FRIDAY, 21 JULY 2017
SUBJECTS: Inequality, tax reform, Buffett Rule, offshore processing.
PATRICIA KARVELAS: Andrew Leigh is the Shadow Assistant Treasurer and joins us tonight. Welcome.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: G’day, Patricia. Great to be with you.
KARVELAS: Bill Shorten said in his speech today that inequality is on the march and is the biggest threat to our health as an economy and our cohesion as society. But Australia is really on a golden run – a world record 26 years of economic growth. Where’s the evidence that society is starting to fracture?
LEIGH: One place to look, Patricia, is housing where increasingly we’re seeing a market dominated by investors and first home buyers being shut out. Another place to look is the wage system, where we’ve seen stagnant wage growth, wages growing three times as fast at the top as at the bottom. Average workers in some cases going backwards after inflation. We look too at the prison population, which as a share of population is as high as it’s been since Federation. So, there’s a range of indicators that on that basic issue of egalitarianism – the thing that’s always been critical to Australia’s identity – there’s something askew. That’s what Bill put his finger on today.
KARVELAS: OK. You say that Labor wants and Bill Shorten says that Labor wants the whole picture – revenue and expenditure including tax subsidies and reforms that in the past we might have dismissed as too political difficult to be on the table. So what’s your starting point here? What are those taxes in the too hard basket that you’ll have another look at?
LEIGH: Well, we took the last election a set of policies around curtailing the capital gains tax discount and grandfathering negative gearing. We take the view that these tax benefits go disproportionately to those at the top of the distribution and they’re not fair, because they’re not accessible to everybody in Australia.
KARVELAS: Ok, but they’re already stated policies. He’s said that you’re going to look at other taxes in the too hard basket – what are those?
LEIGH: Well, indeed, we’ve also looked at the tax deductions that are being claimed for accountants’ fees. Again, this is something which affects less than one in 100 taxpayers, but we’ve said that Labor would place a $3000 cap on how much you could deduct for managing your tax affairs. In the area of multinational taxation, we’ve got packages on the table worth around $5 billion, which the government won’t touch because it’s not willing to take on tax avoidance from the big end of town.
KARVELAS: Ok, sure. But in order to show that you’re serious and not just, you know, trying to make sort of a broader talk and trying to put some pressure on the government, what can you nominate right here, right now that’s a tax change that would help tackle inequality immediately?
LEIGH: Well, Patricia, I’ve just nominated three-
KARVELAS: Yes, but they’re already stated policies of Labor. If Labor say it really wants to tackle inequality and is prepared to look at taxes already in the too hard basket, what are those?
LEIGH: Sorry, Patricia, it appears what you’re looking for is for me to announce a brand new policy on RN tonight.
KARVELAS: I’m not asking for the entire policy, because I can live in the real world. But I am asking you to identify taxes that you think are broken.
LEIGH: Absolutely. I’ve given you three, let me give you a fourth-
KARVELAS: Give me something that you haven’t already announced tackling, an area at least that you haven’t announced tackling yet.
LEIGH: [laughter] Patricia, I’m not going to announce something brand new. But I can give you dozens of policies to tackle inequality which Labor has put on the table which the Coalition isn’t willing to tackle. In the area of tax havens, we believe that it’s important to crack down on the big end of town parking their money in these dodgy islands and being able to take advantage of tax systems that others can’t use. We’ve said in superannuation, we believe we need to go further than the government’s been willing to go in curtailing tax concessions.
KARVELAS: So returning to the issue of housing, because you’ve recently given a series of speeches on rising inequality in Australia and you identified the property market as a keydivider of the haves and the have nots and this has been a big theme. So, given we already know your stated policy from the last election, could we also see changes to the tax treatment of the family home under Labor? Because that’s been something that’s been long on the agenda but again is in the too hard basket.
LEIGH: Well, Patricia, what we want to do is make changes which make us more egalitarian. And I think what we need to do is actually boost home ownership rather than reduce it. What we’ve done in the area of negative gearing is really at aimed at something Robert Menzies was about in the post war era – maximising home ownership. I worry that too much now that the Liberal Party is becoming a party of investors rather than the party of homeowners-
KARVELAS: Sure, that’s the Liberal Party. I’m aware it’s a Friday night and everybody’s trying to relax, but I do have to take you back to the question politely. Could we see changes to the tax treatment of the family home under Labor?
LEIGH: What we want to do is make sure more families own their own homes, so I don’t think we would be looking at policies which hurt the home ownership rate overall. We’re really concerned about the fact that young people, particularly in cities like Sydney and Melbourne, are increasingly shut out of the housing market. House prices in Sydney and Melbourne over the past few years have been rising at a rate of $140 a day, so you can understand why young people are just insulted when they’re told they can just skip a few smashed avocado breakfasts and somehow afford a home. We have to do more to make sure the tax system isn’t skewed towards investors. Yes, we have to boost housing supply, but we also have to change tax concessions which are allowing investors to beat out first home buyers at auctions across Australia tomorrow.
KARVELAS: Surely any serious conversation about genuine and substantial tax reform must also include the GST. Bill Shorten noted in his speech that Australians are ready for an authentic debate about the tax system. If the community is up for a debate, as he says, is Labor prepared to have that discussion around the GST?
LEIGH: Well, Patricia, I’m not sure that would reduce inequality. If you look at raising the GST, well that’s a consumption tax and we know that consumption taxes tend to be regressive. We’ve made a modest change, a bipartisan one, which affects low value imports. Certainly there’s been a debate over the GST as it applies to digital downloads and how it applies, for examples, to services such as Uber. But if the suggestion is that we ought to put the GST onto health or onto education, Labor’s not up for that. We don’t believe that that serves the great Australian egalitarian project – and it is a great project. We ought to take great pride in the fact that we’re a country that prefers the word mate to sir, that doesn’t tend to stand up when the Prime Minister enters the room, where many of us sit in the front seat of taxis. You can buy a private area on the beach in many countries, but you can’t do that in Australia. So these are many markers of egalitarianism in our society, but what I’m worried about, what Bill was pointing to in his speech today was the risk that our economy is increasingly advantaging the billionaires over the battlers.
KARVELAS: So, given all of that, are you essentially ruling out any changes to the GST? That won’t be part of the tax reform you take to the next election?
LEIGH: I just spoke to you about three changes to the GST which have received bipartisan support. But-
KARVELAS: But I’m talking about further changes.
LEIGH: Well, not that would increase inequality. What we don’t want to do is support the sort of 15 per cent GST proposals that Malcolm Turnbull and Scott Morrison were talking about after the leadership change, after they rolled Tony Abbott and poor old Joe Hockey. We don’t think that that would make Australia more equal – we think it would in fact make us a more unequal place. So we’ve got to assess each of these changes based on what it does to the income distribution. Inequality, I think Patricia, has to be higher up in the pecking order than would have been the case a generation ago because we’ve got more inequality than we had a generation ago. Globally, we’ve quadrupled the number of billionaires just since the turn of the 21st century. We’re seeing people like Pope Francis talk about inequality, the OECD, the IMF – international experts are recognising that inequality is a central challenge of our age and that’s why any serious Australian government needs to have it high on the agenda.
KARVELAS: If you’re just tuning in, Andrew Leigh is my guest. He’s the Shadow Assistant Treasurer and the author of Battlers and Billionaires, which explores these issues of wealth and inequality in Australia. An internal debate has been underway in Labor about whether to adopt the BuffettRule, whereby wealthy people would be forced to pay a minimum amount of tax. The left like it, the right don’t so much. Could this be revisited under Labor’s new push to tackle inequality?
LEIGH: Well, Patricia, what Warren Buffett was talking about when he raised this issue was his concern that he was paying a lower rate of tax than his secretary. There’s a couple of reasons for that – one is he was able to use deductions, the other is a different rate on capital gains taxation. So Labor’s looking at a set of policies which would essentially address that challenge by reducing the capital gains tax discount and by curtailing the largest personal income tax concession in the form of negative gearing. We’re effectively going to the practical import of the Buffett Rule-
KARVELAS: Well, it’s different to the Buffett Rule.
LEIGH: Well, without the unintended consequences such as if you were to cap deductions on charitable donations. I think many charitable organisations would see that as a bit of a problem if you suddenly said that there had to be a limit on what you could deduct in giving to worthy community causes. That’s the effect of an absolute Buffett Rule. What Labor has done is look at the practical ways in which we can close off loopholes-
KARVELAS: So you don’t think it should go any further? I know some of your colleagues that I’ve spoken to do want it to go further.
LEIGH: I’m yet to speak to one of my colleagues who believes that we ought to cap charitable deductions, which is what an absolute Buffett Rule would do.
KARVELAS: Just finally, can any discussion about inequality in this country proceed without including offshore processing on Nauru and Manus?
LEIGH: I think we have to look at the issue of refugees. Certainly, I believe that we ought to be taking more refugees, but I don’t there’s anything egalitarian about saying that we ought to go back to the days in which people were drowning trying to get to Australia.
KARVELAS: So what was Kevin Rudd, the former prime minister, saying this week? I mean he said these people should have been in Australia by now. Was that Labor’s plan all along?
LEIGH: I think Mr Rudd is reflecting the frustration of many Australians with Peter Dutton and Malcolm Turnbull-
KARVELAS: But he designed the policy.
LEIGH: Well, I think that he’s reflecting the frustration of many Australians that the Turnbull Government has dropped the ball on finding homes for the people on Manus and Nauru. There’s still more than 1000 people in these facilities more than three years on. They were never intended to be permanent facilities, it was always intended that these people would be found third country resettlement options. They’ve been languishing there for many years. It’s been awful for their mental health. It’s about time the Turnbull Government got on and didn’t simply work with the United States, but also looked at a whole range of other options for resettlement for people on Manus and Nauru.
KARVELAS: New Zealand?
LEIGH: I think they ought to be looking at all possible options-
KARVELAS: Including Australia?
LEIGH: Well, what’s important is that you don’t create a set of incentives which would see boats go back onto the water and people drowning in the oceans.
KARVELAS: So Australia has to be off the table?
LEIGH: It’s certainly Labor’s policy to make sure that we don’t have a restart of the people smuggling trade, that we don’t see people drowning in the oceans. Not far from my home is the SIEV Xmorial, the memorial to one of the boats that went down under John Howard’s prime ministership. You go to those little poles that are in the ground in Weston Creek Park in Canberra and you get a sense of the tiny size of the boat and the huge number of people who drowned. Nearly400 people, many of them children. I would hate to see boats like that taking to the oceans again, which is why it’s appropriate that we have firm rules that make sure there isn’t an incentive to take to the water. But that doesn’t mean we can’t find third country options for people on Manus and Nauru.
KARVELAS: Andrew Leigh, thank you so much for your time.
LEIGH: Thank you, Patricia.
FRIDAY, 21 JULY 2017