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Prime Minister discusses the introduction of a GST and its impact on Australia.



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PRIME MINISTER

28 May 1998

 

 

TRANSCRIPT OF THE PRIME MINISTER

THE HON JOHN HOWARD MP

RADIO INTERVIEW, JOHN LAWS PROGRAMME, RADIO 2UE

 

 

LAWS:

 

On the line from our Canberra studios, the Prime Minister of Australia, John Howard. Good morning Prime Minister.

 

PRIME MINISTER:

 

Good morning John. Nice to be with you.

 

LAWS:

 

Good to be able to talk to you. Can I preface our discussion by saying that I have, and you know it, that I have absolutely nothing against the GST. I would rather be the supporter of GST. I don’t think we should get too wound up discussing it until we have some more detail but I do feel that you have left the door open for a terrific amount of criticism trying to sell it because of the use of the word, ‘permanently’, and the use of the words, ‘never ever’. Do you agree?

 

PRIME MINISTER:

 

No I don’t. Back in ‘93, I am sorry, back in ‘95 before the last election I ruled out a GST, and you have referred to that, and that is fair enough, and I don’t deny using those words. And you will be aware of course that I haven’t tried to introduce a GST or tax reform during our first term in Government. We have formed the view that tax reform, including possibly a broad based, indirect tax, or GST, whatever you might want to call it, is desirable for Australia and we are going to the public at the next election and we are laying out our plan and if the public don’t like it, then they will vote against us, and we will fail.

 

LAWS:

 

But Prime Minister but never, ever means never, ever.

 

PRIME MINISTER:

 

John, when you say to the public, your position is X, you have an election and you stick to that and then you believe in the national interest it should no longer be X, What is wrong with then going to the public and saying, we have changed our position but before we implement our changed position we are going to give you a chance of voting against us.

 

LAWS:

 

I don’t see anything wrong with that at all.

 

PRIME MINISTER:

 

Well, that is all I have done.

 

LAWS:

 

But, my only comment, my only comment on the whole thing is...

 

PRIME MINISTER:

 

If there’s nothing wrong with it, what’s all the fuss. I don’t mean you but I mean from others. That is about as open and as transparent as anybody can ever get in politics. It is different, if I may say so, from what the Labor Party did in ‘93.

 

LAWS:

 

I accept the fact that people should be able to change their mind. In fact I have always said that I believed it to be an indication of a big mind if a man can say, well hang on, that might not have been quite right. Let’s have a look at it this way.

 

PRIME MINISTER:

 

It’s not a question of not being right. I mean, you can form a different view and if you are honest enough to put another election between the change of mind and the implementation about change of mind, that could be, you can’t be more open and transparent otherwise we would all be lumbered with the views we had 20 years ago. Now you would agree that some of the views you had 20 years ago on certain issues have changed. So have mine and they will change again, and providing, in my case as a Prime Minister or a political leader, I am open with the public and I say, right, I have changed my position but before I implement that changed position, I am going to give the public an opportunity at a general election of passing a verdict, of making a decision as to whether they support my change of mind.

 

Now that is very different, if I may say so again, and it’s a very important comparison. In 1993 Mr Beazley and Mr Keating said they were against a GST and they would give us L-A-W law income tax cuts and they were against indirect tax rises. They got re-elected and then they changed their mind, but the crucial difference is that they changed their mind without giving the public an opportunity of passing a verdict on their change of mind and they repudiated all of those promises immediately after they had been re-elected. Now you know as well as I do that in the 1993 election campaign, if the Australian public had known from Paul Keating and Kim Beazley that they were going to increase all of those indirect taxes, that they were going to renege on the L-A-W law tax. What would have happened is that John Hewson would have become Prime Minister of Australia in 1993 and the difference between me and them is that I am saying to the public now, openly, candidly, my position now is that I am in favour of tax reform. I will give you all of the details and you can make a judgement before I implement it, and if you don’t like it, you will vote against me. If you do like it, you will vote for me. Now that is the difference. It’s open, it’s transparent and it’s honourable.

 

LAWS:

 

But you are drawing the parallel between Kim Beazley and Paul Keating talking about L-A-W law tax cuts and then going ahead and introducing certain other increases in taxes without having pre-told the electorate that that is...

 

PRIME MINISTER:

 

I am sorry, it was worse than that.

 

LAWS:

 

anyway, that they would do it.

 

PRIME MINISTER:

 

No, no, it was worse than that because what they effectively did after the ‘93 election, and this is the view of the best academic on indirect tax in Australia, Dr Neil Warren, was to introduce in effect their own GST. They did it without any compensation. So not only did they, before 1993, say look fellas, we are going to give you income tax cuts, and go back on that, in addition they said, we are not only against Hewson’s GST but we are against any increases in indirect taxes and taxes are going to go down. Now they got elected and they did the complete opposite and they promised tax cuts and no GST. When they got in they gave you no tax cuts or only half of what they promised and they gave you their version of a GST without consulting the public again.

 

LAWS:

 

But you’ve just done the reverse. You’ve promised people no GST, never, ever, permanently off the agenda and then gave them one.

 

PRIME MINISTER:

 

Hang on, no I haven’t given them one. I will only give them one if they vote for me in the full knowledge that they will get it. That’s the difference. You can’t, I am sorry John, you can’t, nobody can argue against a bloke saying look, that was my position, I have now had a different, formed a different view but before I implement that different view I am going to give the public an opportunity to vote against me if they don’t like the new view.

 

Now Keating and Beazley did not do that in ‘93. That’s the difference. We are being open and transparent. They in 1993 were deceitful and dishonest and if they had put their plans on the table, if they had revealed in the ‘93 election campaign what the ‘93 Dawkins’ budget was going to contain, I believe John Hewson would have won that election and won it quite easily.

 

LAWS:

 

Well I am not sure that I would agree with that given that, I mean there was a....

 

PRIME MINISTER:

 

That’s a bit academic. Whether Hewson would have won or not is academic but the behaviour is different. I mean, what I am saying to the public is yes. My view now is different from what it was but I am going to lay out my new policy and I am going to give you an opportunity to pass judgement on it and if you don’t like it, you can vote against it. If you do like it, you can vote for it. Now I don’t know how more transparent, open and honest a political leader can be.

 

LAWS:

 

But Prime Minister, my comment to you, I agree with everything you are saying abut changing minds and certainly...

 

PRIME MINISTER:

 

And the openness.

 

LAWS:

 

I agree with the fact that you have been open about it in a convoluted kind of way.

 

PRIME MINISTER:

 

I don’t think it’s convoluted if you say to the public, I have changed my mind.

 

LAWS:

 

But you didn’t say that. I haven’t heard you say, I’ve changed my mind.

 

PRIME MINISTER:

 

Well I have just said it. I now believe that it is in the long-term interest of this country to have tax reform.

 

LAWS:

 

And never ever, in the minds of the Opposition and the minds of those who are opposed to a GST when it comes from the lips of John Howard, means three years.

 

PRIME MINISTER:

 

No, that’s not right. I mean it depends entirely upon... well it depends what issue. I mean, I am not going to deny what I said but what I am saying to the Australian public...

 

LAWS:

 

You can’t.

 

PRIME MINISTER:

 

I can’t and I won’t. I am not going to insult the intelligence of the public and say that I didn’t say it and that was before the last election and I have honoured that during this term. There is no GST during this term and now I am saying to the Australian public I have come to the conclusion and my Government has come to the conclusion that despite what we may have said in the past and what views we held in the past, we believe tax reform is essential to further secure and give safety to the Australian economy and we are going to lay out a plan, we are going to lay it out before the public before the next election and to give the public an opportunity. They can pass judgement. If they don’t like me, if they don’t like my plans for Australia then they can vote Labor. If they do like our plans for Australia they can vote for the Coalition. And we’re not holding anything back. I mean, the difference between me and Kim Beazley on this issue is that he held something back in ‘93 because he knew that if the Australian public had been told that they were going to jack up those indirect taxes in the ‘93 budget, they would have voted for the Liberal Party.

 

Now what I am saying to the Australian public is, I will give you the details of my plan. The benefits that accrue to the Australian public from that plan, if you like it you will support it. If you don’t you will vote for the Australian Labor Party. Now that is what democracy is all about.

 

LAWS:

 

Now John, unlike you, you seem to be missing the point that I am endeavouring to make here, and the only point that I have made about it is that I would have thought, given the comments that you made, given the phraseology like never, ever, and permanently, that you were going to have a great deal of difficulty selling a GST. Do you not accept that?

 

PRIME MINISTER:

 

I don’t believe selling a GST or, I won’t be selling a GST. I will be selling tax reform. I want to make it very plain.

 

LAWS:

 

But part of it will be a GST.

 

PRIME MINISTER:

 

A broad based, indirect tax is clearly one of the options. We haven’t formulated all the details yet but obviously, if we are going to reform the tax system in a big way you have got to get rid of the existing wholesale tax system and if we do have a broad based, indirect tax or a GST, we will throw out the existing wholesale tax system lock, stock and barrel with all of the inequities and lopsided approaches that it contains and of course, one of the advantages of a broad based, indirect tax and one of the reasons why we are looking at this again is that it attacks the black economy.

 

A couple of years ago an academic study was done in this country that showed that no less than $15 billion a year was being lost to the federal revenue through the black economy, through the cash economy, and one of the great advantages of a broad based, indirect tax or GST is that it attacks the black economy and that means that you and I and all the other honest tax payers in Australia will be better off because those who are now evading their responsibilities, will not be able to do it so easily, under a different tax system.

 

LAWS:

 

But do you... .do you really think that the average battling Australian is going to care much about the justice of non-taxpaying people if it means their bread’s going to cost more?

 

PRIME MINISTER:

 

Well the average Australian tax payer will be cranky if I produce a tax policy that makes them worse off. And I can promise them I won’t. I will produce a tax policy that won’t leave them worse off....

 

LAWS:

 

You see, because that’s the difficulty of it at the moment. Fear, fear that exists because they don’t have an understanding of it.

 

PRIME MINISTER:

 

John, John, I can, I understand that when all the details come out, and even now, we have the responsibility to explain and to advocate. Now I accept that. But if you’re saying to me, that we face the job of selling and persuading and advocating, of course we do, I accept that. And it would be an easier life if I took the lazy approach and said, “oh, no, we’ll leave a rotting, decaying tax system. To hell with the national interest, we won’t do anything about it.”. Now, John, Kim Beazley and Gareth Evans, they were in Government. They were in fact part of Paul Keating’s tax push in 1985. They know, as I know, as Paul Keating knows, as you know, as John Hewson knows, anybody, Peter Reith, Peter Costello, anybody who’s had any contact with the Australian taxation system over the years knows danm well that sooner or later we’ve got to reform it. I mean I can remember private discussions I’ve had with my colleagues on other sides of the House, particularly Paul Keating, about the need to change the tax system. There was a time, 13 years ago, when he and I were basically saying the same thing about tax reform even though we were on opposite sides of the House. And he knows that, and I remember it very well and I’m sure he does. Now all I’m saying is that there does come a time in the life of any political leader that you, when he’s got to take some risks in the national interest. When he’s got to say “well it might be unconventional, it might be unpopular, people may vote against.” But if you really care the national interests, if you really believe that Australia needs a better taxation system, than you’ve got to take the risk. Now I can say to the battlers of Australia, you are not going to be worse off Many of you will be better off. You’re going to be fully protected if there is a broad based indirect tax. You will see in the compensation and personal income tax arrangements that you are certainly not disadvantaged and the great bulk of you will be advantaged The only people who will lose from my tax reform plan will be the cheats.

 

LAWS:

 

Will, will there definitely be reductions in regular income tax?

 

PRIME MINISTER:

 

Of course there will be.

 

LAWS:

 

Dramatic increases?

 

PRIME MINISTER:

 

John, until people see the figures. They’ll be significant and they’ll be income tax reductions that will, I believe be seen as not only fair but also, to many people, generous, because we believe that some tax relief is desirable. But there are also other benefits that flow from a change to the system and I’ve already talked about the $15 billion that’s been estimated as being slipping through the fingers, but Tim Fischer made the point last night that the present system penalises our exporters. I mean we tax inputs to exports. People make things in Australia to sell overseas, and they pay taxes on inputs and it’s crazy.

 

LAWS:

 

You said, you said yesterday if we introduce a new broad based indirect tax you can rest assured whatever it’s introduced at, it will stay at. But there are going to be people who are going to say “well that’s like never ever.”.

 

PRIME MINISTER:

 

Well some people will criticise that. I accept that and it will be for the Australian

 

public to make a judgement.

 

LAWS:

 

But you meant what you said, if it’s introduced at 10% it will stay at 10%?

 

PRIME MINISTER:

 

I’m not saying what the percent is 

 

LAWS:

 

No, no, I know.

 

PRIME MINISTER:

 

What I meant is that if it’s introduced at ‘X’% it will stay at ‘X’%.

 

LAWS:

 

Despite the fact that in 21 of 23 OECD countries that have got a GST, they’ve all risen?

 

PRIME MINISTER:

 

I understand that, but I also understand....

 

LAWS:

 

Some of them have doubled.

 

PRIME MINISTER:

 

Well, some of them have, but you’ve got to remember that in many of those countries they doubled. You know why? Because they were too narrowly based which of course is the problem with our existing wholesale tax system. I mean you’ve got some items under the present wholesale tax system, take a television set which is now a pretty standard item for the average family. I don’t think anybody regards a television set as a luxury, that’s 32%. I mean, 32% is ridiculous.

 

LAWS:

 

And would that 32%

 

PRIME MINISTER:

 

That would disappear all together. I mean if you have a broad based indirect tax, what happens is that all of those big lumpy rates go, and you have a single rate.

 

LAWS:

 

I’m just looking here at the, this is interesting, the United Kingdom introduced one at 10%. It went to 17.5%. It’s a pretty dramatic increase.

 

PRIME MINISTER:

 

Oh yes, that’s true and it’s also true of course that they had a far more narrow base at the beginning. John, these are all things that people will make judgements on I’ll answer it when rates are established and the details are out, these are things that we’ll campaign on, talk about, and we’ll be able to tell the public what we intend to do. And if they form a judgement that this is in the interests of their country and that it’s fair, I believe they’ll support it. Now, if they don’t, well they won’t, and in any democracy, I will accept the verdict of the public. I’m not holding anything back. I mean, I say again, I’m not going to the election saying, if you elect me I’ll do ‘X’ and when I get re-elected I do the opposite of ‘X’. Now, I’m not doing that. I’m going to the public telling them that we now believe that tax reform is in the long term national interest of Australia.

 

LAWS:

 

When will we get some detail on it?

 

PRIME MINISTER:

 

Very soon. I can’t tell you exactly when, but obviously...

 

LAWS:

You’re working on it.

 

PRIME MINISTER:

 

Well, Peter Costello and I have been working on it quite extensively and our other senior colleagues, and he’s over in New York at the moment ringing the bell in Wall Street, and he’ll be back shortly, and he and I will be having further discussions over the coming weeks. But we’ve done a lot of work, it’s well advanced, it’s very....

 

LAWS:

 

So are we talking about weeks or months?

 

PRIME MINISTER:

 

Well, I don’t want to get into that. I mean, weeks merge into months and (inaudible) into weeks. I mean, two months is eight weeks. So John please, I don’t, all I’m saying is that it is sooner rather than later.

 

LAWS:

 

I’m asking you for your sake, not for mine.

 

PRIME MINISTER:

 

I realise that, look John, I just you know... sooner rather than later.

 

LAWS:

 

Okay, thank you very much for your time Prime Minister. I think you are in for a couple of rough days.

 

PRIME MINISTER:

 

Well, John, politics is about being willing to do the right thing.

 

LAWS:

 

It should be.

 

PRIME MINISTER:

 

Well, I think it is right for Australia to have a better tax system and I am prepared to face the Australian people, to tell them openly what we intend to do. I don’t intend to get re-elected, telling them one thing and doing the opposite immediately after I’m re-elected. They really get angry with that, and they have a right to be angry with that.

 

LAWS:

 

But Prime Minister, just back to it again. There are going to be those people who say well that’s just what you’ve done. You were elected and you’ve told us there wouldn’t be a GST and now there is one.

 

PRIME MINISTER:

 

But before there will be one, they will have an opportunity to vote me out if...

 

LAWS:

 

To vote on it.

 

PRIME MINISTER:

 

...they don’t like me, now that’s the difference. They didn’t have that in ‘93. In ‘93 Keating and Beazley said one thing. They won on the basis of that one thing they’d said and then they immediately did an opposite without going back to the public and saying “woops I’m sorry I’ve changed my mind, I’m going to introduce my own GST and I’m going to renege on the L-A-W law tax cuts. I will give you another opportunity to tell me whether you want me or you want the Liberals”. Now, if they had done that the Liberals would have won in ‘93 but they didn’t. Now, that’s the difference. On this occasion I’m saying “look fellas, I’ve come to the view, my Government’s come to the view that we want a new tax system for the long term benefit of our country. Now, we are not going to implement it until we’ve had an election so that if you don’t agree with us, you don’t agree with our changed position, then you can vote us out of office”. Now, I don’t think anybody can be fairer or more open or more transparent than that, and that is what I’m doing.

 

LAWS:

 

So you are now prepared to say you were wrong when you said that you wouldn’t introduce a GST?

 

PRIME MINISTER:

 

Well, what I am prepared to say John is that I have now come to the view that we need tax reform including consideration of a broad based indirect tax or GST, I’m prepared now to say that that’s good for Australia, but because of what I previously said, I’m not going to implement it until after we’ve had another election. So that if people either don’t agree with it, or don’t agree with my right to change their mind, then they can vote against the Government. Now, I say again, you can’t be more open than that.

 

LAWS:

 

I absolutely agree with you.

 

PRIME MINISTER:

 

I mean, that is as transparent as the nose on the face, so to speak. You can’t be more open than that. Because I’m saying to the public, of course we went to you on a certain basis before the last election, we are not prepared to introduce something contrary to what we previously said without going back to you again and saying we have changed our position, we now think it is desirable, we now intend to do it, but we want you to decide whether you support it, and whether you agree with us changing our position. Now, that is democracy, that is listening to the people, that is consulting the people, that is being open with the people and it is a world of difference from going to an election saying we’re going to give you L-A-W law income tax, we won’t give you a GST, we won’t increase indirect tax and then sneaking into office on the strength of that and then without going back to the public throwing all of that out the window, and saying to the public, well forget about that, we now find that we’ve got to change the position. Now, that is deceit. That is mugging the electorate. We’re not doing that.

 

LAWS:

 

Okay, thank you very much for your time Prime Minister.