Current system unfair and unsustainable - Transcript, ABC Canberra Mornings

E&OE TRANSCRIPT

RADIO INTERVIEW

ABC CANBERRA MORNINGS

THURSDAY, 7 FEBRUARY 2019

SUBJECTS: Closing unsustainable tax loopholes, Tim Wilson’s conflicts of interest.

ADAM SHIRLEY: Andrew Leigh is the Member for Fenner and Shadow Assistant Treasurer. He's with us on Mornings. Dr Leigh, really appreciate your time. Many people, especially self-funded retirees, have planned to support themselves in part with franking credits. Is it unfair that Labor removes future funds that these people have budgeted for?

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning, Adam. Great to be with you and your listeners. I think it's unfair that the Tax Office is currently writing checks to a group of people who are overwhelmingly in the top part of the wealth distribution. Most Australians think of the Tax Office as someone you pay - you make a contribution to the Tax Office so government can deliver public services. But for a small group of Australians - 8 per cent of Australians - the Tax Office is an organisation that sends you cheques. Refundable dividend imputation is not something any other country in the world does. It's not something we do with any other tax concession. Half of the benefits are going to people with more than two and a half million dollars superannuation accounts. And if we don't close this loophole, we won't be able to extend early childhood to 3 year olds, we won’t be able to give $14 billion more to public schools, we won’t be able to reduce those emergency and elective surgery waiting lists.

SHIRLEY: I know the argument for where the money will go is clear, but some of these people that you mention have budgeted to support themselves and they won't have an income if they don't have these franking credits coming into their coffers. Is that fair

LEIGH: If you're a pensioner, then you're in entirely exempt from these changes. They don't affect charities. So we've been careful to ensure in those carve out the people who are vulnerable aren't affected. But I don't think it's sustainable, Adam, at a time when debt has doubled under the Liberals and when we're not able to invest in our schools and hospitals, that we still need to to have this unique tax concession. No other country in the world has it, which tells you something about the arrangement. It's simply not fair and not sustainable. We're spending more money on the ATO sending cheques out to people with multi-million dollar superannuation accounts than the Commonwealth spends on public schools.

SHIRLEY: You've grandfathered or have put in a policy that would grandfather changes to negative gearing. Why not make a similar concession in this policy area when some people will be caught short on it?

LEIGH: Property investments are different from share investments and selling a house is a much bigger deal than selling shares. So we thought it was appropriate to have those negative gearing arrangements in place in the case of property. Dividend imputation reform is a change which would affect only 8 per cent of Australians. We've had it very carefully costed by the Parliamentary Budget Office and by the Treasury. And the fact is the Liberal’s scare campaign has now turned absolutely shrill. We've had my former Liberal opponent in the 2016 election now setting up an astroturf organisation claiming to be a grassroots body. You've got Tim Wilson, the chair of the economics committee, running around the country, running a deeply politicised inquiry into a Labor policy. When’s the last time a parliamentary committee inquired into an Opposition policy rather than into one of the big challenges facing the economy, like sluggish wage growth or into one of the government's own policies? It tells you everything you need to know about the Morrison Government, that they're spending taxpayer money on an inquiry into a Labor policy.

SHIRLEY: I wonder, Andrew Leigh, whether you or any of your colleagues have benefited from franking credits and this sort of dividend imputation in years past?

LEIGH: Look, I'm sure there are people on all sides of spectrum who've benefited from this-

SHIRLEY: Have you?

LEIGH: I haven’t personally. These benefits tend to go to people who don't have taxable income. That's kind of the point of our change, Adam - that the Tax Office is generally collecting revenue, but for a very small number of people, it's sending out cheques. I was chatting to a guy yesterday who said that he personally benefited from refundable franking credits, but he knows that it wasn't fair. He recognised it was important to make sure the next generation have well-funded public services and that having a Tax Office writing cheques was an unusual situation and they had to come to an end.

SHIRLEY: So, in counter to that, and I've got a series of texts and calls coming through on this issue - Andrew Leigh is with us by the way, Member for Fenner and Shadow Assistant Treasurer. This texter says ‘I spent 40 years in the full time workforce, I spent the last 15 years planning myself funded retirement and the last 10 years saving my bum off putting extra money into super - now the rules would be changed on me and stuffing up my plans and no I'm not a millionaire’. Do you accept that is a sentiment and a degree of unfairness that people feel, Dr Leigh?

LEIGH: The rules changed in 2001 by John Howard and Peter Costello in a way that significantly benefited those at the top of distribution. This wasn't the way the dividend imputation scheme was designed to operate. Dividend imputation was designed to avoid double taxation, but not to avoid any taxation. And one of the ways of recognizing how ludicrous the current system is, Adam, is to imagine that everyone was in the position of this group of self-funded retirees. We would be then collecting company tax revenue and we would give it all back at the individual level. And the effective company tax rate on every company in the land - on Qantas, Telstra, the rest - would be zero. Now if you think that's crazy, then surely that tells you something about the sustainability of this particular tax break.

SHIRLEY: Sixteen past nine. You mentioned the pension before. How many self-funded retirees could be forced onto the pension as a result of these changes when they lose that money?

LEIGH: The Parliamentary Budget Office has taken into account behavioural effects and they don’t believe that's going to be significant.

SHIRLEY: What sort of number are we talking? Because there will be people presumably that will be forced into that situation.

LEIGH: I can't say that number is zero. But certainly that's been taken into account by the Parliamentary Budget Office in their costings. Treasury has also looked carefully at this. The scare campaign has turned from shrill to ludicrous, with the Treasurer suggesting that his own Treasury numbers can't be trusted. Labor has kicked the tyres very carefully on our policy. We've been rigorous in terms of making sure that we're confident in these costings. And when the government is using taxpayer money in order to run an investigation which has a direct financial benefit to the chair of the Economics Committee, you've really got to wonder where this Government's going. They’re acting like an opposition in exile.

SHIRLEY: Is it true to say in some cases people will not have an income because they don't have a taxable income currently and rely on the franking credit payment to fund them in various ways?

LEIGH: Certainly some people have set up their affairs in a way to benefit from the tax change that John Howard and Peter Costello made-

SHIRLEY: And to live? I mean, to basically get through life?

LEIGH: Simply because we have an unsustainable tax loophole in place doesn't mean that that needs to maintain forever. We do need to invest in young Australians - the research around early childhood suggests that there are massive intergenerational benefits to extending early childhood education to 3 year olds. But in order to do that, Adam, we have to find ways of paying for it. I don't want Australia to be a country with the best tax loopholes in the world. I want Australia to be the country with the best early childhood system in the world, the best hospitals in the world, the best schools in the world. We can do that if we close down unsustainable tax loopholes.

SHIRLEY: Dr Leigh, appreciate your time on this issue which is being felt and being discussed by people in this region and beyond. Thank you for your time today. 

LEIGH: Thanks, Adam.

ENDS

Authorised by Noah Carrol, ALP, Canberra.


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Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | Andrew.Leigh.MP@aph.gov.au | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.