpayer next year, in the first year, will get about
$ 9.00 a week and then $ 15.00 a week for next year. And that is
going to mean importantly that the extra dollars that people earn
at work is not going to be raided so much by the tax collectors.
They are going to have more discretion available to them.
BEGG: No catches?
PM: No catches, I mean, we couldn't be more open about it. We
have faced a situation, Ken, where under the system that had
been allowed to develop under our predecessors, so many of the
high income earners have been able to avoid paying any tax at
all or paid very little. That meant that the tax scales upon
ordinary Australians have been kept high and have been coming in
at progressively lower levels of income and that meant that the
extra dollar that they earnt was more and more being soaked up
by the tax man. So we have given fairness and equity and discretion
back to the ordinary taxpayers by making sure that the free lunches
and the tax haven dodgers are now paying and through them paying
we are giving the money back to ordinary Mr and Mrs Australia.
BEGG: It is going to cost you $ 2 billion to give the tax money
back. Where are you going to finance iiHow are you going to
finance that sort of money?
PM: Well you are referring to That's the first one which meets
the Accord so that we are going' to be able to keep the rate of
wage increase down and therefore lessen inflation and keep
employment prospects up. Now we will be picking up our ca'. pacity
to do that in part-out o . artures that bc
and also in pa-t out of fi... ca. drag. 7. nd t! at mL-ans tlhat e
be imposing any burdens, it means that taking from thc top in1come
earners who have been avoiding tax, we are giving that ncck in
large measure to the upper income brackets who have just been
paying too much. tax, the honest taxpayer. And, of course, in
regard to the lower tax brackets, we gave them massive tau
reduction in rates last year when we reduced the bottom rate from
down to
BEGG: But the Treasurer talks about fiscal responsibilty, belt
tightening in order to pay for it. Does that mean we are going to
be in for more cost cutting, more razor
PM: Oh no, it means that we have imposed a discipline upon ourselves
that no other government has done. We are not going to allow this
to be paid for plus wilc% 1t new expenditure programs and let the
deficit blow out. We have got the trilogy imposing that constraint
upon us. And that is proper, I think that's what the taxpayer wants.
He wants government to say ' alright, we are going to bring the tax
rates down, we are going to decrease the tax burden and we-. are going
to at the same time bring the deficit down'. They want that to be
done so that there is more discretion out there for the ordinary
Australians to make their own decisions. But at the same time we
will be able to keep the levels of real expenditures in those areas
where people want them and necessarily need them. They don't want
us to be cutting down in defence and education and those things. So
we will be able to keep those levels up.
BEGG: But we still will have restraints upon ourselves. Now one of
the so called ' nasties' the capital gains tax. In five years of
operation it will only net you $ 25 million. I wonder whether it
was really worth all the political flak?
PM: Yes, because you see the existence of the capital gains tax
will mean that we will be closing off that avenue which has been a
major area of tax avoidance in the past. People were just avoiding
tax by way of income, they were converting that to capital and there
was no capital gains tax there. Now this will mean in regard to all
future assets) and as you appreciate, it doesn't apply to any existingly
owned assets. But in regard to newly acquired assets, a capital
gains tax on the real gain will apply and that will act as a bar
to. tax avoidance in the capital accumulation area which had involved
a massive distortion of investment in this country which was agains t
the interests of Australia. It inhibited areas of economic growth, and
therefore it inhibited employment.
BEGG: You have hit your own Ministers and Backbench fairly hard.
They have been treated fairly equally I suppose you would say. It
does seem to me though they might have had a-case. They might have
been hardl. y done by.
PM: Well there is a sense in which the structure of the rernuneration
of Members of Parliaments have been somewhat artificial. And now-.
they will have to have the same processes as in the private sectcr-.
That is in regard to that part of their emolument which is cash
allowances, they are going to have to substantiate that. Now: for th'-7_-
who can fully substantiate well then they won't be hit. But for ths
* of them who can't then there will be a tax impost. But to their
credit and I don't want to be partisan about this, I know th. ere olf
have been unhappiness on the opposition side too. I have heard them
complaining about what we are doing. But to be fair to Parlia~ entarlans
on both sides, I think they will accept and agree that they can't
have special rules -for thin as against th~ e Private sctlor.
* BEGG: Do you feel there is any risk in the fringe benefits taxes,
* in the clamp down on the entertainment allowances, of jeopardising
your relationship with business?
PM: No, I think there will be some parts that~ won't like, Eor instance,
taxing of fringe benefits in the hand of the employer, they won't
like that. But there is much of what we have done that they will like.
And they are approaching this in the context where we have restored
business profitability to historically high levels frcm the low
level that existed under the previous government when we came. That
has meant billions of dollars more profits going to companies and
that has been right because companies have got to have those profits
to invest and then employ. So they are going to be able to meet this
relatively light burden out of a significantly higher level of profits
which have come from our decisions in government and our overall
macro-economic policy. But the other point I make is that there are
also some goodies. One thing that the business community, Ken, has
been crying out for for years and which they couldn't get under
years of conservative government was the end to double taxation
of dividends. Now with full imputation that has gone. It has cost
us $ 250 million but we think it is right, not just for the companies,
it is right for the community that you shouldn't have the distortion
of investment patterns that accompanied that double taxation of
dividends. So I think the business community will have the capacity
to take an overall view of this and see this as part of sensible
general economic policy.
BEGG: Finally Mr Hawkef you have been in a bunker, You have been
in Cabinet almost for nine months. ' Vou have had a tax summit that
has cost you politically, have taken a lot of flak. Wouldn't
it have been better not to have had the summit, Wouldn't it have been
better to have made these decisions......
PM: No I don't think so. And you are quite right, It has cost us,
being tied up in the processes leading up to the summit and then
after the summit because we have been buggered in the sense that we
have been here in Canberra doing the work. We have paid some price
for that. But in politics I think you have got to be fair. I said to
the Australian people in the last election, ' look, we have turned
this economy around, growing better, doing better than any economy
in the world now from being in its worst recession * for 50 years'
But now the one thing that we have got to do for the long term
future of Australia as well as immediate fairness for ordinary
Australians, is to reduce tax rates to get fairness, to get a better
structure for the allocation of investment resources. Now I believe
that they are going to welcome that and they will see now that we
have done~ r'job in the area of financial deregulation bringing more
banks in, of having a sensible Prices and Incomes Accord, sensible
monetary policy. The one thing that was left to be done to look
after the future of this country was to get rid of the delapidatcd,
unfair, regressive sort of tax system, regressive in economic growth
terms, that we had. Now we have fixed that up. We have now created
a basic economic structure for the policy future of Australia which
will mean that we can continue to have the high levels of growth
which put us far beyond the rest of the world and do that with
acceptably low levels of inflation, continue to create more -nd more
jobs, to bring an Austra1ia~ that your viewer wants, a f airer AuF~ tr:. 2.'-Z
where the burden to distribute it fairly in a way which is goliny to
maximise growth. And I think it has been worth the temporary price
to pay to get that system.
BEGG: Mr Hawke, thanks very much.