Government Chases Labor's Lead on Multinationals




MONDAY, 2 MAY 2016

SUBJECT/S: 2016 Budget; Labor’s plan to clamp down on multinationals; Higher education funding.

LAURA JAYES: Andrew Leigh thanks so much for your time.


JAYES: There has been a lot of talk about income tax cuts in the budget tomorrow and the talk is that it will be at a $80,000 level, will Labor support that?

LEIGH: Laura, there has been a lot of talk about a lot of things in this budget. It has had the suggestion that the Government was going to cut company taxes, remove funding to public schools, that it was going to give income tax powers to the states and raise the GST. Rather than speculating, why don't we wait and actually see what's in the budget. We do know that a tax cut which comes in at $80,000 would only go to the top quarter of Australian workers and that would be something which would see the typical Australian worker miss out.

JAYES: So you won't support it?

LEIGH: We'll wait and see what's in the budget. It would be irresponsible of me to give you rule in, rule out approaches. What you want your Opposition to do is look at the budget in its entirety, carefully consider it and give you a considered response.

JAYES: OK so is that the fairness measure you will apply to this tax cut? You want to see how it weighs up in terms of other measures in the budget?

LEIGH: Yes, that is a good way of thinking about it. Labor will always apply a stronger fairness test than the Coalition. We'll be looking at measures that not only boost overall economic growth but also benefits as many Australians as possible because we don't believe that Australia has been travelling well in the last few years. If you look at living standards, you look at net national disposable income per capita, down 4 per cent since the election. So we've had a fall in living standards under this Government and a rise in debt.

JAYES: Well there is less of a need to tackle bracket creep then isn't it?

LEIGH: We're always keen to see taxes as low as possible to fund the services Australians demand. But we do also have this warning from Moody. Moody is saying that Australia's credit rating could be at risk if the debt blow out that we've seen from the Abbott/Turnbull Government continues over the coming years. So Labor is fiscally responsible, we want to make sure that we narrow that gap because a credit downgrade would hurt not only Australian households but also Australian businesses. 

JAYES: We haven't seen that demonstrated by Labor yet. You have put out about $100 million worth of revenue raising measures or savings measures but you've also announced a lot of spending measures and you haven't said exactly how much of that will go to paying down the deficit. Will it be made clear during the election campaign and the budget reply speech from Bill Shorten at the end of the week?

LEIGH: Well Laura we've got more fiscal policies on the table than any Opposition in the last 20 years. 

JAYES: Is that to pay for new spending or is that to pay down the debt?

LEIGH: It's both. We've said that we will have over the course of the decade, more saving than spending. We've been very clear, there's a range of things we wouldn't pursue. We don't think the Coalition's marriage equality plebiscite makes sense, we don't think we need to restore the baby bonus, we don't think the Government's direct action plan - its slush fund for polluters - is a good use of public money. We've also made hard decisions on the revenue side around curtailing superannuation tax breaks for the wealthiest and making sure that multinationals pay their fair share. All of those things, tough decisions, and as you say add to $100 billion which allows Labor to answer the question that Scott Morrison and Malcolm Turnbull can't answer, how would you pay for the schools and hospitals Australians need?

JAYES: They will be answering that tomorrow. If I can talk about something that has been flagged as well and that is a cut in the company tax rate, most economists and you in the past have agreed that a cut in company tax does deliver a growth dividend. So where do you stand on this now and if it is split in the budget between a big company tax cut, maybe a tiered approach and then more relief for small and medium businesses, is that something that you could entertain?

LEIGH: Let's see where the Government lands on this one, Laura. But you do have to be careful about making sure that you're not simply offering a tax cut funded by borrowings which ultimately could then lead to a credit downgrade.

JAYES: OK well then let me put this to you. Does it make sense to pay for a company tax cut whether that be large, medium or small with the extra revenue you get by clamping down on multinationals, that could be hypothecated spending?

LEIGH: I've never seen this Government come up with a plan that actually clamps down on multinationals and adds to the bottom line, Laura. Their last package had asterisks in last year’s budget where the revenue numbers should be. That's in contrast to Labor's package which does raise revenue.

JAYES: To be fair, Joe Hockey argued in the last budget that essentially the government didn't have enough information to put a firm number on the revenue you'd get from clamping down on multinationals. Over the last 12 months, there has been more investigative work put in place. My understanding is there is a better understanding on how much you can get out of multinationals, do you accept that?

LEIGH: Laura, we should always push for greater precision. But we're the Opposition. With just the resources of the Parliamentary Budget Office, we can come up with a plan that is definitely implementable. The Government, with all the resources of Treasury, has been unable to.

JAYES: OK with all the resources that have been put in for the last 12 months and once we see the Government deliver on that and that number tomorrow, do you think that Labor might have to go back and look at the number it has put next to your plan for clamping down on multinationals?

LEIGH: We are always looking at ways to make sure multinationals pay their fair sure. Chris Bowen and I announced over the weekend additional measures that Labor would put in place, raising penalties for firms which don't file their country by country accounts, requiring greater transparency for big private firms and having a public register of beneficial ownership. We will keep on pushing the envelope on multinational taxation because we've been out there leading the debate. Chris Ketter, Sam Dastyari and others in the Senate have been making sure that we have that transparency for what big firms are doing because tax commissioner Chris Jordan said our tax system is "under fire" from multinationals. 

JAYES: I think it's $9.3 billion in revenue by clamping down on multinationals over 10 years, are you confident that that is being quite sensible and moderate in what you can get out of multinationals or will you need to revisit that?

LEIGH: The estimate that we have from the Parliamentary Budget Office is $7.2 billion over the decade. We will obviously be going back to the Parliamentary Budget Office periodically for updates in our costings but that's what the budget experts have told us our plan will raise and it does so by closing off loopholes that don't have good economic sense behind it. We've talked about this before Laura, that if you're clamping down on debt deductions then you can raise revenue without hurting growth and that's your ideal budget measure. 

JAYES: Just one final question on higher education, this is a hangover if you like from the 2014 Abbott budget. It seems that the Government is either going to reveal their plan in the budget tomorrow or throughout the election campaign but would you support deregulation of university fees if they were capped at a certain level?

LEIGH: Laura we know that the experience in other countries has been a very rapid increase in university fees.

JAYES: But if you cap it that would change that wouldn't it?

LEIGH: In Britain for example, almost everybody pushed straight towards the cap. They did that partly because universities began then to use their price as a signal of quality. In an income contingent loan approach, you don't have the same sort of market discipline which you get for example if you get grocery providers raising their prices. There is a risk that prices push up too high that you then ultimately deter some of the poorest Australians from taking on university degrees. If you want an agile, innovative nation then discouraging people to go to universities is a very bad way of doing it.

JAYES: So even if the Government does put forward such as that, Labor is not going to budge on this?

LEIGH: We'll see what they put on the table. But Kim Carr has been very clear on this, the international experience on fee deregulation does suggest that you can get very rapid increases; the tripling of fees that Britain saw after deregulation could potentially have had significant deterring effects for Brits undertaking university. We don't want to see that in Australia. Inequality is a race between education and technology: as technology advances we have to have more young Australians getting better educated through vocational training at university.

JAYES: OK Andrew Leigh, we will wait to see what is in the budget tomorrow. We look forward to the Opposition's reply on Thursday.

LEIGH: Thanks, Laura.



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