E&OE....................................................................................................
TUCKER:
Primer Minister John Howard today continues with a hectic schedule
of events around the country promoting the Government's new
tax package. Since the release of the package on Thursday there's
been a wide range in response. The business sector has been particularly
enthusiastic about the changes saying it will lead to increased
investments, while initial responses from the welfare lobby were
also positive, some have expressed concern about the devil in the
detail. Meanwhile the package ahas not been embraced by Premier
Peter Beattie who's expressed fears about Queensland's
financial position and the impact on our tourism industry. This
morning Prime Minister John Howard joins me in the studio. He's
willing to take your call so if you have a question for Mr Howard
about how this whole tax package will affect you please call us
now on 1300 36 06 12. John Howard good morning, good to see you
back here.
PRIME MINISTER:
Good morning Carolyn, good to be here again.
TUCKER:
Could I start with whether Parliament's definitely going to
be reconvened at the end of August?
PRIME MINISTER:
That's the plan.
TUCKER:
Is that going to happen?
PRIME MINISTER:
Well that's the current plan, yes.
TUCKER:
There's just some concern around this morning about the wool
stockpile and whether that will actually...
PRIME MINISTER:
Well Parliament is scheduled to meet on the 31st of
August.
TUCKER:
All right. What do you make of the polls in the paper this morning
in response to your tax package? Do you read that as a good thing?
PRIME MINISTER:
I don't get carried away with polls. We still have the job
ahead to explain it. But I am encouraged by the fact that people
do see this plan for what it is and that is a long-term plan for
the good of Australia. This is not a plan for the political advantage
of the Coalition, it's not a plan for a tax cut, it's
not a plan for a GST, it is a comprehensive attempt to reform a
ramshackle old-fashioned taxation system and give the country a
system fit for the 21st century. The Labor Party had
13 years to fix Australia's tax system. Mr Beazley and Mr Keating
were at the helm during the whole of those 13 years and they just
tinkered at the edges and it's obviously going to do the same
again. We on the other hand recognise that for the sake of Australia
we need to tackle the weakness of the system, root and branch, and
that's what we're doing. And you can't look at one
item in the plan in isolation from everything else. It's interdependent,
it's interlocked, it's a comprehensive assault on the
system.
TUCKER:
It's not negotiable?
PRIME MINISTER:
The essential thrust of it can't be changed. I mean we said
from the day it was announced that we would have an expert committee
to deal with some of the minor details and to talk to the community...
TUCKER:
Mr Howard, I'm afraid I'm going to have to interrupt
you. If you've just joined us, for our regional listeners who've
joined as at this stage it's 8:35am. You're with Carolyn
Tucker and the Prime Minister and we're talking about the tax
package. Now you say that all of these parts are of equal importance.
Why do you think people are having so much difficulty seeing the
advantages for them? I mean even though about half of those polled
think that it's a good thing for the country, only about 20%
seem to think it's a good thing for them.
PRIME MINISTER:
Well Carolyn, it is a big plan. Although once it's fully understood
and I think it takes a little while for that to occur and that's
perfectly natural because we are proposing some things that Australia
hasn't had before. But the great advantage of this is that
we attempt to tackle the root problem. I mean, what people feel
about the tax system is that, over the last 13 years in particular,
Governments have just sort of tinkered at the edges and come election
time they've offered a personal tax cut. But a personal tax
cut on its own is not tax reform. I think Australians increasingly
understand that you can't have the benefit of personal tax
reductions without fundamental reform to the system. And fundamental
reform to the system has to involve a goods and services tax, it
really does. Because the present indirect system is old fashioned,
it's unfair and imposes a lot of hidden taxes that people aren't
aware of. I mean I wonder how many of your listeners are aware that
there's a 22% wholesale sales tax on soft drink, toothpaste,
pet food, soap and shampoo, cordial, razors, toilet paper, dishwashing
liquid and washing powder. Now they are ordinary household items
and they carry not a 10% goods and services tax, they carry a 22%
wholesale sales tax. So when people say that the price of everything
is going to go up by 10% they're wrong. The price of many things
will actually fall because a 22% wholesale sales tax on items like
that is far greater than a 10% goods and services tax. So what we're
trying to do is to change, for the sake of Australia, to change
the whole system. And it will be better for the Australian economy.
It will allow the Australian economy to grow more strongly. It will
take $10 billion off business costs in Australia and will take $4.5
billion of the costs of our exporters.
TUCKER:
Well the National Party appears to be somewhat unconvinced about
the mechanism to assure the GST stays at 10%. I know they issued
a statement yesterday and then clarified that statement. But what
about the concept of a referendum to ensure that it stays locked
in?
PRIME MINISTER:
Well you don't, you don't....the likelihood of ever
getting agreement, Carolyn, and I speak to you as a former Treasurer
and as a current Prime Minister, that the likelihood of ever getting
all of the States of Australia, all of the Territories, the Federal
Government, and the Senate and the House of Representatives to all
agree on one single thing is so remote as to constitute the most
practical way imaginable to prevent any future rise, and I think
it's an extremely effective mechanism.
TUCKER:
That may be the case but if you're having difficulty convincing
your own Coalition colleagues about that how are you going to convince
the public.
PRIME MINISTER:
Well we're not having difficulty convincing them of it. They
acknowledge that it's an extremely effective mechanism and
that is what Mr McDonald said last night and he's the Federal
Treasurer of the National Party.
TUCKER:
Yes, second time round though. We haven't heard much from
One Nation since the release of your tax package but I did catch
up with the One Nation leader, Pauline Hanson, this morning for
a response. Let's have a listen to what she had to say:
HANSON:
I don't, look the big problem I feel, it doesn't address
the multinationals not paying their share of tax in Australia here.
Most of the revenue comes from the P-A-Y-E taxpayer and only a very
small percentage of multinationals and the really big corporations,
big business, actually pay tax. So therefore Howard is not addressing
multinationals paying their share of tax.
TUCKER:
Is that the only problem you have with it?
HANSON:
No, actually I was going to put out a report this afternoon on
my concerns about it. Also with the independent retirees I feel
the one-off payment doesn't really address it because once
they lose their, the...once the pensioners start paying out then
they lose that. They're actually paying 15% so that it's
going to, the superannuants capital is going to be eroded and the
amount of the duration of pension will be reduced.
TUCKER:
You feel they should get more compensation?
HANSON:
Well, I don't feel that with paying the 10%, because see you've
got the superannuation fund managers are exempt from paying tax
on the 15% of the earnings at the moment. See, once the...once
he brings in the 10% tax then they'll be paying that. So that
one-off payment doesn't help superannuants with the independent
self-funded retirees.
TUCKER:
You don't feel the abolition of provisional tax is a good
thing for the self-funded retirees?
HANSON:
No it doesn't. It doesn't attempt to offset the abolition
of the superannuation fund managers. Also you've got, my concern
is with the housing prices which will go up. The $7000 does not
cover people, first home buyers. Now that first home buyers means
that people who have never ever been involved in a first home loan
before in their life. Now say if you met someone new and you may
not have had a first home loan before but they could have, well
you're not entitled to it.
TUCKER:
And you remain opposed to the GST.
HANSON:
Yes I do. I had an open mind about it but I don't believe
it's in the best interest of the Australian people. We're
actually looking at, and bringing out a tax policy ourselves that
will tax system address a fairer tax system and it's virtually
scrapping the whole lot and starting from the beginning.
TUCKER:
That's Pauline Hanson, the One Nation leader. Prime Minister,
any immediate response to those comments?
PRIME MINISTER:
Well, most of what she said was wrong. To start with multinationals
are not getting an easy ride. In fact one of the changes that we
have made is to require the full payment of company tax before a
remittance is made to an overseas shareholder through a system of,
known in the trade as full franking of dividends. In other words
if a payment is made to a company, a shareholder overseas, than
the Australian Company tax rate, the full rate has got to be deducted
before a remittance is made. She said all of the burden is being
carried by P-A-Y-E taxpayers. There's a $13 billion tax cut
for P-A-Y-E taxpayers. I don't know what she's talking
about when she says we're taxing superannuation funds. There's
no change in the tax rate on superannuation funds. There's
a full imputation in relation to the shareholdings of superannuation
funds. She said she's against the abolition of provisional
tax. I'm amazed that she should be against the abolition of
provisional tax. It's the bane of existence of a lot of farmers,
of a lot of small businessmen and a lot of self-funded retirees.
So just on that very quick reading, and she says that the pension
would phase out because of the introduction of the 10%. I don't
know what she means by that. We're increasing the pension by
4% on the 1st of July in the year 2000. In fact there
are 10 individual benefits in this plan for pensioners and self
-funded retirees. She mentioned the $1000. That is only one of ten
measures. She didn't mention that we're increasing the
retired persons rebate, tax rebate, by $250 a year for a single
person, $350 for a couple. She didn't mention that we're
reducing the pension taper rate from 50% to 40%. She didn't
mention that we're increasing the free area by 2.5%. She didn't
mention that there is a 30% tax rebate for private health insurance.
The percentage of retired people who have private health insurance
is higher than that within the general community therefore that
particular proposal is of greater benefit to retired people than
any other section of the Australian community.
TUCKER:
Okay. Well, let's get onto calls so you can mention all the
other things in the tax package. Would you mind slipping those headphones
on because you won't be able to hear them otherwise? Anne,
good morning.
CALLER:
Oh hi. Me, is that me?
TUCKER:
Yes it is.
CALLER:
Oh sorry. Mr Howard, I was wondering if you could actually listen
to, and answer a question of mine without pulling out the usual
automatic political spiels.
PRIME MINISTER:
I don't know that we've spoken before so....
CALLER:
Firstly can you not interrupt me?
PRIME MINISTER:
No, no, I'm sorry.
CALLER:
I've watched your mannerism okay....
PRIME MINISTER:
No, no, I'm sorry. I'm simply not going to....you
and I have never encountered each other before so I reject what
you have to say.
CALLER:
[Inaudible] could you just answer my question?
PRIME MINISTER:
Yes, when you give it to me.
CALLER:
Okay, I will in the moment. Firstly though I'd just like to
point out that politicians and people who support the GST have in
my opinion already rorted the current tax system and made their
money and no matter what happens now it's not going to affect
them.
PRIME MINISTER:
You don't have a question, you have a statement.
CALLER:
You and Mr Beazley and I'm sure a lot of other high-income
earners have said that you will have a GST advantage of around about
$80 a week. Yet ordinary battlers who work just hard, if not harder
than you, will only get an advantage of approximately half of that
at the most. Can you justify why that difference is fair because
real people who live in the real world can't and they're
the one who voted last time remember?
PRIME MINISTER:
Well, now that I've heard that statement Anne, let me give
you my statement. My statement is that the people who have relatively
high incomes of course pay much higher levels of taxation than people
on lower incomes. That is the way a progressive taxation system
works. We have not reduced the top marginal rate but we have reduced
the bottom rate from 20 to 17. We've got rid of the 34 and
the 43 cent rates and between $20,000 and $50,000 where most tax
payers are, that's $20,000 a year and $50,000 a year, there
will be a new single rate of 30%. Now that means that people in
that income range will be able to earn a bit more overtime and have
a wage increase without passing into a higher taxation bracket.
It is always the case with a progressive taxation system that a
person on a higher income, in dollar terms, gets a larger tax cut
than a person on a lower income because that person is paying a
lot more tax in the first place. I mean that is how a progressive
taxation system works. But I'd also point out to you that people
on higher incomes like Mr Beazley and myself, as a result of our
first Budget, do not have such generous superannuation arrangements
as we once had and that particular superannuation change only applies
to people who earn over $70,000 a year. So in our very first Budget,
in the name of fairness, in the name of being fair to the battlers
which you claim to be speaking for, we introduced a measure that
only applied to high-income earners and in fact was widely criticised
by those people.
CALLER:
Question: for the real of people of this country, so you have definitely
lost my vote...
PRIME MINISTER:
Well, I don't think I had it in the first place.
TUCKER:
Thank you Anne for your call. Don, good morning.
CALLER:
Good morning. Mr Howard, actually you answered Pauline Hanson by
saying that the overseas shareholders are taxed or will be tax through
their payments etcetera. But what you didn't say is if a company
is operating from an offshore company, offshore base, how much tax
do companies like Toyota, Nissan, Coca-Cola and that pay in this
country where they can transfer large lumps of sum...large lumps
of money out of the country untaxed because they've brought
product into the country at a sale price, not at the wholesale price.
PRIME MINISTER:
Well there are provisions in taxation legislation already about
transfer prices so they are there already. And I'd make the
point again that one of the provisions that we are introducing is
a requirement under the dividend franking arrangements, sorry for
the jargon, but that's how it's described, whereby if
a company operating in Australia pays a dividend to an overseas
shareholder....
CALLER:
That's the dividend?
PRIME MINISTER:
Yeah, well I know. Well that is the way you evacuate the profit
made to your overseas shareholder. I mean that's the way it
works.
CALLER:
Evacuating [inaudible].
PRIME MINISTER:
Well, if it's being evacuated through a transfer pricing mechanism
there are other transfer pricing prohibitions in the income tax
legislation, and there's a further device that I haven't
mentioned and that is that in relation to the arrangement we're
proposing for the abusive trusts, and I noticed Mrs Hanson was talking
about those in the paper this morning. One of the things we announced
on Thursday, with effect from Thursday, is that where you've
got a series of cascading trusts, the head trust in effect has got
to disclose the name of the ultimate beneficiary of those cascading
trusts otherwise that person is taxed at the top marginal rate.
Now the effect of that of course is, in my view, will be to stop
a lot of the abuse that is occurring through the use of trusts offshore.
A practice that was allowed to flourish for 13 years under the former
Labor Government.
TUCKER:
Happy with that Don?
CALLER:
No. He's talking about trusts which I imagine would be Australian
companies setting up trusts.
PRIME MINISTER:
Well, I'm talking about tax avoidance, that's what I'm
talking about. And I'm talking about a device announced by
the Government to clamp down on a tax avoidance practice that was
allowed to develop when Mr Beazley and Mr Keating were running the
country.
CALLER:
Well it's not the dumping of policy but what I'm saying
is if someone exports a car from say, Japan into Australia, and
sold in Australia for $20,000 or whatever and all they've got
to do is write out the invoice for 19,500 and say: well it cost
them $500.
PRIME MINISTER:
Well the point I'm making is that there are provisions in
the Act which are designed to prevent that sort of dishonesty occurring
and those provisions have been there for some time.
TUCKER:
Thanks Don, we'll have to move on I'm afraid. Hello Margot.
CALLER:
Oh, good morning. Good morning Carolyn and good morning Mr Howard.
PRIME MINISTER:
Good morning.
CALLER:
Mr Howard, it was stated recently in the University of New South
Wales report that aged pensions are below the poverty line now.
With couples just being in line on low costs and singles falling
$50 short of living low costs. This 4% you're throwing pensioners
will not compensate for the increase in food and other items. Mr
Howard, the question I'd like to ask you: are you prepared
for an increase in the Medicare bill?
PRIME MINISTER:
Am I prepared for an increase in the Medicare bill?
CALLER:
Yes, exactly.
PRIME MINISTER:
I'm not quite sure what you mean by an increase in the Medicare
bill.
CALLER:
Right, well...
PRIME MINISTER:
I'm sorry, I'm trying to be obscure. I'm just not
quite sure what you mean.
CALLER:
No, I realise that. But pensioners will cut down on food and more
trips to the doctor because of the inadequacy of the nutrition in
the food that they should be getting. And this was already stated.
PRIME MINISTER:
Well I don't know what....I think I've now got the
thrust of your reference to Medicare. Well, I don't agree with
you. The increase in the general cost of living as a result of the
changes will be 1.9%. I mentioned earlier that there are a lot of
items that will actually fall in price.
CALLER:
Yes, I heard that.
PRIME MINISTER:
Now, and I think it's very very important that people understand
that the reason why, with the 10% GST, the across the board price
increase is only 1.9%. It is because things like confectionary,
and biscuits, and flavoured milk, and ice-cream, and soft drink,