Big business tax cuts simply aren't sustainable - Transcript, ABC News 24

E&OE TRANSCRIPT

TELEVISION INTERVIEW

ABC NEWS 24

MONDAY, 26 MARCH 2018

SUBJECTS: Dividend imputation reform; Research showing Australian firms that pay less tax create fewer jobs

GREG JENNETT: Andrew Leigh, the Treasurer Scott Morrison is saying that Labor didn't think through its $11 billion imputation credits policy. In view of the fact Labor is now looking at changing it, that's fair enough that criticism isn't it?

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Greg, we've got strong support for the policy from a range of expert groups who pointed out that this tax concession is unique to Australia. The Tax Office wasn't set up to be an ATM for multimillionaires. We need to make sure that our tax concessions are closed down if they’re not adding to economic growth, yet are detracting from egalitarianism.

JENNETT: Even if it's 200,000 plus pensioners?

LEIGH: We've always been the party standing up for pensioners. We campaigned strongly against the Government's attempt to index the pension to prices rather than wages. We argued strongly against raising the pension age to 70 which would have given us the highest pension age in the world.

JENNETT: So would you try and carve pensioners out so you can continue with what you say is good treatment of pensioners?

LEIGH: Labor will always stand up for pensioners. Pensioners will always be better off under a Labor Government.

JENNETT: How might that be done in this case? Could it be done by putting a cap on the amount of cash refund that goes back to a shareholder or a complete exemption, which would you favour?

LEIGH: Greg, let's focus mainly on the policy here - because this is a policy which has great policy merit. The notion of dividend imputation was to avoid double taxation but it was never to have the tax office cutting cheques to multimillionaires.

JENNETT: Yes but there would have been people who were effectively paying tax twice wouldn't you say if they were pensioners and recipients if they were cut off from receiving this cash dividend?

LEIGH: Greg what you have in this situation isn't even single taxation of company profits. Company taxes are paid and then handed back in cash to retirees. For most of your viewers, they will be in a situation where they think about how much tax they pay. They don't think of the Tax Office as being a body that cuts them an annual cheque. This is a highly regressive tax loophole, one which is doing very little for economic growth and which is unique in the world. At that stage, you've got to ask yourself is this really the best way of spending taxpayer dollars.

JENNETT: Alright you're talking about the policy overall but just to be clear, Shadow Cabinet I think is meeting to discuss some sort of exemption or fairer treatment for pensioners. This is on the cards isn't it? Being actively pursued by Labor?

LEIGH: We're strongly arguing for the integrity of the policy. We believe that the cash dividend policy simply isn't sustainable at a time when gross debt has just gone through the half a trillion dollar barrier.

JENNETT: Alright we're watching the company tax cut debate go through the Senate this week. We're not quite sure how it will come to an end. But there is an assumption that the Government will scrape up the numbers. If it passes into law, do you support a full repeal in the event of a Labor Government?

LEIGH: Greg, we're talking about something that wouldn't come in until mid-2026. That's more than eight years away, we've got three elections between now and then and you're asking me about a hypothetical question about a measure that hasn't passed the Parliament.

JENNETT: You've got colleagues like Pat Conroy saying I don't support the tax cuts under any circumstance. I'd be very happy to go to the next election fighting against these unaffordable tax cuts so that seems a pretty firm position but that's not the position of the Labor Party, why is that?

LEIGH: Greg we've argued very strongly that these big business tax cuts simply aren't sustainable at a time when debt is going up so rapidly. The Abbott/Turnbull Government promised they would have the budget in surplus in the first year and in every year after that and yet had nothing but red ink and we've got a Government which is failing to invest in our schools. What the Government is effectively saying to Australians is that with profits growing eight times as fast as wages, they need to focus on giving a handout to foreign shareholders while cutting penalty rates. We believe that's the wrong priority.

JENNETT: So Labor's consideration of its final settled position on these tax cuts is dependent on that bottom line on the return to surplus, is that what you're saying?

LEIGH: We oppose the big business tax cut. We don't think it is the right thing to do. We've been arguing that vociferously.

JENNETT: But whether you'd repeal it or not, you're really saying you want to buy time on this do you?

LEIGH: Whether you'd repeal a measure which hasn't yet come into law and which were it to come into law wouldn't take effect for three more elections, Greg? I think people will forgive us for not having a settled position on that particular hypothetical.

JENNETT: Alright but just on this issue, you've done some research which broadly found that firms paying less tax create fewer jobs and those paying higher effective tax rates actually create more of them. By extension, that would be an argument to increase the company tax rate wouldn't it?

LEIGH: Well Greg, what this research simply shows is that when you look at Australian firms and you ask what is their effective rate of tax after deductions and rebates, you find that those that pay an effective rate of tax below 25 per cent are on net shedding jobs - they're net job destroyers.

JENNETT: Is that because of the industry that they're involved in? That they can because they might be a bank or something that can bring technology in for instance?

LEIGH: Yeah that's a good question. And as a professor-turned-politician-turned-professor, I obviously kicked the tyres on this result a couple of times just to make sure it was robust. It holds up if you hold constant the revenue of the firm, you hold constant the industry of the firm, we're only looking at profitable firms here so we're not comparing loss making firms and profit making firms. It's a result which is in-line with what American researchers Sarah Anderson and Sam Pizzigati have found. This is a robust finding. When the Government claims that firms that have a lower company tax rate will create more jobs - that's just not there in the data.

JENNETT: Although your base-line is 25 per cent is it? Below 25, you say they're typically not creating as many jobs. Why did you pick that level? Simply because that's the one the Government is arguing for?

LEIGH: Yes, that's right. And just as the American researchers focused around 20 per cent. But you can look across the whole distribution where you'll find a negative relationship there, firms that are paying a higher effective rate of tax create more jobs and firms paying a lower effective rate of tax are creating fewer jobs or indeed shedding jobs. So this whole notion that the Turnbull Government has - that less company tax means more jobs - just doesn't hold in the data right now.

JENNETT: Alright, let's see whether they can persuade enough Senators. They haven't at this stage. Andrew Leigh, Shadow Assistant Treasurer, thank you for your thoughts today.

LEIGH: Thanks, Greg.

ENDS

Authorised by Noah Carroll ALP Canberra


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