JONES:
The Prime Minister yesterday was at it on a million fronts, I thought we would have a word to him this morning on a few of those issues. Prime Minister good morning.
PRIME MINISTER:
Good morning Alan, welcome back.
JONES:
Thank you very much and thank you for your time. Look, on one news programme I watched last night you were talking about the problems in the Solomon Islands, then you were talking about the lecture being given to Australia by President Yudhoyono then you were talking about so-called middle class welfare. Many people were wondering did you get time to read and memorise all those cables?
PRIME MINISTER:
Well Alan yesterday was an example of the variety of things that one has to do.
JONES:
I know so I mean with no disrespect to Mr Cole, but when is all this charade going to end in relation to the AWB?
PRIME MINISTER:
Well I have to defend Mr Cole. I mean Mr Cole was appointed to do a job and I don't think he should be criticised.
JONES:
No.
PRIME MINISTER:
When will it end? Well it will end when he has heard all of the evidence that he thinks is appropriate to meet his terms of reference.
JONES:
Well talking about evidence. There is no evidence whatsoever that Alexander Downer knew the AWB was paying bribes, or he that knowingly aided and abetted the AWB's behaviour. But there are reports every other day by so-called sources within you Party that Alexander is now damaged goods, that he'll never be a leader, or a deputy leader and speculation that there will be a midyear reshuffle and the Prime Minister will move on Alexander Downer and Mark Vaile.
PRIME MINISTER:
Well I can tell you Alan that there will be no reshuffle. I have just had one and Alexander is doing an excellent job. He is a very good Foreign Minister. He did not as you rightly say know AWB was paying bribes, if he had he would have done something about it. The same applies with Mark Vaile and any suggestion that I have lost any confidence in either of them is sadly and totally misplaced.
JONES:
Good on you. Before I get onto tax, President Yudhoyono said at the Easter weekend to Australia, which is indirectly to, 'don't insult us, don't toy with us, and don't deny us justice.' People writing to me here and ringing the programme wonder what President Yudhoyono's mandate is for lecturing us on justice given that everything Schapelle Corby said was a lie and every piece of evidence the Indonesian prosecution delivered in the Corby trial was the truth. But are you are of the mother of the four-year-old West Papuan asylum seeker who is now claiming that she was forced by Indonesia into making a false appeal for the return of her daughter to West Papua and she says she was pressured by an Indonesian army intelligence officer into appealing to President Yudhoyono to help her secure the return of her daughter who is one of the 42 West Papuans granted asylum. She is currently in hiding, she has disappeared, and she has reportedly said that she was pleased that her husband and daughter were in Australia and didn't want them to return.
PRIME MINISTER:
Yes I am aware of that. I don't know whether that report is fully accurate or not, but I am certainly aware of it. It was widely reported yesterday. Alan, this is a difficult issue. There are still a lot of shortcomings in Papua according to what we understand to be autonomy and democracy, but in defence of Indonesia you have got to look at the distance it has travelled in a short period of time. It is very easy for a mature democracy like Australia to be smug about countries that are going through the painful transition to a more open society and Dr. Yudhoyono deserves an enormous amount of credit for the changes he has brought about in Indonesia.
JONES:
The argument is, the argument is, is it not that because you grant asylum to 42 people who are protesting in West Papua that somehow or other Australia is in favour of West Papuan independence?
PRIME MINISTER:
We are not. Those people were given the visas they got in accordance with Australian law and we wont be changing that and nothing I have announced about the treatment of future illegal arrivals will in any way affect the position of those 42 people. It won't affect them in anyway and I made it very clear when I spoke to the Indonesian President some weeks ago now when he rang me about this issue that whilst I fully respected and supported Indonesian sovereignty over Papua the status of these people would be determined in accordance with our normal law and that is what happened and we won't be changing that.
JONES:
An Indonesian commentator, I read to my listeners earlier this morning in the Jakarta Post yesterday said 'the accusation from many Indonesian quarters that Australia would like to see Papua separate from Indonesian is just sheer nonsense.' That is in the Jakarta Post.
PRIME MINISTER:
Well it is nonsense. From our own self interest, fragmenting Indonesia would be a nightmare.
JONES:
Last thing you need.
PRIME MINISTER:
It is the last thing we want. If you really want a problem on your doorstep have a fragmenting Indonesia. So it is in Australia's interest that we keep a united, unified Indonesia. Now there will be with a large country such as Indonesia right on our doorstep with a living standard still vastly below ours, there will be constant issues such as thrown up by these asylum seekers and we have to find a way in a mature fashion of dealing with this.
JONES:
But of course senior diplomats are saying the more we allow Yudhoyono to talk like this about Australia, and that viewpoint to prevail the more humiliated we will become. Is it time for you to pick up the phone to say to the President, listen this language doesn't help?
PRIME MINISTER:
Alan, we are working through the current difficulty in an orderly diplomatic way. The time for me to have a discussion with President Yudhoyono has not arrived. Michael L'Estrange, the head of Foreign Affairs is going to Jakarta later this week. Mr Downer will undoubtedly talk to his counterpart and in time the President and I will have a discussion. We won't be doing anything that compromises Australia's sovereignty and self-respect on this issue. We won't be apologising because there is nothing to apologise about. I want to make that very clear. Australia has not done anything wrong. All Australia has done is to apply Australian law to these 43 people.
JONES:
But there is a Newspoll today that you would have seen. Twelve hundred people nation wide were asked whether the people of West Papua should have the right to self determination and 77 per cent of Australians were in favour of them giving self-determination. So I suppose you have got a very difficult job when you have polls like this indicating that Australians are in favour of self-determination. You have a job convincing Indonesia that by taking these refugees we are not interfering with their sovereignty.
PRIME MINISTER:
Alan, it is a very complex and difficult issue. A comment on the poll, it depends a bit what questions you ask. If you said to people do you want Indonesia to disintegrate you would probably get an overwhelming majority of people saying no. I can understand sympathy for Papuans because there is an affinity in peoples' minds between the Papuans of Indonesia and the Papuans of Papua New Guinea.
JONES:
Plus many of these people are being treated badly by the Indonesian Government.
PRIME MINISTER:
Undoubtedly it is not a perfect state, but in defence of Indonesia I have to say that things have improved and you have to give a lot of marks to a country that has travelled such a long journey from where it was only eight or nine years ago.
JONES:
Fair enough, Just on tax PM. I note that you continue to say that tax cuts are equal to tax reform, but is there something wrong with a tax system where two-thirds, almost more than two-thirds, 73 per cent of taxpayers pay more than a billion dollars every year to professionals because they can't navigate their way through the tax system and they are rather terrified about how they might become victims of it. There is something wrong with something so complex that we have got to go to other people to do our tax.
PRIME MINISTER:
I am glad you raised that. I yesterday made some inquiries about this issue of not having tax returns and I have been informed that there was quite a lot of research carried out on this and it indicated that a surprisingly large number of people like the idea of putting it their own returns because they felt they could get deductions that they might otherwise not get and that is the main reason why many people, not all people, I know complexity is an issue; but one of the main reasons why people get tax returns done by accountants or tax agents is that they believe that is the best way to get a refund. People like getting a cheque from the Government. They like that cheque, that Reserve Bank cheque made out in their favour giving them a tax refund and a lot of people I talk to say, 'I get my tax return done by a tax agent, it doesn't cost an enormous amount and he makes sure that I get all of the deductions that I am entitled to and if I didn't have it done by him then I wouldn't get as much back. I think that is the other side of it.
JONES:
That is the other side of the coin. Well let me just ask, I promised a listener this morning I'd ask you this, because one listener rang up to talk about the tax free threshold and said the 6000 figure had not been changed for a long, long time and would there be any chance that the Government would consider a tax free threshold, not for everybody being increased but say for those people on $100,000 or less. What would be wrong with raising that threshold from say $6000 to $10,000 to give relief at that bottom end?
PRIME MINISTER:
Well it was last increased in 2000 when we brought in tax reform, if you lifted it for everybody under $100,000 that is about 90 per cent of taxpayers. So that is not just, that is virtually giving it to everybody. The problem Alan with lifting the tax free threshold is that a lot of the people who earn small amounts of money are not poor, it is just that they are either part-time workers or alternatively their income is from investments. The other problem with lifting the tax-free threshold is that it is not a good way of targeting assistance to low income earners because everybody gets it. If you're earning $500,000 a year and the tax free threshold is increased by $5000, you get the same dollar benefit.
JONES:
Oh no, I'm saying it shouldn't be available to anyone with an income over $100,000.
PRIME MINISTER:
Over $100,000 alright. But even if it's for somebody on $98,000 a year, he gets the same benefit as a bloke on $10,000 a year. There are better ways of delivering help to people right at the bottom. Paying people what's called a low income tax offset that we have done for quite a number of years now; it cuts out at a certain level of income, that is a far better way of delivering assistance to very low income earners. I'm not speculating about that, I'm just giving an illustration of how you better deliver that...
JONES:
Just on that issue in the speech which was the substance of the speech yesterday and that is you seem to be continuing to say that stay at home mothers, no matter who they might be, and you defended this, should be getting family payments. Now there are 2000 families in New South Wales alone who live in the state's 10 wealthiest postcodes getting family payments, 1500 families in Victoria, the 10 top wealthiest postcodes getting family payments. Should stay at home mothers whose family income exceeds, I don't know, $125,000, say $150,000, be receiving non-means tested money, dough from the Government?
PRIME MINISTER:
Well you could ask the same question should somebody on that sort of income get the private health insurance tax rebate. The problem with introducing income tests on everything is that people's view of what is a high income, your view of what is a high income, might be different from what some of your listeners think.
JONES:
Well a millionaire's a high income. There are 76 millionaires.
PRIME MINISTER:
That's an easy argument; the Labor Party's using that. Their proposed income tests will save $6 million a year. Does anybody imagine if they got into Government they'd leave the income test at $250,000 a year? They'd say well $6 million a year is a paltry saving, we'll have to bring it down to a level where we really save a lot of money. And even if you had it at $125,000 a year you'd only save $100 million.
JONES:
And I suppose what people are saying when they argue that is on the other hand, turn the coin over and we're shovelling single mothers who are out of work into work and then what they lose in benefits and then have to pay in tax, they finish up with only about $3 an hour.
PRIME MINISTER:
But Alan the great bulk of stay at home mothers are in family income situations of under $50,000 a year.
JONES:
We agree with all that. We should just be excluding those people who don't need it.
PRIME MINISTER:
Well you can have an income test that cuts people out at that level of income, but the problem with introducing that is that eventually they are brought down and they start to affect tens of thousands of ordinary people because the Treasury comes along and says well you're not saving enough money from this, this is meant to curb expenditure, you're only saving $6 million a year so let's bring it down to say $100,000 and then you start to affect tens of thousands of people and you are still only saving $100 million. So they'll say bring it down to you know, $80,000 so we can really save a lot and then you're starting to heavily hit middle Australia.
JONES:
I'll just grab a bit more time of yours. Sorry to interrupt you PM. It is 7.30 but I'll just stay with the PM to ask just a couple of questions you've raised with me. According to that OECD, Prime Minister, Annual Tax Report, workers on annual earnings, just the average bloke listening to you, is on average, paying 24 percent of his pay packet to Government. Now the OECD average is 10.1 percent for parents, 15 and a bit percent for taxpayers without children. We're paying 24 percent of our pay packet to Government. Is there room to reduce that?
PRIME MINISTER:
Well Alan, I'm a little bit mystified as to the figures you're using.
JONES:
That's the report at the end of last month.
PRIME MINISTER:
Well it's just that all the OECD comparisons show that the average tax contribution of the worker in Australia is below the OECD average. I'm not quite sure what particular...
JONES:
Well I'm happy to dish that up to you.
PRIME MINISTER:
We're paying 24 percent and everybody else is paying 15 percent in tax? That is not right.
JONES:
Well I've got those figures and I'm happy to get them to you. Let me go to business then, because they are saying the same thing that that same report said we have the seventh highest taxes on business and personal income as a share of GDP. Now Ireland's company tax rate's 12.5 percent, Singapore's 20, Korea 27.
PRIME MINISTER:
Yes, well that is true, but we are also in overall terms, what is it, the 6th or 8th lowest taxed country in the OECD area.
JONES:
Yeah but we leave superannuation out of that.
PRIME MINISTER:
But you can't, superannuation is not paid to the Government.
JONES:
No, but it's paid by the employer.
PRIME MINISTER:
No, but it's not paid to the Government. It's a form of either voluntary of compulsory saving.
JONES:
No it's legislated. You legislated for it.
PRIME MINISTER:
Well the Government requires people to save. But also, some people voluntarily save in response to tax incentives. But that money does not go to the Government. That money goes in trust for somebody and it's invested on their behalf by a super fund and it comes back to them when they retire.
JONES:
It doesn't matter though. He's still got to find it, the employer.
PRIME MINISTER:
But I don't think you can say it's going to the Government.
JONES:
No I didn't say that. I'm just saying it's a tax...
PRIME MINISTER:
Well if it's not going to the Government Alan, it's not a tax.
JONES:
Well it's a tax on business; they're made by you to pay it.
PRIME MINISTER:
Well when the superannuation guarantee levy was introduced by the Keating Government way back in the 80s, the argument was that it was in replacement for a tax rise. In other words, instead of business paying...
JONES:
Yes, we'd put it aside, put it aside.
PRIME MINISTER:
...instead of that they would pay the contribution to the superannuation fund. Now what people will argue is that whether that in truth has happened or not, but that's the argument and you can't really call it a tax.
JONES:
Well then we've got the tax, though, on the superannuation contributions, 15 percent. Now that has no overseas equivalent. Eight countries out of a top OECD 10 tax superannuation only at withdrawal point. I mean it doesn't make sense on the one hand...
PRIME MINISTER:
If you didn't put that money into superannuation you would be paying a higher rate than 15 percent. You would be paying your marginal tax rate.
JONES:
But is that the rationale. We're trying to encourage people to save.
PRIME MINISTER:
Well people argue and I think there's some justice in it, that by putting it into a taxed superannuation fund you're paying a lesser rate. If your marginal tax rate is 30 or 42 or 47 you pay it into a superannuation fund, you only pay 15 percent and that is a concessional rate. Now nobody likes paying the 15 percent, I understand that, but it is lower than 30, 42 or 47.
JONES:
Well just on reform and one final point I'd make. I mean you've now promised to slash more than 4100 pages of obsolete tax law by the end of June. Even if you do that, the Tax Act will be still double the size it was when Peter Costello became Treasurer.
PRIME MINISTER:
That is true because we do live in a complex business world, but Alan, 99 percent of the community never come into touch with that big Tax Act. The great bulk of your listeners are not, in their daily lives...
JONES:
But the great bulk of my listeners are employed by companies and companies have to navigate their way through that.
PRIME MINISTER:
But one of the reasons why we have a complicated Tax Act is that companies have complicated business arrangements.
JONES:
Therefore we should simplify all this shouldn't we?
PRIME MINISTER:
Well you can make it simpler, but it is an unachievable Nirvana to pretend that in a complicated business world, you can have a Tax Act of 10 pages.
JONES:
But Edward de Bono said to me yesterday we've got to encourage people, Government's in particular, to think laterally. Now has any research been done say on a two percent expenditure tax where every good and every service purchased...
PRIME MINISTER:
Yes, a lot of research was done on that.
JONES:
And has that been aired publicly?
PRIME MINISTER:
It does not work Alan because how do you handle financial transactions?
JONES:
Well every transaction, every transaction adds two percent.
PRIME MINISTER:
That would have horrendously regressive affects on people who have a business for example that has multiple transactions compared with a business that has one or two transactions. They would end up paying a lot more tax.
JONES:
Well I think people would be worrying at the bottom end, that people would be paying less. And see everywhere people talk about tax reform don't they? When people talk about tax reform, they say it's all going to cost don't they? But I mean everywhere in the world where they have reduced the levels of tax, the revenue to Government has been greater.
PRIME MINISTER:
Well Alan, we've reduced tax in the last four Budgets and if we have the capacity, if we have the capacity, then we'll go on doing that. I mean we're all in favour of having low taxes. The average person is paying about $3000 less a year in income tax than was the case 10 years ago. Now we are doing that all the time but we do have a need for certain service levels and Governments only have one source of money for service levels and it's a question always of having a good balance.
JONES:
Just before you go, I must ask you about the Solomon Islands. Eight Australian Federal Police Officers on duty there have been injured. Have you got any updates? One officer has a fractured skull.
PRIME MINISTER:
Yes I have. The number is moving around but it could be a few more than that. There are no life threatening injuries, but a number of officers have required surgery. It is a difficult position and I'm talking to the Foreign Minister and the Defence Minister about it this morning. We are willing, if needed, to send troop reinforcements. That is part of our ongoing obligation. We have a long term commitment to the security of the Solomon Islands and we are absolutely determined that the Solomon Islands will be a stable, democratic country and that can only happen if we go the distance and it could well be that we have to send some troop reinforcements, it will depend on obviously the attitude of the Government and an assessment on the ground by our High Commissioner of the situation.
JONES:
Nine Australian police cars set on fire. Is there some objection over there to the regional assistance mission?
PRIME MINISTER:
No, the information I have is that it is an outbreak of hostility to the result of the election. There is no evidence of any hostility to Australia.
JONES:
Okay, thanks for your time PM.
PRIME MINISTER:
Thank you.
[ends]