E&OE....................................................................................................
CLARKE:
Prime Minister it seems as if the election campaign is well and
truly under way at the moment. The only thing missing is a date.
Would you agree with that?
PRIME MINISTER:
Well, I'm certainly out explaining this plan to the Australian
people and I'm doing it enthusiastically because above all
it is a long-term plan for the country's future. The best thing
about the tax plan is that it will benefit the entire Australian
economy by reducing the cost of producing things and that means
that we'll be able to sell more overseas, we'll be able
to compete more effectively against imports and businesses will
in the long run be able to employ more people. The best thing you
can do for the Australian economy is make it more competitive and
you make it more competitive by reducing its operating costs. People
often talk about giving export incentives to Australian exporters.
This tax plan is a $4.5 billion export market development grant
to all Australian exporters because that is the amount by which
export costs are going to be reduced when the plan comes in. I want
the plan to be seen, above everything else, as something that is
good for the future of the entire Australian economy.
We do need tax reform. Most Australians deep down inside know that.
It is not enough just to offer a tax cut. I'm quite sure our
opponents will come along next week and offer a personal tax cut.
Anybody can do that, but you need to have an integrated reform plan
to make to a lasting impact and leave a lasting benefit for the
entire Australian economy, you need to reform the system as well
as offering individual benefits.
And of course for North Queensland, for regional Australia the
plan has a special appeal and that is the huge reduction in fuel
costs, something the Labor Party is opposed to. Their spokesman
on the environment, Duncan Kerr, attacked the $3.5 billion reduction
in fuel costs so we can assume the Labor Party is against reducing
the price of fuel in regional Australia because they've come
out against that part of the plan. Now, I can't think of anything
that is more likely to help North Queensland, long distances from
other parts of Australia you buy a lot of goods that are hauled
long distances, most of the trucks that haul them are diesel-fired
- diesel fueled - and there's going to be a massive cut in
the excise on diesel fuel. It's going to come down from 43
cents a litre to 18 cents a litre. That is a drop of 25 cents. On
top of that every business man and woman in Australia will be able
to buy their petrol effectively at 7 cents cheaper because the GST
on fuel used for business, quite apart from the diesel reduction,
which is a separate additional thing, the GST on fuel for business
will be fully refunded. So overall, one of the really specific attractive
features about this plan is the way it reduces fuel costs, and that
is of unbelievable benefit to country Australia.
CLARKE:
Let's talk about another issue of importance in North Queensland,
and that is tourism. It has been said in some circles that a 10%
tax on so many things will make the price of a holiday so much more
expensive. People will not be keen to come to North Queensland for
holidays. Your response?
PRIME MINISTER:
Well, the tourist industry will benefit from the reduction in fuel
costs because it won't only be heavy transport that will get
that reduction in fuel excise, all the pleasure craft operators,
all the boats that ply the coast, that go from the coast to the
islands, they all use fuel that will get the benefit of this concession,
and so there will be enormous benefits for them. We have included
the internal air travel section of holiday packages bought overseas
in the exemptions in relation to charging a GST. There'll be
no GST on international airfares and packages bought overseas, there
will be no GST on airfares, international airfares, and on top of
that, the internal leg of packages bought overseas, that likewise
will not be subject to the goods and services tax.
See, what you've got to understand is it is not 10% on top
of everything. Everything is not going to go up by 10% because many
of the things that people now buy are subject to sales tax. I mean,
you pay 22% on a family car, you pay 12% on biscuits, on flavoured
milk, on orange juice concentrate, you pay 22% on soaps and detergents,
on many household items. Now, all of those things will go, all of
those 22%s and 12%s and in some cases 32%s on videos and TVs, they
will all be abolished, and everything will be subject at the consumption
level to a 10% tax. Now, because the input costs will come down,
the average price rise all over is only going about 2%, 1.9%.
CLARKE:
But are we looking at price rise?
PRIME MINISTER:
Well, in the overall, yes. Overall it will be about 2%, but not
10%. Overall 1.9%, not 10%, and the reason it is not 10% is that
all those things that are now bearing WST, wholesale sales tax,
of 22%, 32%, 12% - they will all go, because one of the conditions
of the introduction of a goods and services tax is that the wholesale
sales tax has got to be abolished in full. The other thing that
will go is those annoying items in some of your bank statements
people get around Australia the financial institutions duty
and the bank accounts debits tax. Now they vary a little bit from
State to State but they are a great aggravation to Australia. You
will no longer have to pay stamp duty on share transactions, you
will no longer have to pay stamp duty on business conveyances, no
longer have to pay stamp duty on checks and bills of exchange and
promissory notes, because the proposal is that when the GST is introduced
the wholesale sales tax will be abolished all together. The price
of a family car will drop dramatically and the States will be required
to abolish nine other taxes including the financial institutions
duty and all the other taxes that I've mentioned.
So that the idea that you are lumping 10% on top of everything
is quite wrong because what you are doing is you are taking all
of these taxes away first. And then the great advantage of the goods
and services tax is that it applies in an even consistent manner,
and a businessman now who buys a computer pays wholesales sales
tax on that and he can't get it back. But under the GST if
he buys that same computer, instead of paying a higher rate of wholesale
sales tax - I think off-hand it may be 22% - he will pay 10% goods
and services tax and he'll be able to get the whole of that
10% back from the tax man, because the way a GST operates is that
you get refunds of the GST paid on your business inputs. I mean,
that is why petrol will be cheaper for every business man and woman
in Australia. If you use it for business, it will be 7 cents a litre
cheaper. Now, when you add all of those things up you can see that
this argument that it pushes up the price of everything by 10% is
wrong and of course there are personal taxation reductions to ensure
that people, even after the price effects of the GST of around 1.9%
are going to be better off. It's an integrated package. You
can't have one without the other. The Australian public I think
understand that if we really want to fix the system, then you have
to have a GST. If you don't want to fix the system, if you
want to stick with the present indirect tax system where
you've got taxes as high as 32% - which can be put up at the
whim of any Federal Government as we found after the 1993 election
where Mr Beazley and Mr Keating put them all up. If you want a really
genuine reform, you've got to embrace this.
CLARKE:
If you want to ask a question to the Prime Minister. Let's
go to our first caller now and it's a good morning to Jack.
Hello Jack.
CALLER:
How are you this morning?
CLARKE:
Good thanks.
CALLER:
Welcome to North Queensland Mr Howard. My question is: recently
I had my roof system repaired on my house which cost $1000. I was
advised by the contractor that if GST was operational I'd have
to pay an extra $100 extra on that account which would make it $1100.
I was just wondering if in fact that is correct.
PRIME MINISTER:
Well his operating costs would be less than what they are now because,
for example, his fuel will be cheaper and I would expect that there
are many other items that he now buys in which he pays wholesale
sales tax so his input costs would be lower. Therefore even with
the imposition of the 10% GST, the figure that he's given you
would not be right.
CALLER:
Yes, well he said that it was $100, it's be 10% and that would
be....
PRIME MINISTER:
Well I've explained to you how, because some of his other
costs will be lower, the amount on which you impose the 10% would
be less than $1000 therefore it would not be the gross amount that
you mentioned.
CALLER:
But I didn't ask about what he purchased from the wholesale
people and so forth in which he carries [inaudible], I see it, he
told me that it would cost $100 extra. And I believe him too.
PRIME MINISTER:
Well I would say to you Sir, that I'd go back to him and I'd
get a list of all of his input costs and I'd find out whether
he's telling you the complete picture and if I were you I'd
find out whether he pays any wholesale sales tax. If he does than
you'll find that what he's saying to you is a little wide
of the mark.
CLARKE:
Jack, we'll have to move on but thanks very much for your
call this morning. We are taking your calls on talkback with the
Prime Minister this morning, 4772 2630. Good morning Jennifer.
CALLER:
Oh, good morning Prime Minister.
PRIME MINISTER:
Hello Jennifer.
CALLER:
I was reading the tax scale in the Sunday Mail on Sunday
and it left me a little bit amazed because of the variations in
the...what they're going to receive. Like people on $20,000
are only going to get 3% back where as anyone earning $38,000 to
$50,000 are now paying 43 cents in the dollar, they're going
to get a 13% increase back. Pensioners of which we are, we're
living on $5.96, that's what we're going to get out of
our 4% increase. Now someone on a gross salary of $880,000 are going
to get $8,969 a week and the pensioners have to survive on $8,058
a year. Now he's earning $911 a week more than what we get
per year. And I just thought that this GST was mainly for the Australian
battlers and I'm afraid I can't, you know, I just can't
see it.
CLARKE:
Prime Minister, your response.
PRIME MINISTER:
Well my response is firstly that it's always the case under
a progressive taxation system that if you reduce income tax right
across the board then people on high incomes get larger dollar amounts
because they're paying more tax and it stands to reason that
if you reduce the tax from somebody who's earning $100,000
a year than the dollar gain from that is greater than somebody on
$20,000 a year because the person on $100,000 a year is paying a
hell of a lot more tax in the first instance.....
CALLER:
[inaudible]
PRIME MINISTER:
...no could I, listen, with respect I did hear you out. Would
you please hear me out. The other point that I think ought to be
made is that we have not reduced the top marginal. Of the existing
rate scales, you mentioned the 43 cents and the 38,000 which it
comes in, we have cut the bottom. We've...to start with
we've increased the tax free threshold from $5,400 to $6,000
and in proportionate terms that is of more benefit to somebody who
earns $20,000 or less than somebody who earns $80,000. The second
thing is that we've reduced the first rate from 20% down to
17. Then we've introduced a new 30% rate that will run right
from $20,000 to $50,000 and the great advantage of that is that
it will encourage the average wage and salary earner to work overtime
without going into a higher tax bracket. Then we have a 40% rate
that cuts in at $50,000 and then at $75,000 we still maintain the
top 47% rate. Now the other point I should make to you is that in
the first Budget that was brought down under my Government, we introduced
a special surcharge in relation to superannuation contributions
that only applied to people who were earning $70,000 a year or more.
That didn't apply to anybody whose income was below that. Now
I know a lot of people in that income range didn't like that
particular measure but we nonetheless stuck to it because we believe
it was only fair and equitable in fixing the Budget deficit that
we should get a contribution in relation to an already quite generous
tax treatment of superannuation from high income earners. So I don't
think anybody can suggest that we're asking the low paid in
the community to bear a disproportionate burden. We're not
doing that. We've spread things very evenly and the best token
of that of course is that we haven't dropped the top marginal
rate.
CLARKE:
Jennifer, thank you very much for your call this morning.
CALLER:
Thank you.
CLARKE:
And now we say good morning to Kim. Hello Kim.
CALLER:
Hi. I never went to school a few years ago and I'm not really
good at maths, but my husband is on a earning of a little over $33,000
a year and the way I see it that he pays 33 cents in the dollar
and with the tax cuts he will get a saving of 3 cents for every
dollar taxed that he pays. Am I correct in that?
PRIME MINISTER:
No, it's more than that because if he's on $33,000 he'll
also get the benefit of the increased tax free threshold and he
will also get the benefit of the drop in the first rate from 20
down to 17 and he will be on, if he's on $33,000, well under
this plan his marginal tax rate will be 30% but he'll be paying
lesser amounts on chunks of his income between $6000 and $20,000.
The 30% rate doesn't apply until you hit 20,000. Now therefore
he'll gain more than what you have suggested. And then on top
of that, do you have any children?
CALLER:
I have two teenage children, 14 and 15.
PRIME MINISTER:
And are you in the workforce?
CALLER:
No.
PRIME MINISTER:
Well, what are the ages of your children?
CALLER:
14 and 15.
PRIME MINISTER:
Well you will get increased family benefits as well. He will get...you'll
get an additional $1000 a year off his tax free threshold for each
of those two children. So that's another $2000 that he can
add to his tax free threshold of $6000. So overall you will be better
off than that. I mean if you gave the studio your name and address
I'd get you the exact calculation but I'd have to know
the exact figure and I'd have to know whether there was any
private health insurance involved.
CALLER:
No we couldn't afford it.
PRIME MINISTER:
Well you may be able to afford it now because you will be able
to get 30% of the cost of it back back off your tax. If you had
a policy that cost you, say, $1000 a year, from the 1st
of January next year you'll be able to get 30% of that back.
So you will certainly be better off than the bald amount that you
just suggested.
CLARKE:
Thanks very much for your call.
CALLER:
Thank you.
CLARKE:
We're taking your calls this morning on 634QN, your local
ABC, talking with the Prime Minister. Brian, good morning.
CALLER:
Good morning. Good morning PM.
PRIME MINISTER:
Good morning Brian.
CALLER:
Mine's a very broad question. In your tax package they say that
you'd close some of the tax loopholes. Why is it neither side
of politics will actually close off all those loopholes, and they
say there's about $8 billion of tax to be collected from that
area?
PRIME MINISTER:
Well there's not $8 billion. I mean that is just a mythical
figure. Unless you're going to wipe out things that I don't
regard as loopholes, such as negative gearing and tax incentives
for people to invest in superannuation. You see a lot of people
say that things that aren't really loopholes are loopholes.
I don't think it's a loophole to give an incentive for
people to invest in superannuation. That's not a loophole.
If you want people to divert investment income, if you want people
to invest in funds that are set aside for their retirement you have
to give them a tax break. That's not a loophole. And I don't
think negative gearing which encourages a lot of development, I
don't think that's a loophole. I don't think depreciation
for business is a loophole.
CLARKE:
But I guess a good question would be does this tax package get
rid of all the tax cheats?
PRIME MINISTER:
This tax package will hit tax cheats very hard. I mean to start
with, a GST hits tax cheats because a GST is much harder to evade
than the existing taxes. That's one of the great virtues. We
will get $3 billion additional revenue at least over a period of
three years as a result of the introduction of a GST, and that would
not be possible unless you have a comprehensive goods and services
tax. We've also introduced some special rules with effect from
last week in relation to off-shore tax havens that will hit down
very hard on the use of cascading trusts to ship money off-shore
and evade taxation. Now we make no apology for doing that. We're
also going to tax trusts in the same way as companies but we will
allow the continued legitimate use of trusts because they are a
way of holding together assets in a farm or small business and there
is a legitimate use for them. But we're going to eliminate
the abuse of them. So we are doing an enormous amount in relation
to loopholes but I want to make the point that not every tax incentive
is a loophole. Otherwise you get the ridiculous situation where
people are running around saying anything that involves a tax concession
is a rort. It's not.
CALLER:
Brian, we'll have to leave it there but thanks for your call
this morning. Prime Minister, just on a separate issue and that's
on the wool stockpile, the legislation to freeze the wool stockpile.
Will Parliament be resuming to pass that through?
PRIME MINISTER:
Parliament is scheduled to resume on the 31st of August.
CLARKE:
So at this stage you believe that Parliament will be resuming to
put that legislation through?
PRIME MINISTER:
It's scheduled to resume on the 31st of August.
CLARKE:
So the Government's staying committed to that. 630 4QN, your
local ABC. We've got four minutes to news. We're taking
your calls with the Prime Minister this morning and good morning
to North? Hello North.
CALLER:
Good morning Michael. Mr Prime Minister, I do appreciate you making
a visit to Townsville and, you know, give us chance to talk to you.
You stated earlier that you wished to fix the system.
PRIME MINISTER:
Yes, I do.
CALLER:
And I wish to refer to an October 28, 1996 Sydney Morning Herald
quote that says: the tax office, the vast majority of multinational
corporations pay little or no tax.
PRIME MINISTER:
Who said that?
CALLER:
The tax office, it's quoted here in the Sydney Morning
Herald.
PRIME MINISTER:
Well that doesn't necessarily mean it's absolutely correct
just because it's quoted in the newspaper, I just wanted to
check the real source of it. Well could I say in relation to multinationals
and this tax plan, as we've only got a few minutes, we are
requiring that every dividend paid to an overseas shareholder from
Australia be subject to the full company tax before it is remitted.
Now that is a very very effective way of ensuring that the concerns
of people about tax obligations of overseas shareholders, which
is another way of describing multinationals, are in fact met. Now
I have no truck for tax avoidance arrangements by multinationals
or anybody else. But this tax plan, because of that particular device,
amongst others, goes very directly to the concerns that people have
expressed.
CLARKE:
North, thanks very much for your call this morning. Prime Minister,
we've only got about two minutes til news time. Just
looking at the calls that we've seen so far, a lot of confusion
out there. Is this package too complicated for the people to understand?
PRIME MINISTER:
Well, I think people are interested to know, but I mean, I think
both of us are over 21 and we know that every so often political
parties arrange for questions to be asked, and I think perhaps over
the past week I've had a few questions that may have been inspired
by my po