SKY AM AGENDA
FRIDAY, 12 MAY 2017
SUBJECT/S: Labor’s Budget reply, 2017 Federal Budget for millionaires and multinationals, Medicare levy
KIERAN GILBERT, PRESENTER: Joining me on the program now is the program now is the Shadow Assistant Treasurer Andrew Leigh. Andrew Leigh, thanks for your time. First of all on the deficit levy, let's start with that, has Labor given up on aspirational voters with that move?
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Kieran, this is a levy which is basically paid for by the top 1 per cent. Ninety-four per cent of the revenue comes from the top 1 per cent of Australians, a group that has doubled their share of national income over the last generation. We believe that they ought not to be the only people in Australia who are getting a tax cut. Let's take an example of a bank CEO. A bank CEO would get a $170,000 tax cut as a result of Malcolm Turnbull's decisions. Meanwhile, someone working on the Sunday the 2nd of July, the day after the bank CEO begins to get their tax cut, they get $77 less from the cut to penalty rates...
GILBERT: The numbers have been repeatedly raised by both sides over the years, but Deloitte Access Economics analysis shows that the top few per cent, the top 3 per cent, contribute well over 20 per cent of the tax revenue. It's a huge contribution they make already that they make.
LEIGH: And they have well over their proportionate share of income, Kieran. It's exactly what you would expect even if we only had flat tax rates. But we have progressive tax rates for a reason which is that if you are on a multi-million dollar salary you can afford to pay a bit more.
GILBERT: But what about a person on $180,000 living in Sydney?
LEIGH: They don't benefit from Malcolm Turnbull's tax cut. It's people earning over $180,000.
GILBERT: So those on $190,000, $200,000. So you're saying 49.5 per cent is competitive?
LEIGH: Kieran, we ought not to be giving tax rises to those on $30,000 while giving tax cuts to those on a $1 million. Malcolm Turnbull believes we ought to be giving a huge tax giveaway to some of the biggest companies in the world despite the fact that his own modelling suggests that it delivers very little for wage earners and employment.
GILBERT: Why does Labor think that now? Four years ago, Julia Gillard implemented a Medicare levy across the board. of which, you supported.
LEIGH: We did that in order to pay for the National Disability Insurance Scheme.
GILBERT: That's what they are doing here. They are doing it to pay for the NDIS.
LEIGH: Kieran, this is a bit like turning up to the store, paying for your groceries, walking to the security guard and he says "well hold on, you need to pay for them". When you reply that you've already paid, he says “but it’s the same principle”. We have paid for the National Disability Insurance Scheme and the Government is asking for Australians to pay for it again. What they are really trying to cover up is that debt has blown out by more $4000 a person since they have come to office.
LEIGH: But the 0.5 per cent increase that Julia Gillard announced only funded a fraction or a part of the NDIS, it was never claiming to be funding the whole thing. Not even she claimed that.
LEIGH: And that's why we set out in that year's Budget papers the full payment plan, which included savings such as means testing the private health insurance rebate.
GILBERT: So you're not paying for it twice, they are just saying they will hypothecate this component of the Medicare levy just like Julia Gillard did, but to fund the whole thing - isn't that just a clean way to do it?
LEIGH: Kieran, the NDIS was fully funded, and what the Government is trying to do now is pretend that it wasn't as an excuse for covering up their failure to keep the budget under control.
GILBERT: So how it is funded then into the long-term under Labor's proposal beyond that 0.5 per cent Medicare levy?
LEIGH: We made a set of structural saves. I talked to you about the private health insurance rebate save and a range of other savings including efficiency dividends. They were tough decisions, we were heavily criticised at the time for it, but that was fully funded. Let's look at where this money goes now.
LEIGH: We showed decade-long projections. Let's look at where this money is going now. It's going to a giveaway to the top end of town, to millionaires and multinationals. Bill Shorten's plan last night set out a different vision for Australia. One in which we close multinational tax loopholes, which we crack down on tax havens, and which we protect four out of five workers from a tax rise.
GILBERT: I want to get to the tax havens and multinational loopholes in just a moment. First though, in relation to the tax rate at 49.5 per cent for the top rate, is that competitive? It's the second highest in the world.
LEIGH: I certainly think it is appropriate that those at the top end pay their fair share. Why should millionaires be the ones who are getting a tax cut at a time when apprentices are copping a tax rise? That just doesn't seem fair. Australia has seen a big increase in inequality.
GILBERT: But as you've said it is pretty progressive, it is progressive, and it's been progressive forever and that's the approach here, even with a half a percent increase those who are earning $500,000 a year will pay $2500 more in the Medicare levy, as opposed to a few hundred for someone on $50,000.
LEIGH: It's an interesting point, Kieran - at what point does Malcolm Turnbull's millionaires’ tax cut overwhelm the Medicare levy increase? The answer is about $250,000. Anyone over $250,000 - and that's every Cabinet Minister, and every bank CEO - they come out well ahead as a result of Malcolm Turnbull's tax plans. Under Bill Shorten's plans, they don't come out ahead. We believe that's fair.
GILBERT: Would you ever remove it, the deficit levy?
LEIGH: When the budget comes back into surplus, we believe it's time to talk about tax relief and obviously we'd be looking at that right across different income brackets.
GILBERT: What's the argument at the top then? Why would you remove it if you don't think that it's necessary now, why would you remove it then, when back in surplus?
LEIGH: Our fundamental philosophy, Kieran, is that Governments shouldn't raise more revenue than it needs to deliver the services that Australians demand. So obviously, you want to look at bringing taxes down once the budget is back in surplus, and you look at that right across the board.
GILBERT: Why not just bring it down for low to middle income earners, because that's consistent with your argument now?
LEIGH: As the budget comes back to surplus, that is the conversation we'd be having, how to provide tax relief right across the tax code.
GILBERT: Finally, on the tax havens, you've been working on this for some time. Can you explain how this works?
LEIGH: It's a range of measures, some of the toughest in the world. Tax havens are a serious problem for our global tax system. They have been white-anting tax compliance across the world, costing hundreds of billions of dollars. Labor would require anyone who is tendering for government work to disclose their country of tax domicile. We would be saying very clearly that we would need more transparency about where tax is being paid. For a company which has activities in a tax haven, they would need to disclose that as a material tax risk to shareholders. For super funds, we will be working with the superannuation sector to work out how we can get better transparency about tax havens. But we have to stop...
GILBERT: Do you have any sense of how broad that would be? How many businesses you would catch as part of that approach?
LEIGH: It will catch some businesses. I don't have access to that information and that's why we have got these transparency measures, Kieran. We have to bring it into the sunlight - sunlight is the best disinfectant. We need to clear up our tax system in order to make sure out tax system to ensure multinationals pay their fair share.
GILBERT: Are you worried, just finally on that, this limit that has been announced that claiming accountants fees for sole traders who might have a larger expenditure when they have got an apprentice or two apprentices, and they still pay under the Pay as You Earn system?
LEIGH: This is a measure that catches less than one in one hundred tax payers. $3000 is considerably more than the average individual, or indeed the average small business would be claiming, so we believe it is reasonable and appropriate.
GILBERT: If the sole trader is affected though, they may have one apprentice but they have still got to have some bookkeeping to do? Would you look at exemptions for that?
LEIGH: It's a considerable amount of exemptions to come over this $3000 cap. The vast majority of taxpayers are under that cap, and we believe that it shouldn't be the case that people on multi-million dollar incomes get to pay no tax because they can make these massive deductions for managing tax affairs.
GILBERT: Andrew Leigh, good to see you. Appreciate it.
LEIGH: Thanks Kieran.