Standing up for Canberra

Television Interview: Lunchtime Agenda Sky News with Tom Connell

SUBJECTS: Iron ore prices; Multinational tax avoidance; GST distribution

TOM CONNELL: Welcome back to the program and it’s time now for our political panel. We’re joined by Liberal MP David Coleman who is in our Sydney city studio, and here in Canberra Labor MP Gai Brodtmann. Thanks both for your time today. And we’ll start on this iron ore price David Coleman, because in opposition Joe Hockey did criticise Labor for using this as part of a reason, or an excuse if you like, for not delivering a budget surplus. Joe Hockey said “No qualifications, all the excuses Wayne Swan talks about - falling commodity prices, a high Australian dollar, nominal growth not being up to standard.” Is it déjà vu now? Is the shoe very much on the other foot?

DAVID COLEMAN, MEMBER FOR BANKS: Look Tom I think obviously the iron ore price is one of a range of factors that have to be taken into account in planning for the next budget. Back in the Rudd era it was around $100 a tonne, we thought in the December MYEFO update it would be around $60 a tonne, it’s actually in the $40s at the moment and potentially tracking lower. Every $10 change in the iron ore price has a hit to the budget of about $2.5 billion annually, so it’s quite a significant issue in the context of the budget. More broadly of course the task we face is to get Australia’s finances back under control after the appalling legacy of the Rudd Gillard years. We’ve already got the trajectory 50 per cent better than it was under Labor. But there’s always more work to do and factoring in the iron ore price is something that needs to be done in any sensible analysis.

CONNELL: What should a voter, though, who keeps a close eye on politics make of Joe Hockey listing off those three items and for now, having no timeline for a surplus?

COLEMAN: Well I think obviously Tom we face – and the IGR is a document I recommend to you very strongly because it shows the horrendous situation we were faced with under Labor. Now we’ve made some tough decisions in the first 18 months of government. We’ve made some decisions to make changes in funding of areas like foreign aid, family tax benefits and some other areas, and as a consequence things are on a much better trajectory. Now there is more work to do, we certainly don’t deny that, but we’re certainly a lot better off than we would have been under Labor.

CONNELL: Gai Brodtmann, I’ll let you respond but can I ask you as well, Labor has obviously said for a while there is a revenue problem there. With iron ore there certainly is. But you can’t just make up for falling commodity prices. So unless you hike up taxes, you’ve got a revenue problem. Maybe you have to solve it through cutting some spending?

GAI BRODTMANN, MEMBER FOR CANBERRA: Well we acknowledge that this is going to have a hit on the Budget. We experienced that when we were in government as well, in terms of the iron ore prices going down. But, as you rightly pointed out, back when we were in government the now Treasurer said that what we had was not a revenue problem but a spending problem.

Now we’ve come up with a number of revenue ideas that we’ve put to the Government in a bipartisan and constructive fashion. We’ve put forward the multinational tax idea, in terms of a range of suggestions on hybrid schemes, improving resources in the Australian Tax Office, as well as enhancing our compliance regimes. Those ideas were developed in consultation with the OECD, and they were also costed by the Parliamentary Budget Office that suggested that they would raise revenue of about $1.9 billion over four years. So we’ve come up with a range of constructive ideas, that being one of them.

Another suggestion that we’ve had is a conversation with the Treasurer and the Government on tax and superannuation, particularly for the top-end of town, but these suggestions have been ignored.

COLEMAN: When it comes to commodity prices it’s been a whole series of write-downs, so far we don’t have the commensurate amount of make-up if you like from Labor’s policies, so you need to look at both don’t you? Because you had perhaps the Liberal party saying it was only one. You shouldn’t be as dogmatic either saying ‘no, it’s only a revenue issue,’ spending needs to be looked at, too.

BRODTMANN: We’ve made it clear that we’ve come up with ideas in terms of revenue, on multinational tax, potentially tax on superannuation. We want to have a conversation with the Government in a bi-partisan and constructive way. But we’ve made it abundantly clear that we will not stand by and allow low and middle income earners to be targeted for savings. That’s what this Government has done. It’s done it on a number of fronts – from pensions, $100,000 degrees, cuts to universal access to health. A range of measures. We’re not going to stand by and allow that to happen.

CONNELL: David Coleman, itching to get in there?

COLEMAN: Indeed. When Labor talks about revenue measures, Tom, that’s a somewhat elegant way of saying tax increases. And their instinctive reaction is to increase tax in all situations. Ours is to be sensible about spending. And of course look at revenue, but always in a modest and constructive fashion.

Gai alluded to a couple of the ‘capital I’ ideas in the year of ideas that we’ve seen so far. The idea around the multinational tax idea, which Labor raised, is very poorly thought through, quite superficial, and will basically result in a fraction of the money that they raise being raised, and significant losses of jobs as multinationals move overseas.

CONNELL: This area, if I could just jump in, is one that Joe Hockey looks keen to be at least looking at as well, chasing what is known as the Google tax. And they seem to be on the right path, and it’s something that they seem to have been beating the drum on a bit more before the Government.

COLEMAN: Tom, I don’t think that anyone disputes that there is an issue here in multinational tax avoidance and we do need to address it and Josh Frydenberg and Joe Hockey have been doing a lot of work in this area. But you’ve got to do two things. Firstly, you’ve got to work closely with international partners. Because if we make changes here and our partners don’t, then what happens is the capital flows into those other nations, which is bad for business and jobs. Secondly, you’ve got to do things unilaterally where you can sensibly. So at the ATO we’ve significantly beefed-up the resources in multinational tax analysis.

CONNELL: Even through we’ve had big jobs cuts in the ATO from both major parties?

BRODTMANN: Well no, thousands under this Government.

COLEMAN: There is a very significant increase in the areas of multinational tax avoidance because I think we do recognise that it’s an important area.

CONNELL: The other impact of course is not just the Australian budget it’s WA’s budget. Now they’re pretty unhappy with GST split up. The fact that they’re on track to get less than 30 cents back in the dollar. That’s the way the system’s working at the moment. Gai Brodtmann, we know it’s because of this three-year lag of iron ore prices. Bill Shorten today said this is the system in place. We know that, but we can tinker with it if it’s delivering such a small windfall in WA?

BRODTMANN: Well, we just go back to the original premise, which is quaintly called the horizontal fiscal equalization premise or principle, which is designed to ensure that there is equity throughout Australia. That every Australian gets to enjoy fairness in terms of services and facilities.

CONNELL: But the other premise here is, for example the iron ore prices, which are predicated on something that was I think $120 a tonne, now it’s $47. So yes, it’s the broad ‘make-sure wealthy states support the poorer ones’ sure, but this is not actually how it’s working now in effect.

BRODTMANN: Well look we don’t know what the Government’s response is on this. We’ve sort of been getting mixed messaging or mixed intimation today from the Treasurer and also the Minister for Finance, but our view is that we go back to those original principles, of equity and fairness throughout the nation.

CONNELL: But you can have the principles and tinker with the system so it’s actually working like that.

BRODTMANN: Well you’ve just got to be careful. I mean, going back to the original principles, they’re the principles that have worked successfully in the past, and they’re the principles that we’ll follow in the future.

CONNELL: David Coleman your thoughts? We know when it comes to the GST, give more to one, take away from the other. What do you make of WA’s case that they’re going to be getting fewer than 30 cents back in the dollar?

COLEMAN: Yeah look this is a complex area Tom, and as you say there are knock on effects. Any change in one place means changes in others as well. I think it makes sense that Western Australia-based representatives will be making representations about the impact on WA, but equally, people from other states will have different views. Any big structural change to the GST distribution, to the method or amount of GST raised is something that requires unanimous agreement amongst the states.

CONNELL: Just on that, David Coleman, on the unanimous agreement because it’s more gentlemen’s or ladies’ agreement if you like on the GST. The Government can act. Saying to the treasurers ’you’ve got to all agree’ means that there won’t be more money for WA. Why would the others give it up? So if you think it’s unfair, you’ll have to tell them so. So is it unfair is the question?

COLEMAN: Tom I think this is an appropriate matter for consultation across all the states. And it is absolutely appropriate if there is a change to GST, as it has always been the position of governments of both stripes across the years, it needs agreement across the states and across the political divide. It’s an appropriate debate to have, we want to have that debate in the tax white paper amongst a whole range of different tax issues. But in terms of the GST, you do require a consensus amongst the states for any change.

CONNELL: But your personal thoughts – is it unfair? Because if you say it’s up to the states, you are telling WA it’s a doomed case, surely?

COLEMAN: I don’t think that’s necessarily the case Tom. But again I wouldn’t want to preempt the deliberations of the state treasurers and the COAG discussions with the Treasurer and others. The states are sovereign governments. They’re big enough to speak for themselves. Undoubtedly there will be some areas where there’s agreement and some areas where there is not. That’s democracy and that’s what you’d expect.

CONNELL: I’m afraid we’re right out of time. I think in that area perhaps we’ll still back the horse of self-interest. But we’ll wait and see, you never know. David Coleman, thank you for your time. Gai Brodtmann, thanks to you as well.