E&OE............................................................................................
JONES:
Well, it is an immensely courageous step one I have to say which
has been widely supported by editorial comment right around the
country today, demonstrates again that the electorate takes underestimates
John Howard at their own peril. But he has come to this with some
credit. He has been advocating tax reform for the bulk of his parliamentary
life. Now he holds the reigns and he has put something on the table.
He is on the line in Canberra. Prime Minister, good morning.
PRIME MINISTER:
Good morning, Alan.
JONES:
Can we just try, because it is complicated and the purpose of talking
to you is to try and simplify it, we will just start with the simple
things first. The income tax scales, just a comment on that.
PRIME MINISTER:
Well the best thing about them is that you can now go from $20,000
a year income to $50,000 and that is probably 60 to 70 per cent
of wage and salary earners in Australia without going into a higher
tax bracket. So for that group of people we have effectively abolished
bracket creep and that is a massive reform, it is a big cut in income
tax but for low and middle income earners to be able to increase
your income through overtime, getting a better job, working harder
and know that you won't go into a higher tax bracket until
you hit $50,000 a year is a terrific reform.
JONES:
Right, put it another way, you are shifting the emphasis from income
tax are you not to indirect tax and you are taking out $13 billion
out of income tax?
PRIME MINISTER:
Well we are making the whole system more efficient. One of the
dividends of a GST is that you collect more tax because it is harder
to dodge and that enables you to spend the extra money you collect
on giving income tax cuts. The shift that you talk about is not
as marked as some may imagine is a real dividend out of the black
economy and in other areas of efficiency of having a GST and that
is very important for the future debate because others will come
along and say: oh you can have these tax cuts, you can have all
of these changes without a GST. You simply can't because without
a GST you don't get the huge tax savings for business, which
is important for jobs, nor do you get the efficiency gains through
getting money out of the black economy....
JONES:
I'll come to the GST in a minute, we'll just do that
specifically. Just t he personal things. So income tax, and I say
to our listeners the margins are quite clear, the rates are clear,
check your own position because the tables are everywhere. Let's
go to private health insurance which is a matter of crisis. You
are going to provide a 30 per cent tax rebate on private health
insurance premiums?
PRIME MINISTER:
Yes we are. That is a huge injection of support into private health
insurance and this is available to everybody. There is no income
test on it.
JONES:
And that'll start immediately?
PRIME MINISTER:
That will start in January of next year. It starts 18 months ahead
of the tax package and it will mean that if you have got a policy
of $2,000 a year you will get $600 back from the tax man or you
can get it earlier by going along to the Government office and presenting
the receipt for the payment of the health insurance premium. The
beauty of this is that it is equal to or better than full tax deductibility
for 81 per cent 81 per cent of the entire Australian
community. It is a real injection and when you add it to the $915
million extra that the Government put into the public hospitals
last week it means that our credentials in supporting health care
in the Australian community are second to none.
JONES:
Okay. Right now families, people out there listening to you, there
is mum, dad. Just take mum, dad and three children could we by way
of simplifying it and have one of the children under the age of
five. Now under your family tax initiative that you introduced in
January last year, that has been going for about 18 months, you
provided did you not, you increased the tax-free threshold by $1,000
for each child and by $2,500 for each child under the age of five.
So could we just take our listeners through what this means now.
Firstly, your tax-free threshold for that family has gone up hasn't
it?
PRIME MINISTER:
Well the tax-free threshold for each child irrespective of age,
under 16, has gone up by an additional $1,000. In other words, we
have doubled it.
JONES:
Yes, the overall tax-free threshold for the income earner has gone
from $5,400 to $6,000 hasn't it?
PRIME MINISTER:
The basic threshold has gone from $5,400 to $6,000 then on top
of that you now get $2,000 for each child and on top of that if
it's a single income family, in other words, mum or dad at
home looking after the children you now get an additional $5,000....
JONES:
For the child under five?
PRIME MINISTER:
For the child under five you get $5,000. So if you have got a single
income family one child under five your tax-free threshold is $13,000.
And then on top of that for each additional child you can have another
$2,000. So your example, if my calculations are correct, your example
you are up to $17,000.
JONES:
That's correct.
PRIME MINISTER:
And then on top of that, that man gets the taxation cuts of which
I spoke of earlier. And you are looking at somebody in the $35,000
to $40,000 a year range and there are a lot of families in Australia
that are living on that with one income and three children and it
is not easy and they will get in the order of $45 to $50 a week
tax cut after the GST out of this deal. And, of course, if they
have got private health insurance they will get the benefit of which
I spoke earlier and also there is built into that $45 to $50 a week
a significant increase in some of the family benefits that they
are also getting.
JONES:
Yes, and the one final thing on that, just keeping it simple, the
income test because many people out there on low incomes qualify
for a family allowance. You have raised...
PRIME MINISTER:
That's been liberalised. Instead of it starting to cut out
at $24,000 odd it now starts to cut out at $28,000. And instead
of cutting out at a rate of 50 cents in the dollar the taper rate
has been reduced to 30 cents. It eliminates the poverty traps of
which many of the groups like the Salvation Army and ACOSS have
quite correctly spoken. And very importantly it gives people a greater
incentive to find a job because under some of these arrangements
in the past you could actually be worse off with a job than being
on welfare and there is nothing worse than that.
JONES:
Absolutely. Childcare, just a quick one there because that affects
a lot of people.
PRIME MINISTER:
Well for low income families there will be an increase of about
$7.50 a week per child and we are simplifying the payments.
JONES:
Maximum payment of over $116.
PRIME MINISTER:
$116 and then extra loading for each additional child. Any suggestion
that we have sort of in any way not fully looked after working parents
is wrong. We have simplified the benefit, we have protected existing
levels and in relation to the lower income people there is an increase
of about $7.50 a week. And, of course, all parents all parents
share in the doubling of the tax-free threshold for children
and, of course, the cuts in personal income tax. And bear in mind
if you have got two incomes you get two increases in the tax-free
threshold. Both of you get the benefit of the personal tax cuts.
If you are both earning between $20,000 and $50,000 a year you can
both work as much as you want to extra and up to $50,000 you don't
go into a higher tax bracket. That capacity to move from $20,000
to $50,000 without going into a higher tax bracket will do wonders
for peoples motivation in relation to things like overtime. How
often do you hear somebody say to you: oh it's not worth
working overtime, the taxman takes half of it.' Well the taxman
won't take half of it under these scales.
JONES:
[Commercial break]
Prime Minister, for those people on benefits and pensions, this
package would increase the maximum rate of all income support payments
so...
PRIME MINISTER:
Yes it increases them by 4 per cent and that 4 per cent is paid
on the 1st of July 2000 when the plan starts so that
pensioners have the additional money in their pocket as some of
the price rises occur. We have calculated that that amount is well
ahead, at least 1.5 per cent or more ahead of the estimated CPI
increase and we are going to guarantee to pensioners that at all
times their pension will be in real terms 1.5 per cent above any
increase in the CPI. So if the CPI goes up by 3 per cent which we...it
won't but if it does, then we'll make certain that the
continuing increase and the increase is 4.5 per cent so they are
always 1.5 per cent ahead. And they have got that as an extra buffer,
an extra bonus if you like. Now that's....
JONES:
Plus the cash bonus.
PRIME MINISTER:
In addition to that anybody who has got investment income and who
is 60 years or more will get a $1,000 untaxed upfront payment. Over
and above that, if you are a self-funded retiree and you have got
an investment income and most of them do you will get another $2,000
if you are of pensionable age. And that is subject to an income
test, it is fully available under $20,000 a year and it phases out
between $20,000 and $30,000. And then on top of that, of course,
for retired people we are going to abolish provisional tax. Say
that again, abolish provisional tax. It's the bane of existence
of a lot of retired people, a lot of farmers, a lot of small business
people...
JONES:
A lot of people with income outside wages.
PRIME MINISTER:
Indeed, income outside wages and then also for retired people a
lot of them have shares and under this franking credit system as
it is called, sounds complicated but the company pays the tax at
36 cents and then you get the dividend with the tax paid on it.
But if your tax rate is less than 36 per cent you don't get
the full value of that. And what we are going to do now is arrange
for it to be refunded from the tax department so if there is a tax
of 36 cents paid and you are only paying 20, we'll get the
tax department to send you the 16 per cent, send you a cheque. Now
that will be of enormous assistance to many modest income retired
people. And, of course, also for retired people the private health
insurance rebate will be very beneficial. Many of them have paid
for private health insurance all their lives, they need it, they
feel it gives them security. It's very expensive now. A 30
per cent cheque from the Government to help you pay for it will
be of enormous assistance.
JONES:
Good on you. Well let's just sum up there what we have tried
to do. And we are not here to start challenging, we are here to
try and seek some explanation. So that's the personal tax scales,
we are talking about pensioners, those without work, we are talking
about health, we are talking about self-funded retirees. Let's
now go to the central component of the package, Prime Minister,
the GST.
PRIME MINISTER:
Yes.
JONES:
Now the revenue from that you say will go to the States. I have
some questions this morning about which taxes it will abolish. I
understand that you have said that conditional upon them getting
the money is that FID goes, debits tax goes, stamp duty goes, stamp
duty on mortgages, on bonds, on leases, bed tax goes. Some asked
me land tax, land tax is not included in it?
PRIME MINISTER:
No, land tax is not included. But it is a condition of the States
getting the money that they abolish all of the taxes that you have
mentioned and, of course, first and foremost we will abolish all
of the wholesale sales tax which is a Federal indirect tax. But
we will say to the States: you can have the GST revenue in full
provided you get rid of all of these taxes like stamp duty on shares,
stamp duty on business conveyancing, cheques, promissory notes,
bills of exchange....
JONES:
And on your mortgage.
PRIME MINISTER:
And on your mortgage. The financial institutions duty, the bank
accounts debit tax, the dreaded bed tax in New South Wales which
is a tax on the Olympic Games in a sense. And that must be removed
by the 1st of July in the year 2000 before the Olympic
Games starts, and the tourist industry will like that. So all of
those taxes have got to go for the States to get the proceeds of
the GST and I think that is a very good arrangement.
JONES:
Okay, now it won't apply to the export...
PRIME MINISTER:
No.
JONES:
...of goods or services consumed outside Australia?
PRIME MINISTER:
No, it will make Australian exports cheaper to the tune of $4.5
billion a year. See what a lot of people forget is that if you are
in export and you buy a computer and you pay 22 per cent sales tax
on that, now you don't get that back. Whereas under this system
you pay 10 per cent on it, you'll get it back and that means
that your export when it is finally produced is cheaper to the tune
of all the tax that you have recovered. And we calculate that that
will make Australian exports cheaper to the tune of $4.5 billion.
Now at a time when Australia must trade to survive that's a
terrific boost.
JONES:
Right so the inputs in anything that is exported won't be
taxed?
PRIME MINISTER:
That's right and also it is not just exports but it is also
any business operator can get the tax paid on his or her inputs
back. So the gain for business out of this is enormous.
JONES:
GST credits?
PRIME MINISTER:
GST credits.
JONES:
Right now just for business out there listening they have to collect
this stuff. It is collected, as I understand it, every quarter and
they have got up to 21 days following the end of the quarter so
business will have access to that revenue for an average of 66 days?
PRIME MINISTER:
They will. It's a very big cash flow gain for businesses.
If you have got a turnover of less than $20 million a year, and
that is more than 99 per cent of all businesses in Australia, you
will remit on a quarterly basis if you are a very big company such
as Coles or Woolworths you will remit on a monthly basis. The cash
flow gain from this is huge and as you say small, well $20 million
is not small, but any company with a turnover of less than $20 million
is remitting quarterly, $20 million remitting quarterly will have
the money for an average of 66 days. That will improve their cash
flow position. That will help them in all number of ways.
JONES:
[Commercial break]
Okay Prime Minister, we chop off the wholesale sales tax and that
is replaced with a GST. Things should be cheaper, the customer out
there is saying how can I be sure the wholesale sales tax is going
to be removed.
PRIME MINISTER:
Well we are going to give the Australian Competition Commission
additional powers to enforce that with fines of $10 million for
unscrupulous people who try and exploit the change. I can tell the
Australian people that we will leave no stone unturned to make certain
that there is a full passing on of the price benefit of the removal
of the wholesale sales tax. And certainly a lot of items will fall
in price, a family car for example now has a wholesale sales tax
of 22 per cent, under this there will be a GST of 10 per cent so
that car will fall quite significantly in price. Other items, of
course, will go up, we don't deny that. But we calculate that
across the board the price increase will be a one-off 1.9 per cent
and, of course, all of the figures I have used earlier about tax
benefits are after allowing for the price effect of the GST.
JONES:
Right, now a lot of the big cost in business and in daily life
in trying to make a quid is the cost of fuel. You're providing
a diesel fuel credit for registered business?
PRIME MINISTER:
We are but before I come to that can I make the general point that
all businesses, whether they use diesel or not will find that there
fuel is, on average, 7 cents a litre cheaper. If you are running
an ordinary suburban business now and you buy petrol you have got
to pay the full bid on it, full excise. Under our plan the excise
will be reduced to accommodate the GST so that it is no dearer at
the pump for any motorist no dearer at the pump for any motorist
- but the business man will be able to get a refund of the GST component
and that means that petrol for business use will be 7 cents a litre
cheaper.
JONES:
That's right, if the fuel is used in production....
PRIME MINISTER:
In business, in production it will be 7 cents a litre cheaper whether
you are in diesel or not. Now on top of that we are going to provide
a special cut in relation to the use of diesel. Diesel fuel will
be...the excise will be 25 cents lower in heavy road transport
and rail and in relation to what is called off-road use, that's
farmers, miners, power generation, things like that, then the diesel
excise will be completely refunded. Completely refunded. That particular
change all up, when you take all of the fuel things into account,
is worth about $3.5 billion. Now what it does is to dramatically
reduce the cost of transporting items around Australia. Now isn't
that sensible with such a big country, particularly if you live
in the outback you need your goods. It costs more to carry them,
you pay more often. By reducing the cost of carrying them we're
helping people in the more remote parts of Australia and we're
recognising that in a big country you should not lose the opportunity
of reducing the cost of fuel.
JONES:
Prime Minister, just have a breather for one moment if you don't
mind because we've had a bad accident this morning and the
M4 has reopened but the traffic is a shambles...
Prime Minister, just one point to clarify on vehicles, there is
an argument from some because luxury vehicles are taxed at 45 cents
in the dollar. You have now determined that that luxury cars shouldn't
come as cheaply as people imagine. As I understand it will be an
extra tax on cars over $60,000. So if the cost of your car plus
GST reaches $60,000 you'll then pay what?
PRIME MINISTER:
You'll pay an extra 25% at the retail level, so-called luxury
car tax. The cost of it will still come down but the dollar reduction
will be about the same as a family car just below $60,000. So the
Beema' will still be cheaper but it won't be dramatically
cheaper, it will just be ordinarily cheaper, which is fair enough.
JONES:
Okay. Now let's just do now, in the time that's remaining
Prime Minister, some quick ones from listeners who've asked
some questions. You've said that an average of 66 days the
business will be able to keep the GST revenue and you said that's
a bonus. What if the business goes broke, what cover do you have
for keeping...for claiming your own money?
PRIME MINISTER:
Well you always get your own inputs back, there's...
JONES:
You the Government? You the Government, how will you get your.....
PRIME MINISTER:
Well you'll just have to take a punt like everybody else.
I mean why not. Where there's no money, you can't do anything.
JONES:
Right. How will this new tax system deal with the cash workers
such as house cleaners, gardeners and the flower seller by the side
of the road? What's to stop them from simply adding the 10%
to existing prices and pocketing the extra.
PRIME MINISTER:
Well they won't get any of their inputs back unless they get
into the system. See one of the great advantages of a Goods and
Services Tax is that you have an incentive not to cheat because
the only way that you can get the 10% you pay on things you buy
in order to run your business, the only way you can get that back
is to get into the system and to come clean. If you don't do
that you don't get it back and you're worse off.
JONES:
But in this instance, of course, they're just going to charge
more. There's not anything in the system, they're selling
flowers and they whack the 10% up for the GST and...
PRIME MINISTER:
Well, yeah, at some stage that fellow will go into a restaurant
and buy a meal won't he?
JONES:
That's correct.
PRIME MINISTER:
And he'll have to pay some tax. A