Ross Greenwood speaks to Finance Minister, Mathias Cormann, after Senator Brian Burston formally quit One Nation today, after a public falling-out with the party’s leader over corporate tax cuts, giving a little hope to the Coalitions company tax cuts despite still needing four votes to pass.
Introduction: Can Company Tax Cuts pass now?
Ross Greenwood: Great to have your company here on Money News right around Australia. Now the budget right now is in better shape, than what it has been for perhaps a past five or six years. The second part about it is also you’ve got a situation where Australia right now, has got a whole bunch of potential tax cuts sitting in the wings. Income tax cuts for individuals in a package that the government put together in the budget this year. Then you’ve also got company tax cuts to extend them out to more companies over a longer period of time. They’re held up in the Senate right now.
When you actually look at the way in which that’s delicately balanced with, of course, the Senate really being rocked around the place right now as a result of. For example the One Nation Senator Brian Burston in quitting the party after his feud with Pauline Hanson. Then you’ve got other situations such as people such as Fraser Anning joining Katter party, you’ve got Tim Storer there, so it really is a bit of a hodgepodge is the base word to describe it right now. One person who has to deal with that and try for the sake of his own portfolio get through all of this is the Finance Minister of Australia Mathias Cormann, who is online right now. Many thanks to you as always Mathias.
Interview with: Mathias Cormann, Senator, Finance Minister
Mathias Cormann: Good evening Ross.
Ross Greenwood: You are also the leader of the Senate, so you are basically in charge of trying to wrangle these crossbench senators, to get them on site to try and get tax cuts through, how are you going?
Mathias Cormann: The only reason we’re forced to deal with crossbench senators is because Bill Shorten has made a reckless decision to put businesses in Australian, and workers in Australia at a competitive disadvantage with businesses and workers in other parts of the world. We’re always going to remind ourselves, the reason we are proposing, the reason we’re pursuing lower globally more competitive business tax rate, is because we want businesses in Australia to continue to be able to successfully compete with businesses in other parts of the world.
If we keep taxes in Australia high, when countries around the world are lowering taxes imposed on their businesses, the people that we’re putting at a disadvantage are workers in Australia. If we keep our taxes high we are essentially helping businesses in other parts of the world take investment and jobs away from Australia. Nobody who cares about Australia’s future economic prosperity should be prepared to tolerate that.
Look, Labor has a populist political self-serving political and reckless decision, which in the heart of hearts they known to be against our national interest. Against the interests of working families around Australia, but we are where we are. Yes, we have been engaging with the crossbench, and I continue to have very good conversations with my colleagues on the Senate crossbench.
Ross Greenwood: The way I see it right now according to the where people publicly appear to stand right now, is that the numbers look like 35 including the coalition votes are in favor. There seem to be 40 against, with maybe Derryn Hinch a little undecided. Is that the way in which you’re seeing it at the moment?
Mathias Cormann: Well, I don’t want to speak for colleagues that haven’t publicly declared themselves. Certainly, there are 35 senators who’ve publicly declared that they support a globally more competitive business tax rate for Australia so that businesses in Australia are not disadvantaged against businesses in other parts of the world. That means that I need to convince four more non-government senators to support the government’s agenda. Now, there are 10 crossbench senators, so far four have indicated that they would support our plan to lower business tax rates for all businesses in Australia. That means that out of the remaining six, I need to convince another four.
Ross Greenwood: One Nation imploding, do you believe that this helps or hinders the government’s program?
Mathias Cormann: Well, our preference, of course, would have been for One Nation to stick to the agreement that we had reached earlier in the year. We did a lot of good work.
Ross Greenwood: How firm was that agreement out of interest?
Mathias Cormann: It was a very firm agreement. I was about to say, Pauline Hanson and I personally, both of us personally did a lot of work. A lot of policy work talking through the issues, and exploring how we could find consensus and an appropriate way forward. I believe we had landed in a place that was good for Australia. It would have delivered a globally more competitive tax rates for businesses in Australia, which would have helped us protect investment and jobs in Australia.
Which would have helped us to generate stronger growth and more jobs into the future. There were a number of issues that were important to Senator Hanson and her team that we explored through that process. It was a very thorough process. It was a very good process. I had very good engagement with Senator Hanson and I was– I’ve said on the public record. I was bitterly disappointed when a few months later she decided to walk away from what I thought was a very good agreement in the national interest.
Ross Greenwood: Tell me about One Nation given your role as the leader in the Senate. I know it’s Anthony Green, the ABC’s political correspondent today indicated that 30 MPs have been elected to represent One Nation. Six are current members, 19 resigned in their first term, two were disqualified in the first term, only three lasted long enough to face re-election. Two of those were defeated and only one One Nation MP has ever been re-elected. That does not sound like a coherent party to me.
Mathias Cormann: Well, look I’m not a political commentator. I leave that commentary to people like Anthony Green. I’m somebody who works with every individual Senate in the Senate who’s prepared to work with me. I certainly work with every individual, a non-government Senator on the crossbench, even as required to ensure that the government can get its agenda through the Senate.
Our economic agenda is all about delivering stronger growth and more jobs so that families around Australia have the best possible opportunity to get ahead. If Labor and the Greens decide to oppose any part of our agenda as they have with business tax cuts, as they have decided to do with- in large part with our personal income tax relief plan, then we need to find eight non-government senators on the crossbench to support us given that we don’t have a majority in our own right.
Ross Greenwood: I want to pick you up on one other thing about the tax cuts because it’s not only the company tax cuts, but there’s now going to be the personal income tax cuts as well. The Reserve Bank Governor Philip Lowe spoke last night. He appeared to almost endorse the coalition government’s income tax plans, just have a listen of this.
Philip Lowe: It will help with household budgets and I think that’s what it’s designed to do. I think if you are starting from first principles and saying what type of tech system do we have, to make it very attractive to invest, employ people, and to innovate? You probably wouldn’t design the system we currently have. The society doesn’t have the appetite I don’t think for a whole scale rewriting of the tax cuts so it’s going to be incremental process of moving it. This is one step in that process, but it’s just one step.
Ross Greenwood: One step in the process. Is that the way you would view it or is this the grand tax reform that people have often wished for?
Mathias Cormann: Well, he is absolutely right. At every budget, and every budget update we look at obviously all of the policy settings on the revenue side, we look at the policy settings on the spending side. We make judgments on how we believe that can be improved, to put Australia on a stronger economic and fiscal foundation for the future, and to ensure we can sustainably fund all of the essential services Australians rely on. Now, of course, we make judgments at every budget and budget update. Some people might want to have the one big bang massive plan which will never be legislated. Well, what we’ve done is we’ve continuously worked to improve our tax system to make it more efficient, to make it more growth-friendly, and also to make it more equitable in substantial parts.
Whether it was, getting rid of the mining tax and the carbon tax, to help make us more competitive internationally. Whether was the instant asset right off for small business to encourage them to invest more, or whether it was the tax reforms to our superannuation arrangements, which were designed to make our tax system essentially more equitable? Now, company tax cuts are critically important to ensure we protect investment and jobs, and future economic prosperity here in Australia.
We are an open trading economy. We compete for capital investment with businesses around the world. We compete in markets around the world with businesses from other parts of the world. What has happened is that even a country like France, which is led by a center-left the president, has legislated to reduce their tax rate from 33% to 25%. The US has gone down to 21%. The UK is going down to 17%. The US is our biggest single foreign investor in Australia. Where do you think investors out of the US are going to go from here on in, when they have a choice between Australia with a 30% corporate tax rate, or the US with 21% corporate tax rate?
Ross Greenwood: It’s a bad one, the final one I want to ask you about is the decision of the remuneration tribunal to award all public servants, so, Commonwealth public servants plus also politicians a 2% pay raise from the first of July this year. As the Minister of Finance, and a man who counts the pennies in the budget, are you happy with the 2% pay raise to our public servants?
Mathias Cormann: Well, it’s an independent process for a reason and remuneration tribunal makes these judgments independently. It is within the framework for it is within the public sector payment framework, but what I would also say, of course, members of parliament and senior public servants were subject over a number of years to a pay freeze as well and–
Ross Greenwood: They have been three years. 2014, ’15 and also 2016. The other pay rise seems to have been 2% per year. Here’s the question. I spoke to David Landhelm about this last night. He says it should be linked to performance and somehow that you should not be given a pay rise until you get the budget back into surplus. That’s only a year or so away, why don’t you wait until then?
Mathias Cormann: Well, he can introduce some legislation to try and make that happen.
Ross Greenwood: In other words, you’re going to have to live off 2% over that period of time. The finance minister, always good with his time on here in the program here. Mathias Cormann, as always we appreciate it.
Mathias Cormann: It’s always good to talk to you.
Interviewed Chris Richardson, Chief Economist, Deloitte Access Economics titled ” Who pays for the tax cuts? .”
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