SKY NEWS, AM AGENDA
MONDAY, 21 MARCH 2016
SUBJECT/S: Company tax cuts; tax reform.
KIERAN GILBERT: With me now on the program, Shadow Assistant Treasurer Andrew Leigh. Dr Leigh thanks so much for your time. I want to get your thoughts on Arthur Sinodinos' comments yesterday. Much was made of them that the Government is focusing on the tax cuts for company taxes as opposed to personal. This is something that Bill Shorten has said he supports and has done so on a bipartisan basis. Is that still Labor's position?
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Kieran, it is. It is worth going through a little bit of the history on this. In 2010, the Coalition took a company tax cut to the election and then failed to vote for it when Labor introduced it into the Parliament. In 2013, they took a company tax cut to the election, and then backed off it when they decided to not go ahead with parental leave. Last year Malcolm Turnbull said we couldn't afford company tax cuts. So I think when Australians see the Government again flagging the idea of company tax cuts they'll think of that scene in Peanuts where Lucy keeps holding the football for Charlie Brown and then pulling it away at the last minute.
GILBERT: But in terms of the growth dividend, you would agree as an economist, that the better growth prospects would be from a company tax cut as opposed to the personal income tax cuts?
LEIGH: That tends to be the weight of economic opinion, work for example by John Freebairn last year found that the short run impact of company tax is that it goes almost entirely to offshore shareholders but the long run impact, 7-10 years out, is that it falls predominately on labour.
GILBERT: Yes so employment growth and employment labour wages, so therefore in terms of a longer term reform this make sense doesn't it?
LEIGH: So long as you've got a competitive corporate sector then you can get a growth dividend from company taxes. But what we need from the Government isn't more thought bubbles; frankly the ceiling is full of the thought bubbles that they have been blowing up there the last couple of months. We need a real plan.
GILBERT: Do you give the Cabinet Secretary some credit and the Government some credit for undertaking what would be an important reform to improve growth in the economy as opposed to the one off sugar hit in terms of an income tax cut?
LEIGH: Kieran, do I give the Liberal and National parties credit for putting an idea on the table that they've put on the table three times in recent years and then pulled off? No, frankly I don't. You need to actually follow through in politics, that's what Labor has done for the positive plans we've put on the table that boost growth and will hopefully bring down inequality as well.
GILBERT: So if you look at the current situation in terms of the corporate sector, you've got 28.5 per cent for small business and 30 per cent for big business. It makes sense to get them on the same level doesn't it?
LEIGH: Long term that would certainly make sense. Our corporate tax rates are about in line with the 10 biggest economies in the world, the average across the 10 biggest economies in the world is about 30 per cent.
GILBERT: We should be better if we want investment and growth don't we? The idea is to be lower than those comparable economies?
LEIGH: Well indeed. But we also have dividend imputation which means we take about a third of the corporate tax revenue and hand it back to personal income tax payers. Most countries don't have that. So looking from a Government perspective, a 30 per cent rate with imputation raises about as much as a 20 per cent rate without imputation. You've got to make the numbers add up and what we haven't gotten from the Government is a clear plan on how they are going to return the budget to surplus anytime in our lifetimes with the tax plans they're proposing.
GILBERT: What do you think of the other discussions that have been out there in recent days about 30 year bonds and the value capture, the idea that when you build infrastructure that otherwise would have been affordable that you can then capture value from areas that go up in terms of their property prices and whatever else if you have a high speed rail for example from Sydney to Melbourne. Do you like that idea?
LEIGH: Value capture is a great idea in principle. The place that does it best is Hong Kong where the Government owns the land and then as they roll out the metro to new areas, they sell off that land that is then raised in value. The challenge is where private individuals own the land and might not necessarily want the bit of infrastructure that has been put through but have to pay the taxes.
GILBERT: But do you think that the 30 year infrastructure bonds make sense given how low debt is right now in terms of the cost of debt? That we should be looking at these long term projects and putting a funding framework in place that capitalises on these historically low rates?
LEIGH: Look absolutely. It's really important that we take advantage of opportunities in the market just as households take advantage of opportunities to refinance the mortgage. But it's also important that we make decisions on infrastructure spending based on cost benefit analysis rather than pork barrelling. And the watering down of the role of Infrastructure Australia under this Government, the scrapping of any urban rail projects under Tony Abbott meant that we weren't getting the best value for money. With the third lowest population density in the world, Australia has to be much more choosy about our infrastructure projects than most countries do.
GILBERT: Do you like the fact though that the debate has gone away from all debt is bad to this now much more constructive discussion it seems on the prospect of acquiring debt but if it's over a long term and low rates, we can make it enormously to our advantage.
LEIGH: Look, if you look at it from an inter-generational perspective certainly there is something to be said for high yielding infrastructure assets in the long run. But you also need to make sure that you make the recurrent budget add up. What I've been concerned about with the Government is that every time Labor has come up with positive plans to add to the budget bottom line, rather than working with us constructively on cigarette excise, reining in superannuation tax concessions, reining in negative gearing and capital gains tax concessions. They've gone the low road, the scare campaign rather than working constructively to have a bipartisan approach to bring the budget back to surplus.
GILBERT: If you look at the Newspoll today, I know you don't like polls, but this shows on economic management and on tax reform, the Government has a clear lead as being seen as the better economic manager and better to manage the whole issue of tax reform. That's even without a policy out there.
LEIGH: You see these sorts of results for economic polls whatever country you're in. Parties to the left tended to be rated lower. It always seems strange to me, Stephen Koukoulas had a recent analysis pointing out that in the middle of this year Labor and the Coalition will have been in power for equal periods since the Whitlam Government came to office. If you compare the economic record of the two parties, Labor has delivered better growth and better employment growth over that period.
GILBERT: What about debt?
LEIGH: We've gone through the Global Financial Crisis, we dealt with the GFC and we did take on some debt there. But since this Government has come to office they've more than doubled the deficit despite all their claims about debt and deficit. Their debt and deficit has gone through the roof and they haven't had to face a GFC.
GILBERT: Andrew Leigh, thanks for your time.
LEIGH: Thank you, Kieran.