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Interview with Malcom Turnbull. -

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(generated from captions) has been pushing his tax reform plan Liberal backbencher Malcolm Turnbull for some time. is now firmly back on the agenda, But the subject earners are paying too much tax, with the PM saying high income and there is a case for reform. is Malcolm Turnbull. Joining me now in the studio

Good morning, Mr Turnbull. Good

morning You've produced a paipthar

comes up with some 300 different

scenarios for tax reform, but the

basic premise - cutting the tax

rate is affordable? It is. To cut

the top tax rate alone, to reduce

the 42 and 47 cent rate down to 40

cents, to 40%, would cost you less cents, to 40%, would cost you less

than $2 billion in '06 and '07.

That is a pretty conservative

estimate. It could be less than

that. How do you make up the $2

billion? If you do that - I

actually think that a tax reform

has to deliver tax cuts across the

board. Any tax cut he reform agenda

is going to benefit people that pay

the most tax because of course they

have the most that can be cut. But

I think a reform would have to see

cuts at the top rate but also some

changes in the middle. We have

modelled, by way of illustration, a

lot of different changes so that

people can see where the costs lie.

But if you wanted something that

was on the surface politically

attractive, it would be to have a

15-cent bracket as we do now.

Instead of a 30-cent bracket and a

29% bracket and then a top rate of

40% or 40 cents in the dollar. What

would that cost if you did the

whole thing? Well, in next year

that would cost on our calculations

less than $4 billion. That is very

affordable within the context of

the Budget, particularly because

you think then go and look at at a loss of the tax concessions and

look at which of them you can claw

back or put caps on so that the

people that are benefitting from the

tax cuts are paying for the tax

cuts by giving back concessions.

Now the virtue of that, of course,

is that you have a tax system, if

you have lower rates and a broader

base and fewer concessions, ideally

nobody should be a net loser but

you have a much simpler and more

efficient tax system. That is the

objective. You could do

across-the-board cuts that would

cost $4 billion. Cow make up the $4

billion entirely by reducing concessions? You could if you chose

to do so. There is a productivity and participation dividend. The

experience has been that when you

reduce tax, you get greater

compliance. People declare more

income than they otherwise would.

They also engage in less tax

avoidance. You also get greater

productivity. More people going

into the workplace, people are more

productive and revenues rise. It is

more doable, simple and affordable.

Why haven't we done it? It is

politics. Governments quite ietly

take a very conservative approach

to conservative achproch to

changing the tax system. There is a

broad expectation in the community

that the Howard-cost tell owe team,

which has delivered so much

outstanding tax reforms in its

nearly 10 years of office will

continue to do that, will continue

to be a reforming government. The

PM and the Treasurer have both said

that economic reform is an ongoing

task. Indeed they have. But this

puts you on a collision course

directly with the Treasurer, don't

it. It was only last may that he

was saying that Australia's top tax

rate is not out of kwhak with the

developed world. He clearly sees

any top to the top rate as a cut

for multimillionaires? Any tax cut

is a tax cut for Australians. Any

tax pairs if they are

multimillionaires are going to

benefit from a tax cut. The top

rate is relative to the comparable

developed countries. It is on the

high side. That is in direct conflict to the Treasurer's

argument Well, I'm not sure about

it being in direct conflict. My job

as a member of Parliament is to lay

out the facts, make the arguments I

think are in the best interests of

the country, not to echo other

people for the sake of oaking them.

He is your Treasurer. You don't

want to be seen to be in conflict

with him, surely. The Liberal Party

is a group of independent minds. We

don't just say the same thing. The

reality, as the PM said, the 47

cent rate is seen as being high and

too high. I think it acts as a

disincentive. You see, the

objective - one of the objectives

of the tax system is to raise as

much revenue for the Government as

it needs ab do so in as efficient a

fashion as you can. Now the higher

a tax rate is, the more of a

disincentive it creates for

economic activity. So in an ideal

world, you would have lower taxes.

Everyone agree was that this is

common sense. And a broader base.

Now what I am saying is that we can

raise substantially the same amount

of money and the same groups of

people - the top 10%, the top 5%

and the top 20% lsh will pay as big

a share of the total but we can do

so in a more ef efficient way.? The

political will to do this because

you have had support from the PM

but you have got that view from

Costello. Will if happen? Time will

tell. The challenge with tax reform

is making it work politically.

That is why I believe it cannot

just be seen as tax cuts at the top

It's got to be tax reform has to be

such that the broad group of

taxpayers, as large a group of

taxpayers as possible, can look at

it and say there was something in

it for them. Thank you very much