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Transcript of interview with Fran Kelly: 28 March 2017: Turnbull Government's $50 billion company tax cut; emissions intensity scheme; China extradition treaty

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SUBJECT/S: Turnbull Government’s $50 billion company tax cut; Emissions Intensity Scheme; China extradition treaty.

FRAN KELLY, HOST: Chris Bowen, welcome back to Breakfast.

CHRIS BOWEN, SHADOW TREASURER: Always good to be back Fran. Good morning.

KELLY: It now looks like the Government is working on securing a tax cut for big businesses with turnovers of up to $50 million, it’s hoping it might get that threshold. Why wouldn’t Labor support that deal if it comes off? I mean $50 million, it’s not what we think of as big business is it?

BOWEN: Well it’s a matter of priorities Fran and it’s a matter of Budget repair and the Government lectures everybody, the Opposition, the public, about the need to get the Budget back to balance and the biggest hit on the Budget which is being discussed in Australia at the moment is Malcolm Turnbull and Scott Morrison’s plan for a corporate tax cut. That is the biggest hit on our Budget. Now what we’re doing is leading debate on budget repair and saying “well no, if we’re going to get back to balance we need things like negative gearing reform and capital gains tax reform”. But also, we simply can’t afford this tax cut. Now in a perfect world, sure we could have this discussion. But we’re not in a perfect world, we’ve got our AAA rating under threat, we’ve got a budget deficit which continues to blow out and you’ve got on this Government’s watch, and you’ve got this Government saying “well we need budget repair but what we’re going to do, what we’re going to do is give away $50 billion in corporate tax cuts” and we just don’t think its affordable at this time…

KELLY: Yeah, but the Government’s argument is not just giving away tax cuts, it’s a boost to the economy, it’s all about jobs and growth, should I say that again? “Jobs and Growth”. The small and medium businesses, the ones with turnovers of under

$10 million or under $50 million, say it will make a difference to employment. They can employ a lot of people.

BOWEN: Well what it is, it’s a wing and a prayer and a punt to say this will flow through to investment. Now you’ve got, for example, the banks today in The Australian and the business section saying it wouldn’t improve their hurdle rates for investment, it wouldn’t necessarily see them create any more jobs. It would just go straight to their investors bottom line and that’s the big banks who favour a tax cut for themselves but at least they’re honest about what the sorts of impacts it will have. The Government says we’ve got to look at international competitiveness, I accept that but just look at the Congressional Budget Office report out just this month which says that, and makes a similar point to the one I’ve been making, that it’s not just about headline rates, you’ve got to look at the deductions in the average rate and the Congressional Budget Office in the United States for example says companies consider the average corporate tax rates when deciding whether to undertake large or long term investment in a particular country. The average, not the headline rate, and when you look at…

KELLY: No, but we’re a long way from the average if Britain and the US cut it to 15%...

BOWEN: No no Fran, when we say the average we’re talking about the rates that companies actually pay after their deductions. And again as the CBO points out, Australia is quite competitive when it comes to that equation and you look at our top corporate tax rate of 30% comes down much closer to 20% when you look at the average that’s actually paid. Now these are the sorts of things, because we have dividend imputation in Australia, you have depreciation, you have all sorts of deductions, these are the sorts of things that you’ve got to take into consideration. The United States, they have state corporate taxes as well as national corporate taxes, I mean, you’ve got to weigh all this up Fran.

KELLY: Sure, but I know we’ve been through this before, but the Prime Minister is not giving up on it. He’s accusing Bill Shorten of “breathtaking hypocrisy” was the quote, reminding the chamber that Bill Shorten said a few years ago company tax rate increases productivity and investment. You argued in your own book “Heart and Minds: A Blueprint for Modern Labor” it is a Labor thing to have the ambition to reduce company taxes…

BOWEN: Well Fran, let’s go through it…

KELLY: Hang on. Hang on. So you argued then it’s there because it creates job and drives growth, now if you’re saying the time is not right now for that, what is Labor’s plan to creating jobs?

BOWEN: Well Fran let’s just deal with this point firstly. I’ll come to that, but let’s just deal with this point about hypocrisy because we are more than happy to have this debate. Firstly, Malcolm Turnbull and Scott Morrison won election with a promise with their colleagues to increase their company tax rate to pay for Tony Abbott’s paid parental leave. So let’s not have this hypocrisy debate. They were still arguing not that long ago that Australia could afford a higher corporate tax rate. And they

certainly were opposing Wayne Swan’s rather modest measure to reduce the corporate tax rate by 2 per cent and voting against it, so you know when they are quoting those of us in Parliament, well let’s have all the quotes. Let’s have Malcolm Turnbull and Scott Morrison’s quotes saying that the corporate tax rate didn’t need to come down and two, that it could be increased to pay for Tony Abbott’s paid parental leave scheme. His boondoggle paid parental leave scheme. So let’s go through that.

KELLY: Okay well how about we deal with that here and now then.

BOWEN: And then when they refer to my book, and I’m very grateful to Scott Morrison for the publicity, it refers to one particular page in a book which talks about many ideas and I make that point that it will be a while before fiscal circumstances allow tax cuts of any type. Of any type including corporate tax cuts. I was making the point that they’ve got to be affordable. It’s a similar point to the one Paul Keating’s made, that when he was reducing corporate tax, he paid for it through broader tax reform. Something that Scott Morrison and Malcolm Turnbull are singularly incapable of doing.

Now when it comes to the need to engender investment, I strongly agree. We’ve got 26 years of uninterrupted economic growth. There’s no law which says it must continue. And that’s why we are looking at things like a much better NBN to improve the productivity of business, or business in particular, investment in schools, much better investment in infrastructure, and we will have much more to say about our plans for growth, but a $50 billion dollar punt, a $50 billion punt which will see the AAA credit rating out the window on the hope and the prayer that it somehow translates into investment when you’ve got for example, banks out there today saying ‘well no, we’re unlikely to invest any more, it will all go to our shareholders’. It’s quite a punt and it’s not one that the Australian taxpayer should be happy to make.

KELLY: A couple of quick ones, Senator Xenophon’s position is a company tax cut for businesses with a turnover of ten million, but he does say he could go higher if the Government commits to an emissions intensity scheme for the electricity sector. Now Labor supports an EIS, would Labor lift its threshold 2 million if the Government agreed to an EIS?

BOWEN: Oh, look I’d like to see Malcolm Turnbull sell that one to his party room. I mean we see the internal ructions in the Liberal Party. I mean I’m not privy to those conversations between Nick Xenophon and the Government. Malcolm Turnbull, he must be frustrated because he secretly supports an Emissions Intensity Scheme, and Josh Frydenberg does too, you might recall just before Christmas last year, they floated it for a day before the right wing came down hard on them.

We’ll just stick to our position and our values. The argy bargy between the Liberals and the Nationals and the internal between the Liberals and Nick Xenophon is not something that I think we will get caught up in in the Labor Party.

KELLY: Alright and can I just ask you finally on another issue, I understand Shadow Cabinet has decided to block the China extradition treaty. Did the Shadow Cabinet discuss you know, how much this could harm the bilateral relationship?

BOWEN: Well Fran I’m not going to talk about what happened in Shadow Cabinet. I’ll leave Penny Wong and Bill Shorten to say more during the day and also to communicate with the Chinese Government. But I will say that the Shadow Cabinet took this issue very, very seriously, considered all the pros and cons, considered the implications not only for foreign affairs but considered the submissions to the Senate enquiry from the Law Council etc. There will be a Caucus discussion about this today. I’ve seen again some internal Liberal dissent on this this morning. This is a very serious matter. It’s not my place to announce what the Labor Party’s position will be but I can assure you that we’ve looked very, very closely with the guidance of Penny Wong and Mark Dreyfus at all of the issues involved and come to a very well-considered view after long deliberation of what is a very serious matter.

KELLY: Chris Bowen, thank you very much for joining us.

BOWEN: Always nice to talk to you Fran.