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Docks Restaurant, Melbourne, 4 July 1997: transcript of doorstop [Launch of Taxpayers' Charter, tax reform, gold sale]

JOURNALIST: Why do we need a charter?

TREASURER: We need a charter because a lot of people will feel that as individuals dealing, with the Tax Office, which is a pretty big organisation, they feel there's an imbalance of power and the Charter of Rights is to help redress that so that people feel they have got rights dealing with the Tax Office, that they can insist on them, that they have a right to fair treatment, that they presumed to be honest unless there's evidence to the contrary, and that they can get better service. That's what all this is about, better service out of the Australian Taxation Office.

JOURNALIST: Ray Reagan says it's the toothless tiger saying it's not forceable by law.

TREASURER: Well, he's wrong.

JOURNALIST: When it comes to taxpayers' rights, what about their obligations? When's the government going to get serious about collecting the money that's being avoided, something like $1 billion to $2 billion?

TREASURER: Well our Government of course, is always taking active steps to make sure that people who seek to evade the system are picked up.

JOURNALIST: It's not working is it...

TREASURER: No, we've had enormous strides. Our government closed down RD syndicates. Our government closed down the haemorrhaging over infrastructure borrowings. Our government dealt with fairness in relation to superannuation. So ours has been a very active government....

JOURNALIST: But what about those slipping through the PAYE net, Mr Costello?

TREASURER: Well... I'm just seeing where you are from.

JOURNALIST: I'm from ABC Radio, Mr Costello.

TREASURER: In relation to the PAYE net I don't think there are many people slipping through the PAYE net. You've got the challenges from, as I've said earlier, modern technology, and I mentioned yesterday that you do have challenges from technology, and it's one of the reasons why you'd have to look at broadening tax bases to make sure that technology doesn't defeat current bases that we have. This has been a very active government in relation to making people pay their fair share. I regret that we haven't had co-operation from the Labor Party in closing down tax avoidance loopholes, but we've managed to make a very good start.

JOURNALIST: Are you concerned about the Internet, talking about loopholes?

TREASURER: Yes, the Internet is one of those technological developments which does pose a threat to our current taxation base. What it means is that electronically you can locate transactions outside of our Jurisdiction and that is a challenge to the tax base. We have had a group within the Tax Office working on the challenges of technology and globalisation for some time. We've been very active in relation to other areas, such as transfer pricing.

JOURNALIST: But will we be following America's example in not taxing the Internet?

TREASURER: Well, I think that was really related to another issue. The issue that I'm talking about is the geographic location of transactions on goods and saying that you have to be quite vigilant where those geographic transactions are put outside the jurisdiction. The taxation of the Internet as a service itself is a separate issue.

JOURNALIST: Why hold any gold at all...

TREASURER: Well, we think that it's important to have a diversified portfolio. The Reserve had a look at its portfolio. It made the decision to sell quite a substantial part of its holdings in gold because gold is one of those holdings that you don't get a strong return on, and it has actually taken out securities which will earn income, and in the long term that will be good for our financial position, because we'll be in better yield securities. Why hold any gold at all? It's really only for the purposes of diversification. The Reserve's looked at its portfolio, it believes that there's a value in holding some gold reserves but not the gold reserves to the extent that it used to.

JOURNALIST: Can that be revisited...

TREASURER: Can I just say, when you say can that be revisited, the Reserve has announced that it does not intend to sell any further part of its gold holdings, but of course in relation to its reserves it at all times makes sure that it's got that under consideration. But it did state quite clearly that it does not presently intend to sell any more.

JOURNALIST: Were you involved in that decision, Mr Costello, personally? Did you endorse it?

TREASURER: Yes, the Reserve Bank consulted me about the sale of the gold reserves, it's a decision that I supported. And from the government's point of view we indicated that we would be quite happy for the proceeds to be reinvested and held as Reserve's assets. This is a very important point that the government did not seek a dividend from that sale. We did not seek a dividend because we believe it was important that the Reserve retain the level of assets that it did, that this would underline the security of the Australian financial system. We did not seek a special dividend because it would have been a one-off benefit for the budget, but it would not have given long-term benefit to the budget. We have taken the prudent decision in relation to that. Longer term, the Reserve will get better dividends but we did not seek any short term benefit whatsoever, because in our mind the important thing was to underline the security of the Australian financial system.

JOURNALIST: ...price of gold, Mr Costello. Are you concerned at the overnight drop in the market?

TREASURER: Well, I don't comment on prices in the market.

JOURNALIST: Do gold producers have a right to be angry about this decision?

TREASURER: I don't think so. Gold producers are people that are producing for all sorts of levels, including international markets and there'll always be an international market for gold. People in international Markets will want gold for decorative and jewellery purposes, and others will want to have gold as part of their holdings. And the Reserve Bank of Australia still has gold as part of its holdings.

JOURNALIST: Should this affect the strength of the Australian dollar, given that we are backed by only a third as much gold now?

TREASURER: ...but the Australian dollar is still backed by the same level of assets as previously, it's just that we've changed the nature of those assets, and what's more we've put some of the holdings into assets which will yield better dividends. So if anything the position has strengthened as a result of this. And the only reason we did that was to strengthen the position. At the end of the day, as I said before, the government took no dividend and all of the assets are there, they're just better placed now, and they're in higher-yield assets.

JOURNALIST: So the dollar should be stronger, given the sale?

TREASURER: I'm not commenting on the level of the dollar.

JOURNALIST: ...tax system, Mr Costello, if you introduced a GST?

TREASURER: Look, our government thinks that tax reform is important and we are going to keep talking about tax reform, about the nature of the current system and what's got to be done to improve it. Now, today was a practical demonstration of how to improve the tax system. We've introduced a Taxpayers' Charter of Rights. But you've also got to look at how you levy and collect tax in this country, and by and large if you can do it simpler, you can do it equitably, if you can do it fairly and if you can do it in a way which helps the economy and creates jobs, you ought to look at doing that.

JOURNALIST: So will you be bringing in any measures to cut out tax avoidance, any new measures, any new legislative measures?

TREASURER: Well, as I said we have already had an active reform programme on tax avoidance. Let me go through them again - R D syndicates, infrastructure borrowings, superannuation, and we have brought in thin capitalisation, we've brought in charitable distributions. Now if there are other areas that we discover where people are not paying their fair share of tax we will move on them.

JOURNALIST: But you're not going to bring any new legislation in?

TREASURER: We will bring in new legislation in other areas as they become apparent.

JOURNALIST: Treasurer, you mentioned yesterday that given the strength of your budget position you could hold out the prospect of lower over-all taxation. Are you suggesting you might be prepared to spend some of the surplus in the future to secure community support for tax reform?

TREASURER: No, our government believes that it is important that we start developing national savings, and from this financial year we'll start doing that because we'll start retiring debt. We'll retire $5 billion in 1997-98, and in underlying terms we will be running a surplus in 1998-99. I believe that it's important that we run that underlying surplus to contribute to overall savings. Why contribute to overall savings? Because unless we get savings up we'll not be able to grow the Australian economy as fast as we want. So make no mistake, one of the great achievements of this government was we started out with a $10.3 billion deficit, and in our first term we'll go into surplus. That's a turn around of over $10,000 million. Now when you achieve a turn around like that you don't let it go lightly.

JOURNALIST: So your benchmark for tax reform is revenue-neutral reform...

TREASURER: Well, the great thing about being in a surplus is you don't need tax reform to get more revenue. You see, why would we need more revenue? We'll be in a surplus, and when you are in a surplus you can engage in tax reform from a position of strength.

Thanks very much.