Transcript – Interview with Sky News – Tax Reform, Bracket Creep
Interview with Kieran Gilbert
Tuesday, 20 January 2015
Subjects: Bracket creep, tax reform, GST, Treasurer on people living to 150 years, Medicare reforms
Minister thanks so much for your time. The Treasurer yesterday, I want to start with his comments relating to bracket creep, saying that soon those on middle income in Australia will be paying the top level of tax – nearly half their wages in tax.
Can you give us a sense at the moment as the Government sees it of the lack of incentive in the tax system and how you’re going to go about dealing with it, improving it?
This is one of the key motivations for the comprehensive tax-wide paper that has been announced.
We are looking to engage the Australian public, not only in a discussion about what tax system will best support the provision of resources for essential works and services that the citizens expect from Government, but how to make sure incentive is there for people to innovate, to apply themselves, to be their best selves, to be that hum in the economy that brings about the prosperity that generates the wealth that then underpins our living standards.
This bracket creep issue is a real concern where you are finding middle income earners now starting to head towards the highest tax bracket. A real concern and I think Joe is right to highlight that as one of the key considerations for the tax reform discussion that we are moving in to.
Sounds like the start of a narrative. This was something that was very much lacking last year from the Government. Do you concede that you need to do better in trying to layer the foundation, the platform, for the reform that you are talking about here?
I think with all of the changes that a Government contemplates, ensuring that there is an understanding of the need for change and also frankly what the consequences are of a set-and-forget approach, which seems to be what the Labor Party advocates.
To do nothing will see middle income earners facing higher rates of tax on their additional earnings. That is not going to be the encouragement that we are looking for, as we want Australians to be full of vigour and making a full contribution to the economy and seeing an incentive and a reward for their effort and enterprise.
It is one of those framing issues; I suppose you are right in outlining it in those terms. But it really starts to illustrate why there is a need to have a serious and adult conversation about the structure and the way our tax system operates into the future.
It’s not just the Treasurer is it, because you have got the Rio Tinto managing director of Australia this morning; it is on the front page of the Financial Review describing the Government’s finances as a ‘slowly rotting platform’.
How far do you think your Government needs to go here? Do you need to embrace the issue of the GST, the consumption tax, to then deal with that bracket creep issue? Is that something that you would be open to?
Budget repair is something that we have been talking about for many years – the need to get the fiscal foundations, the budget platform sound and solid so that builds confidence that encourages investment that is nurturing of opportunity. And this is a discussion we have had over and over again.
The discussion more recently has been about what…
But how brave… how ambitious would you be?
In our view, we have tackled both sides of the equation. You have seen Joe leading an international discussion about base erosion and profit shifting. You have seen this Government focus very much on getting the tax system right and tackling some anomalies. And you have seen the Government tackling the expenditure side.
So this has been an ongoing process. We need to get the budget repaired. It is the platform for economic prosperity. Even Labor now I see today is saying – yes there is a job to be done on the budget. They have been in denial for a while but even now Labor recognises that getting the budget repaired is important. The tax reform process is about the structure, the kinds of tax mechanisms that support our goals as a nation… obviously the revenue needs to be raised as part of…
Do you politicians get too spooked when the issue of the GST comes up because time and time again economists say it is the most efficient way of broadening, making the tax system revenue more sustainable?
It is one of a range of tax measures and you would have seen through the Henry tax process and more recently some of the discussion of how 10 taxes raises about 90 per cent of our national revenue.
There is another 100 odd taxes that raise the balance of the 10 per cent. So the GST is one of the workhorse taxes in our economy.
Having it land in a way that is fair and equitable; generates a meaningful contribution to the revenue, and encourages the kind of national goals that we have for ourselves about a stronger and prosperous economy- that is all part of the discussion that we are heading in to this year and I encourage people to be a part of it.
Mr Hockey was misquoted in various places yesterday about living to 150. He said that some babies, somewhere in the world, might get there. It was a lot different to the way it was characterised by others, I suppose it is hard to get your head around though isn’t it.
Again, this is about him trying to frame up the inter-generational challenges of course. But was it the right analogy to use?
I think the simple fact that we are living longer is an undeniable fact. I have seen some figures that one in three of the babies born today are likely to live to 100 years. We have seen an improvement in our length of life, but we have also seen an important measure about active living.
This is why getting our health system right and encouraging a full participation in a full life is good and it needs to go along with the ageing of our population.
Let me put this in context: in 1970 there were seven people in the workforce for every one retiree. Today it is about five. By the middle of this century which frankly is not that far away there will be less than three people in the workforce for every retiree.
This is why getting the economy humming, improving our productivity, getting our budget under control is so essential, so we can offer that secure living standard that people expect.
On the health system – you talk about the reform – you have hit stumbling block after stumbling block and back flipped a few times. Apparently some of your colleagues, backbenchers, are still worried about the $5 co-payment; they want that scrapped as well.
There is work to be done there. We know in the last 10 years the cost of Medicare has more than doubled, it has gone from $8 billion to $20 billion and in the next decade it is $38 billion a year. This is a very substantial share of all of the Government outlays.
But some of your colleagues don’t get it, clearly.
Some of our colleagues do understand and all of our colleagues understand that the best thing we can do for Medicare is to ensure that it is sustainable. That it provides accessible, reliable, high quality healthcare.
To make sure that it can meet the challenges and embrace the new health technology. But we also think there is a need for a price signal.
Let’s have none of this nonsense from Labor about price signals, they introduced a price signal in the Pharmaceutical Benefits Scheme so we are saying a price signal is important as a contribution for those able to make that contribution towards their healthcare.
An important structural reform, good for the health system, part of our work in repairing the budget, it is work we have to get on with Kieran, and we are.
You argued for that rebate reduction for GP’s, just finally, two and half hours later after you had advocated that Government policy the Health Minister came out and scrapped it. You were a bit blindsided on that a couple of days ago, that must have been a bit annoying.
What became clear and what Sussan Ley understandably dealt with was the clear position that was coming from the Senators. They were going to block that measure.
Now the next question would have been – so what is the Government going to do about refunding contributions in that window before the measure was disallowed in the Senate?
I think what Sussan Ley did was the absolutely responsible, pragmatic and sensible thing to do given the declared position of the Senate, but, the principles remain: a strong, reliable health system, quality healthcare, affordability, accessibility- and looking for those able to make a contribution to their healthcare to do so whilst looking after concession card holders and those with particular needs.
Bruce Billson, thanks for that, appreciate it.