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Canberra, 24 November 1999: transcript of doorstop interview [business tax]



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Media Release

The Hon Simon Crean, MP

Deputy Leader of the Opposition and Shadow Treasurer

 

TRANSCRIPT OF DOORSTOP, CANBERRA, 24 NOVEMBER 1999

 

E & OE - PROOF ONLY

 

Subject: Business tax

 

CREAN:

I wrote to the Treasurer today setting out three conditions that Labor wanted met and if they were met we would pass the package. The Treasurer has agreed to those three conditions, we therefore have an agreement and I will be writing to him accordingly. Labor set out to achieve two important things and we have achieved them. One was to ensure that this tax package paid for itself and this agreement will ensure that it does. The second is that we set out to secure the integrity of the revenue base into the future by getting bipartisan agreement to effective anti-avoidance mechanisms and that I think will be a lasting legacy to whoever governs this country. I congratulate the Treasurer for the constructive way in which he has entered into the discussions. I look forward to the dialogue continuing but importantly continuing to work to see the detail of this implemented in full.

JOURNALIST:

Did you set the bar to low?

CREAN:

We set a bar that the Treasurer has agreed to. It was a bar that said, ‘revenue neutrality has to be met’. It has been met. It was a bar that said, ‘we wanted to preserve the integrity, the revenue base into the future’, it will do that.

JOURNALIST:

...(inaudible)...

CREAN:

What we’ve got in terms of the detail, I think, is very important. The Treasurer has said, that the attachments containing the detail now represent instructions that will go to the Parliamentary draftsman. This isn’t the exercise about further dialogue, further consultations, further consideration, these are the drafting instructions. It would have been better to have had the draft legislation but, quite frankly, we were not going to get that within the next week. We had to make ajudgement in that regard. But what we have in this agreement is the strongest commitment on record that the Government is committed to implement all of the business tax measures announced. All of them. That is the trusts, the alienation of personal services income, the conversion of losses. These are all important commitments in writing by the Treasurer on behalf of the Government and if there is any backsliding in terms of them it is the Government’s integrity that will be at risk.

JOURNALIST:

Why is the Government still negotiating with the Democrats if you have reached an agreement with them? Is the Treasurer hedging his bets?

CREAN:

I’m not sure. Ask him. He has reached an agreement with us and, as I have indicated to you, we have that agreement.

CREAN:

The Treasurer has conceded to the three points that we asked him to concede to and we therefore have an agreement.

JOURNALIST:

When do you expect the Legislation to go through the Upper House?

CREAN:

The Legislation in terms of the Upper House will go through next week, presumably. It has passed the Lower House, it has met the cut off period and it will be in the hands of those scheduling the program in the Senate.

JOURNALIST:

Were you pleased with the Treasurer’s preparedness to offer support for a tougher part IVA rule and are you confident you are going to be able to stop that flood of income to capital which all the tax experts say could cost billions of dollars in leakage.

CREAN:

On both counts, yes. We are pleased that the Government is prepared to recognise that they do need to toughen up Part IVA, particularly because what we have now have got is a bigger gap between capital gains tax and the marginal tax rates…The detail of what we have put forward, we have consulted with Trevor Boucher about, so we believe it is an important advance. The Treasurer believes that it is not properly drafted, well that is a question of words, but the intent, I think, is very significant, very important.

JOURNALIST:

Would you like to see Trevor Boucher sit down with Michael Carmody and actually construct some amendments, given that you have got Boucher working for you.

CREAN:

Well, he is not working for us, we sought his advice. But I mean, sure, anyone who can constructively build upon this agreement is welcome to do it. I think we have for the first opportunity in this country, not only a bipartisan position for certainty against which business can invest and that is essential for job opportunity into the future. But we have bipartisan agreement on effective crackdown on avoidance mechanisms. Now there are always problems with trying to introduce avoidance mechanisms one Party alone, because there will always be losers out of it. What you need is bipartisan support. We have used the opportunity not only to get revenue neutrality and not only to get certainty but to build integrity into the revenue base. And let me make this point — in terms of comparisons between the deal that we have done with the Treasurer and that of the Democrats on the GST, as we saw yesterday, the Democrats deal has undermined the integrity of the Budget. Our deal is about securing integrity into the future.

JOURNALIST:

This allows you to clear the decks on Ralph and basically focus on attacking the Government’s GST?

CREAN:

Which we have been doing this week. We will continue to attack the GST of course, but we offered bipartisan support for business tax refor m from the beginning of this year. We have been saying it constantly. We said that business tax reform stood in its own right. We wanted it separate from GST, in fact no GST. We said in fact, we can have business tax reform that is not revenue neutral if you don't have a GST. The requirement for revenue neutrality is because of the GST and that is why it had to be insisted upon. It has now been agreed, we will now get on with its implementation.

JOURNALIST:

Peter Andren accused you of rolling over on an issue of basic equity, isn’t this just a tax cut for the rich?

CREAN:

No the basic equity in this agreement is securing revenue neutrality. If these arrangements were going to be paid for by dipping further into the surplus resulting in further cuts to important expenditure programs, that would have been totally inequitable. The truth of the matter is, that on capital gains tax more than 70 per cent of what is proposed is paid for by the abolition of two mechanisms we had in place to soften the capital gains tax, indexation and averaging. So, let’s not get

into the exercise of trying to argue equity when in fact, the fundamental equity test was always revenue neutrality. We said it had to be met, we have got agreement that it will and that is the basic equity test.

JOURNALIST:

Have you seen the drafting instructions for the Part WA changes?

CREAN:

No, we haven’t seen the drafting instructions for Part IVA...

JOURNALIST:

That is the crucial anti-avoidance measure.

CREAN:

Yes, it is a crucial anti-avoidance measure but what we have got agreement to is a form of words that reflects the amendment that we have moved, that is, to stop the leeching of the revenue base by people entering contrived schemes to convert income into capital gains. The Government said it was going to strengthen Part IVA, we will await the detail of it but those integrity measures were never about revenue neutrality, they were about preserving integrity into the future. So I think you need to understand the two elements of that.

JOURNALIST:

…why the deal so quickly today when you would have got this extra information next week? Clearly it looks like the Democrats have forced your hand.

CREAN:

We wouldn’t have got this extra information, what extra information next week?

JOURNALIST:

The detail on Part IVA.

CREAN:

No. If the drafting instructions are available next week that is well and good. What we have is the commitment to the drafting instructions on the other measures and we have the Government saying, it will implement all of its measures in full. It’s never made that statement as strongly before. We have the strongest commitment ever now from this Government to implement the full aspects of the package and if the full aspects of the package are implemented not only will it be revenue neutral but it will also crack down on significant avoidance mechanisms.

JOURNALIST:

So, the Democrats didn’t make you do the deal quicker than you otherwise would have?

CREAN:

Absolutely not. I mean, we have been operating in terms of the conditions that we have put on, they have been met, the Government has agreed to them. The Government has signed up to the conditions that we put on.

JOURNALIST:

But aren’t you shooting yourself in the foot by admitting that the Government does have the economic answers?

CREAN:

We are not admitting that the Government has the economic answers.

JOURNALIST:

You are voting for them.

CREAN:

We are voting for a bipartisan position on business tax reform. They didn’t have the answers because they had to amend them and they had to amend them on our terms.

JOURNALIST:

Mr Crean, earlier this week a Committee dominated by Labor Members raised serious questions about revenue neutrality. What have you been given by the Treasurer that now gives you reassurance, is it extra information or is it a promise.

CREAN:

It is both. And it is the strongest commitment ever that they will implement the full measures on business taxation that they have announced. If they are implemented, and have a look at the costings the Treasury has put, assuming they are fully implemented, if they are fully implemented revenue neutrality will be met. And that is the test we always put, it is the test that is being met. It is the test that the Government has signed up to ensuring is met.

JOURNALIST:

How do you think this changes the dynamics? Time after time in Question Time we have had the Treasurer talking about the Democrats as the Party prepared to do a deal, the economically responsible Party and talking about Labor as being irrelevant, are you expecting more of those kind of comments now?

CREAN:

I don’t know. Let’s wait, every Question Time is another day. It depends on the issue.

JOURNALIST:

Are the Democrats back to a bit player status now?

CREAN:

Well, I don’t know. It is not for me to talk about the Democrats. The Democrats h ave never determined our position. They were at one with us in saying it had to be revenue neutral, but they wanted to go off and play around with notions about the capital gains tax, the detail. It seemed to me that what was far more important was to get the commitment to the implementation of the full package and the underpinning of the integrity of the system into the future. They weren’t seeking that.

JOURNALIST:

Mr Crean, did the East Timor levy yesterday, smooth the way for this deal in protecting the surplus.

CREAN:

No, the East Timor levy yesterday, or the announcement about it, I think, highlighted the real problem that the Government got itself into with the deal it did with the Democrats. I mean, what we saw yesterday was the Government say that it had to introduce a new tax to pay for a $1.1 billion hole in next year’s surplus. Yet they did a deal only four months ago that put a $1.8 billion hole into that same surplus and said, it didn’t require any changes to the tax cuts. For the first time when this Government said it had the tax system that would take us into the new millennium, that wouldn’t require changes for 50 years, it has had to be changed within three months and it has had to be changed seven months ahead of it being implemented. I hardly think that this has been sound economic management. And what has lead us to that has been the deal done by the Democrats and the Government. As I say to you, what underpins their agreement is that they have eroded the integrity of the fiscal position. They have exposed us to the risk that requires further adjustments. What Labor has been about in this next stage is securing the future by building integrity back into it.

JOURNALIST:

Were you surprised when the Treasurer came to the party?

CREAN:

Well, maybe. But he did. Thank very much.

 

md 1999-11-26  10:47