Interview with Steve Vizard
Radio MTR, Melbourne
2 May 2010
SUBJECTS: Release of 'Stronger, Fairer, Simpler – A tax plan for our future'; upcoming Budget
VIZARD:
Thanks for joining us, Treasurer.
TREASURER:
Good to be with you, Steve.
VIZARD:
Treasurer, you haven't abolished a single tax.
TREASURER:
Not true.
VIZARD:
Okay, well tell us about the ones you have abolished.
TREASURER:
Well, what we've done is we've replaced the royalty regime in the resources sector that was recommended which hasn't extracted fair value from the public resources that all Australians own. And we're using that to put in place some fundamental tax reform, particularly extra incentives for small businesses - something like 600,000 small businesses in Victoria - will be very substantial beneficiaries. And what they will get is not only extra incentive in terms of the $5,000 instant write-off, they will get simplification and less paperwork. So that is a very big reform which will impact on something like 2.4 million small businesses before you get to super.
Now super goes to something like eight million workers. So someone who's say 30 now, they will through these reforms, when they retire, have an extra $108,000. So that's just in two areas where there are substantial reforms, reforms that have not been looked at for many, many years.
VIZARD:
Treasurer, why the timing differential between small business and big business in terms of these incentives?
TREASURER:
Well, because we wanted to try and say to small business, which is doing it particularly tough - you know, small business did a great job during the global recession, but we think that some of them are doing it pretty tough now as we go through the recovery. Some sectors of the economy are strong on the back of resources, but many small businesses are finding it tough. So we decided we'd give them a head-start in terms of the lower company rate, and a head-start, if you like, in terms of the instant write-off. That's the reason, because we recognise that many of them are doing it tough and this is what we talked about yesterday – it's the economic impact of this package across the three areas I talked about, which is very important. It's making sure that we all share in the economic recovery whilst dealing with the problem of the ageing of the population and building up our national savings which is important for every Australian, and very important for generations to come.
VIZARD:
The mining industry obviously are saying that this is just a money-grab. What's your reaction to that?
TREASURER:
Well it is not that. Some parts of the mining industry have benefitted and profited very much from the very poor royalty regime which has not extracted the true value of the public assets of Australia. Before the boom, in terms of mining profits, about one dollar in three of those profits was going in royalties; now it is one in seven. All we're saying is that the Australian people deserve some fair value. And a 40% profits based tax is not new to the mining industry; it is what applies right now, up to the Gorgon deal which was the biggest project approval in Australia's history at the end of last year. And that project went ahead, under a profits based regime.
VIZARD:
A lot of the commentators this morning are saying goodbye to any serious attempt to reform the tax system. Opportunity to reduce a whole lot of taxes, upwards of 125 taxes, state and federal…
TREASURER:
… hang on a minute. Now, Steve, hang on a minute. We're just talking about 2.4 million small businesses that we've done something really fundamental about in tax. That is a very big change. You see, some of the commentary seems to be preceding on the basis that every small recommendation in Henry has equal weight with every large recommendation in the Report. And it simply doesn't.
Now, in terms of the state taxation regime, the Report doesn't anticipate, the Government never anticipated, that something could be done on a lot of the State taxation matters separate from the Commonwealth and States sitting down and talking about all of those things.
VIZARD:
One of the beneficiaries of this, apart from super fund contributors, are the super fund managers. They're rubbing their hands in glee. And yet this is ignoring one of the recommendations of the Henry Review.
TREASURER:
I'm sorry; it is not ignoring one of the recommendations of the Henry Review, I'm not sure which one you're talking about.
But in terms of the governance of superannuation, we are in the process of reforming that. My ministerial colleague, Mr Bowen, made some very substantial announcements the other day about the nature of financial advice, about commissions in the industry, a very big clean-up in that area, and that continues. So we're working in that area, and you're right to point to the need for fair value, and the Government is certainly working hard on that because if we are going to grow our national pool of superannuation savings, then we have to make sure that everybody is getting the best value for their dollar. And we're absolutely intent on doing that, and there is a big reform program going on in that area.
VIZARD:
The Budget announcement yet to come. What's left for the Budget, that hasn't already been announced in this latest package?
TREASURER:
I'll tell you what's left for the Budget - the most important thing that there is - disciplined financial management. And that's what we'll be doing in the Budget, and I'm sure that many people will, and many of those commentators that you were talking about before, will say, "oh, there's no new handout in the Budget". You know John Howard trained a lot of commentators to think that Budgets were all about handouts. I'll tell you what our Budget is about - it's about disciplined economic management.
VIZARD:
Finally Treasurer, how do you expect voters to react to these proposals?
TREASURER:
I expect voters to recognise that we've got our eye on the long term, that we can't sell the country short in this mining boom like the previous government did in the last one. That we have to modernise, simplify and make our tax system stronger. The Government has made a very significant start on that process with the long term prosperity of this country firmly in mind.
VIZARD:
Treasurer Wayne Swan, very much appreciate your time this morning.
TREASURER:
Good to talk to you.
