E&OE....................................................................................................
QUESTION:
Prime Minister, you stated that part of your tax reform, that all
the details of the package was to provide incentives for people
to get of welfare. Could you explain to me how that mechanism will
work.
PRIME MINISTER:
Well at the moment, because of the interaction of the taxation system
and the welfare system there are points of income where there is
virtually no incentive for a person who has a number dependents
to get of welfare and to get back into the workforce because the
effective marginal rate of taxation constituted by the actual rate
of tax plus the withdrawal of the social security benefits can be
as high as 85%. And what we have done is two things. We have increased
significantly the income levels that people can have before they
start the lose the social security benefits and we have also reduced
from 50% to 30% the rate, the taper rate, the rate at which the
social security benefits are withdrawn. And this has the very beneficial
effect of people who find a job and do their sums deciding that
it's much better to get back into the workforce than to stay
on welfare. Now I think anything that you can do to reduce welfare
dependency is desirable. That's why we introduced work for
the dole. That's why we've extended work for the dole.
That's why we've introduced the youth allowance which
tilts the incentive towards training and education rather than being
on the dole. And that's one of the reasons why we have made
these changes and I'm pleased to note that this is one aspect
of the plan that ACOSS this morning said it strongly supported.
QUESTION:
Peter Lindsay spoke at a rotary lunch last week and he informed
us that allied or alternative health care people would be collecting
GST whilst the orthodox medical practitioners would not be collecting
GST. Can you explain the logic to me behind that? I'm a great
personal believer in a GST. I'd like to see everyone collecting
as opposed to some people being excluded by the process.
PRIME MINISTER:
Well what we have sought to do, and I think with all of these things
it's very important that because they involve a great deal
of technical detail, if you have a specific question about what
is in and out that should be carefully checked with all the documentation
so that you're accurately informed. But the idea is to have
a GST free situation for things that are, in effect, covered by
Medicare, plus other activities including dentistry and a number
of other activities. There obviously has to be a line drawn somewhere
and the difficulty of us including everything that could be regarded
as allied to medical activity would be that that in turn would open
up another boundary of requests where people will say: well if you're
going to leave that free of the GST then our activity can also be
beneficial to somebody's health and we think that ought to
be free of the GST as well and before long you find yourself back
to the situation that we have at the present time where you have
rates of wholesale sales tax on things up to 32% yet you have other
activities which are not subject to any wholesale tax at all. The
grossest example is I think the comparison of caviar with orange
juice concentrate where caviar is free of the wholesale sales tax
yet orange juice concentrate carries a wholesale sales tax of either
12 or 22%. I'm not sure off-hand which it is but whatever it
is it's at least 12% more than that carried by caviar. Sir
I understand there will be borders of discontent. Your own particular
activity and others, we'll check the list. I think in fact
yours is on the list isn't it Arthur? Anyway we'll check
that out for you.
QUESTION:
Mr Howard, you talked about the [inaudible] broad picture and I
can appreciate that about reducing taxes on exports and things like
that. In the book trade there are currently [inaudible] sales tax
on books. We're having major problems with books being imported
or imported through the internet. Are you going to address the problems
of books coming into Australia being paid for with credit cards,
no tax being gathered on them?
PRIME MINISTER:
Well within the bounds of practicality we are seeking to address
that problem in a way that doesn't end up costing more than
its worth in terms of revenue collection and part of the consultative
process that's going to be undertaken over the next 18 months
will ensure that that occurs.
QUESTION:
Prime Minister the one thing you did not touch upon is the most
inequitous tax introduced by Labor ...(inaudible)...opposed
by the Liberal Party was the Fringe Benefits Tax. What are we doing
about the Fringe Benefits Tax, where the employers paying for the
wider benefit to the employee.
PRIME MINISTER:
Well...did everybody hear that? No well the gentleman wanted
to know what we were doing about the Fringe Benefits Tax which was
introduced by the former Government in 1985. Well the answer to
that is we are not proposing its abolition. I know that will disappoint
a lot of people here. We don't think, given the revenue constraints
that we have and the other changes that we've wanted to make
that we could afford to abolish the fringe benefits tax. The gentleman
suggested that what we should do is, by implication I think, correct
me if I'm wrong, that the Fringe Benefits Tax ought to be borne
by the employee rather than by the employer. Can I see, in all candour
that whatever might be the intrinsic merit or otherwise of that
if you were starting from scratch that is not realistic now that
an arrangement has been in operation for such a long period of time,
particularly inside other major reforms for that to take place.
And I know, as I said at the beginning of my speech that not everything
we have done satisfies everybody and there will be people in the
business community who will say: well I wished he'd had done
something about that and I wished he'd not done something about
something else. What I'm asking everybody to do is to look
at the whole, is to look at the aggregate impact of the plan on
the Australian economy and on the business sector. And if I had
a choice between taking $10.5 billion of taxes on inputs off business
community or taking the Fringe Benefits Tax of the business community
I would frankly say taking that $10.5 billion of input costs off
is far more beneficial. Far more evenly spread and much more desirable
in the long term interests of the productive sector the Australian
economy. In the end in Government, when you're talking about
the revenue, it comes down to choices. And all of us have got choices
and that's the choice that we've made. It's not to
say that every aspect of the fringe benefits tax now is desirable
but we simply didn't have the room to get rid of it any more
than we had the room to get rid of payroll tax. Much and all as
a lot of people in the community think that that ought to be done.
But if you'd wanted to get rid of payroll tax you'd have
to have had a GST rate of between 13 and 15%. Now we didn't
think that was very smart. We thought that would have grossly reduced
the acceptability of the plan that we're putting forward. So
the balance was struck. We go for getting rid of the tax of the
costs of taxes on inputs. We go for cleaning up the indirect tax
system. We go for reducing fuel costs. The cost of that is that,
of all of those things, is that you have to keep some other things
which in an ideal world you might want to get rid of.
QUESTION:
My first question was going to be about payroll tax. The second
one was another similar, relationship between the GST and the States.
How will the GST, you said that it will be handed over to the States.
How will it be divided up between the States? Is it on the basis
of past taxes or is it on the basis of population or the...?
PRIME MINISTER:
Sir, we're asking the Commonwealth Grants Commission. After
the election we will have a meeting of the, a Premiers' Conference,
perhaps the last Premiers' Conference of the modern era, to
talk about how we're going to bring the new plan into operation.
And the proposal is that we will ask the Commonwealth Grants Commission
to decide the allocation between the States and it won't just
be done, I mean it's up to the Grants Commission to devise
its own formula, but if you do it strictly on a population basis
you get one result. If you do it on a per capita growth basis you
get another result. And therefore we take the view that what you
should try and do is to get the Grants Commission to decide on the
allocation between the States. We estimate that after ten years
of operation of the new plan the States will be, in aggregate, $25
billion better off than they would be if the existing revenue sharing
arrangements were to continue. It's an extraordinarily good
offer for the States. It's a fabulous offer for Queensland
because not only would Queensland benefit along with all the other
States but Queensland will get more out of getting rid of that fuel
tax, that excise, than any other State in Australia because Queensland
is big and decentralised. And just....Queensland is the most
decentralised State in Australia. The majority of you people don't
live in Brisbane as you all know. Where as the majority of people
in New South Wales do live in Sydney. And those circumstances I
can't for the life of me understand why Mr Beattie is against
my plan. Because it's a pro-Queensland plan. It's terrific
for Queensland. I mean I can't believe how good it is for Queensland.
And when you add all of those things together it's terrific.
Beautiful one day, perfect the next, and fabulous the day after.
QUESTION:
Mr Howard, thanks for dropping in. Pity you can't stay longer.
Just a couple of things. One thing that concerns me for those of
us, I think in many ways you're preaching to the converted
which is not such a bad thing, but one thing for some of us who
lived through Wik and also the industrial relations reforms, I guess
we look at it from an angle in that how is your tax reform going
to get through the Senate if you win the next election? The concern,
you know, how many concessions are going to be put in place to the
Democrats and or whoever else may be there obstructing this legislation.
This is Queensland after all. I was just wondering, isn't the
common enemy a hostile Senate and what are you going to do about
it?
PRIME MINISTER:
Well the answer to that. It's a very serious question. The
answer is that is in the hands of the Australian people. I heard
a report this morning, it may or may not have been accurate, forecasting
that the Australian Democrats were going to declare at some stage
that the plan in its present form was unacceptable. Can I say that
the acceptability or otherwise of this plan will be determined by
the Australian people, not by the Australian Democrats and in the
end it is for the people of Australia by their vote at the next
election and the size of the support that they register for this
plan that will ultimately decide what happens in the Senate. Nobody
is more conscious than I, there is person in Australia who is more
conscious than I of the vagaries of the Senate voting system, and
there's no doubt in the world that we've had one hand
tied behind our back from March of 1996, despite our 44 seat majority
,because we don't have a majority in the Senate. But that is
the law of Australia. And I'm as bound by it as you are and
every other Australian is bound by it. I might rail against it,
I might get angry about it, I might complain about it, I might seek
refuge and explain the way why things haven't happened but
in the end I've got to live with it and I've got to make
the thing work. But in the end we got Wik fixed. In the end we did.
It took a while but I got it fixed in the end against enormous odds
and incredible obstruction from the Labor Party. Incredible deliveries
of sanctimonious lectures from different sections of the Australian
community and I though that was a very very protracted issue and
that no good was done for the Australian community because of the
obstruction by the Democrats, by the Greens and by the Australian
Labor Party and I say full marks to Senator Harradine, who in the
end had the sense of responsibility to the rest of the Australian
community. But sir, all I can say to you is that I will be asking
the Australian people to vote for us in the lower house and to vote
for us in the upper house. And if people want this plan they'll
vote for Coalition in both houses. They won't muck around with
minority parties, they won't muck around with people who are
against tax reform. And the only show in town, the only good people
in town who are interested in tax reform are the Liberal Party and
the National Party. The rest of them, in one form or another, don't
want tax reform. The Labor Party doesn't want it. The Democrats
I'm not sure. One Nation says it is against tax reform. So
if you really want tax reform the message you ought to give your
mates is vote for us in both houses and don't muck around with
minorities.
QUESTION:
Good afternoon Mr Howard. One of the things, I'm [inaudible]
and I believe the GST, I believe in what you're doing and I
believe in the open Government policy, but a lot of people will
look at the GST as a fear of the unknown. There's a lot of
products that even I utilise that I don't know the indirect
taxes are already there and I think possibly that a lot of people
ought to know what's already there and how you're going
to change it. I think it's an education program that the average
Australian as well as give people the right to know and feel safe.
I believe in GST.
PRIME MINISTER:
Well I believe that you're right about education and that's
what we're doing by spending this $10 million. That is not
a propaganda campaign it's an education campaign. We're
not attacking the Labor Party in any of those ads. What we're
doing is explaining how the new system will work and part of that
information is to remind people that the 22% on the family motor
car, of the taxes on flavoured milk, on biscuits, the taxes on orange
juice concentrate, the taxes on soap powders the taxes on detergent,
the taxes on computers, the taxes on all the other...., the fact
that petrol is going to be 7 cents a litre cheaper. Whether you've
got a farm or you're using diesel or whatever. So we are going
to do all of those things and that's why we have to spend the
money on the advertising campaign.
QUESTION:
Mr Howard, my name's [inaudible]. I'm the State Secretary
for the Livestock Transport Association and a local operator. Congratulations
on recognising the input that transport has in this country and
it's a bad time. I just have a couple of questions. The 18
cents per litre that you're about on diesel, how much of that
is actually going to be regarded as a road user charge as being
suggested and how much of it will actually go back onto the roads?
PRIME MINISTER:
Well we are not going to formally hypothecating it but we obviously
will have a very very strong roads program.
QUESTION:
Just a second question Mr Howard. The National Road Transport Commission
[inaudible] a 25% increase in registration for [inaudible] road
train prime movers. You probably don't know about that or whatever,
I'm interested to know, are we giving it with one hard and
maybe taking it away from the other?
PRIME MINISTER:
Well we are certainly not. I've had no part, that thing that
you're referring to, we certainly are not part of that. And
certainly there's no sort of sinister plot I can assure you.
It's a terrific deal for your industry it, really is.
QUESTION:
[inaudible]. Mr Howard, welcome to Townsville. I agree with you
[inaudible]. But Mr Howard my business is [inaudible] medical engineering
(tape break) dying breed as well, but taking into account the national
competition policy, with the GST how would you differentiate between
government supply services, and those services provided by private
enterprise? And if this GST does actually apply to government supply
services, would it apply to the full cost of these services, in
other words, the full cost that the government would bear for these
services?
PRIME MINISTER:
Well, look, what we've endeavoured to do is to lay down some
principles, we've been able in the document to enumerate an
enormous amount of detail but in the 18 months that will go by between
now and the introduction of the new scheme we will obviously undertake
a very very strong program of consultation with industry and there
will be various elements where decisions will need to be made and
a certain amount of fine-tuning will take place.
When you are putting together a plan such as this you have to balance
on the one hand the need to have sufficient specificity and clarity
and detail when you announce it, but equally because it is new,
to allow a consultative process so that there is a certain amount
of fine-tuning, and what we want is to in response to the sort of
issue that you've raised, we want to ensure that it operates
in a way that doesn't put private industry in any competitive
disadvantage in relation to public the activities of Government,
and we certainly don't want that to be the situation. I mean,
one of the things, amongst other things that motivated us in relation
to making education GST free was the recognition that there is both
public and private sector education and that if you had applied
it in relation to private education there could well have been some
disadvantage in terms of its competition with public education services.
SO the principle, Sir, in relation to your industry will be to ensure
that we have a set of principles and a set of rules that guarantees
that your industry and your particular activity is not at a competitive
disadvantage because that is certainly not the goal and we are quite
certain that we can work that out and work that out effectively
through the consultative mechanism that we are going to undertake.
QUESTION:
Welcome Prime Minister. I'm Trisha Brown from James Cook University,
and I'm particularly interested to know how the GST will affect
universities, given that they are currently sales tax exempt organisations
and operating in a climate of dimishing resources. I'd like
to know what the GST will do to operating costs?
PRIME MINISTER:
Well, we don't think, given the other changes we are proposing,
we don't think they'll have a detrimental impact on the
operating expenses. Of course ordinary tuition is going to be GST
free, and that of course means that there will be a full recovery
of input taxation. Now, the other thing you ve got to remember
is that although you think that you are completely wholesale tax
free, I think you will find that there are some items that where
the taxation under the existing system is embedded into your cost
structure. I mean, half of the wholesale tax revenue collected in
Australia at the present time comes from sort of non-personal areas,
and most of them commercial, and I think you will find that however
free you may believe that you are wholesale sales tax, there will
be quite a bit of it embedded in the operating costs of educational
institutions.
QUESTION:
Mr Prime Minister. John Dawkins, I'm a local small builder
and also Chairman of the Queensland Master Builder's Association,
Northern division. Our concern is that we employ quite a large number
of people in the industry, in the housing and construction industry,
and some of the things that we've heard around the place is
that we will have additional costs in excess of $4000 and up, depending
on who you talk to. Our concern is the effect on the industry. You
do say here that you are reducing some of the taxes, I see very
little of these taxes being reduced for the small builders throughout
Queensland.
PRIME MINISTER:
Well, I don't, with respect, I don't agree with that.
The reductions are the same, the taxes, the input taxes that are
going are going across the business sector. As far as housing is
concerned, we calculate because of the wholesale sales tax that
is embedded in the cost of a new home now, that the net increase
is not of course 10% but it is about 4.7%. There is of course a
first homebuyers grant of $7000 which is non-means tested. It has
no age specification, the only requirement is that there not previously
have been a dwelling owned by that person, and that is available
in relation to whether the house is new or it is second hand or
a unit, or apartment, whatever the method and whatever the kind
of title is. There's no restriction of that kind. People in
your industry purchase a lot of fuel. People involved in your industry
would already have very significant embedded costs and I know that