SKY AM AGENDA
WEDNESDAY, 6 APRIL 2016
SUBJECT/S: Land tax; ABCC; Company tax rates.
TOM CONNELL: In an area you are very familiar with as an economist. Land tax, increasing that, broadening that and putting it on the family home these sort of different issues to raise more money in getting rid of stamp duty. A lot of economists say it is efficient, it's a good idea it will boost the economy ultimately without collecting more revenue, your thoughts?
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Tom I've made exactly that argument on this program before. Stamp duty is essentially a tax on mobility. Indeed I've done academic work in the past showing that higher stamp duty impedes mobility and reduces the amount of transactions that we see in the market. Land tax isn't politically popular but it's far more economically efficient.
CONNELL: Labor states don't seem to agree with you so far.
LEIGH: They certainly do. You've got the ACT going out there with a nation-leading reform. You've got South Australia seriously contemplating this. The serious reformers -
CONNELL: Is it a thought bubble from Malcolm Turnbull?
LEIGH: I think a good thought bubble. The point that is being made is that Malcolm Turnbull was nowhere to be seen when the ACT Liberals were running a scurrilous scare campaign against this reform. Malcolm Turnbull didn't lift a finger. When South Australia has been putting this on the table you haven't seen Malcolm Turnbull going down there and saying that the South Australian Government is on the right path. He's using it only as a politically convenient argument, to distract from the fact that he's been flipping and flopping like a fish out of water on the issue of economics and tax.
CONNELL: One of the studies done earlier this week, one of the NSW lobby groups suggested you might need something as high as 1.4 per cent in terms of land tax to make up for the short fall in stamp duty. If you're talking Sydney, million dollar houses aren't that rare and then they've got a bill of $14,000 a year. Is that going to be palatable?
LEIGH: Look that seems high to me. From the back of the envelope, my rule of thumb for stamp duty is the stamp duty you pay on a house tends to be equivalent to the value of the car parked in the garage. But so then you amortise that over the life of the turnover. People tend to sell houses about every seven years and so you'd have a seventh of the value of your car in very rough terms. This is going to be a matter for States and Territories.
CONNELL: It's thousands of dollars a year though isn't it?
LEIGH: Look, it'll be a matter for States and Territories to make the transition. It's a good reform and it's being done by Labor States. I'd like to see Malcolm Turnbull actually praise them when they're fighting an election against a Tony Abbott/Malcolm Turnbull style scare campaign. At the last ACT election the Federal Liberals were nowhere to be seen. The Federal Liberals didn't say their ACT counterpart were being economically illiterate, they just sat on the sidelines and let the ACT Liberals run an atrocious scare campaign on this. If Malcolm Turnbull is serious about reform he actually needs to put some skin in the game, go out there and make the tough decisions like Labor has done with our ideas on multinational tax and reining in excessive superannuation tax breaks. It's in the tradition of the Hawke and Keating Governments, who put in place the Capital Gains Tax and the Fringe Benefits Tax in the teeth of Liberal Opposition in the 1980s. Liberals love to talk about great tax ideas, they won't back them in when the time is really needed.
CONNELL: They seem to be tossing up so I'll guess we'll see where it lands. Reports today that plans were being hatched a couple of months ago to maybe mount a bit of a challenge to Bill Shorten. He appears to be on pretty safe ground now but are there always going to be some people out there waiting for him if you like?
LEIGH: Strikes me as a ridiculous story. The reason that Bill has the support of his team is that he's out there with positive ideas. Seventy-three practical proposals to improve the lives of Australians. We've had them carefully costed by the Parliamentary Budget Office. When people say ‘where do you get the money from to improve our schools and reduce waiting times in hospitals?’, Labor can answer that because we have done the hard work.
CONNELL: What about hospitals, because there is this amount that Labor has spoken about for a couple of years of $57 billion over 10 years, massive amount of money. How much of that do you think you could possibly afford to tip back into the system?
LEIGH: I believe we're going to be able to restore some of the very savage cuts that have been made under the Liberals.
CONNELL: Not all of them?
LEIGH: Well let's see where things end up. We have at the moment $100 billion of savings, all things that the Libs have gone and bagged us about but economically responsible changes. We don't believe we should subsidise polluters, we don't believe we should restore the baby bonus and we don't believe in an expensive plebiscite for marriage equality. In terms of tax changes, we've put on the table changes to cigarette excise, to multinational tax and reining in the unfair and unsustainable superannuation tax concessions. All of that allows us to say that we have a positive plan and that's why Labor is united behind Bill Shorten.
CONNELL: If I can get you on the ABCC the two main objections often listed by Labor; no legal representation and the Bill says it does allow it and that you lose the right to silent which is true but people also can't self-incriminate within that aspect of the Bill. These are some safeguards within this are they not?
LEIGH: Tom let's look at what the Liberals say about the ABCC. They claim that it is a productivity-boosting institution but in fact the surge in productivity in the construction sector came after Labor abolished the ABCC. We saw fatalities fall after the abolition of the ABCC -
CONNELL: We're just about out of time, but these two specific areas are often cited as the big issues with the Bill?
LEIGH: The Law Council has raised concerns of this because it gives greater powers to go after tradies than ASIO has to go after wrongdoing. This is a civil regulator which had no impact on improving productivity, no impact on reducing industrial disputes, no impact on reducing deaths in a very dangerous industry. Labor doesn't believe it is appropriate to have one law for tradies and one law for everyone else.
CONNELL: And yet these two areas I've listed; legal representation and the right to silent what do you make of first of all there is a provision in the Bill that allows legal representation and the other part though, you can't self-incriminate.
LEIGH: But you can be required to answer questions. So you lose the normal common law protection against being able to refuse to answer a question. That's not something that we have in a whole other range of areas in the law. You could justify it if you thought this was a body which in the past has boosted outcomes for Australia. But the Productivity Commission says that they did not find any strong evidence that the ABCC boosted productivity in the construction sector.
CONNELL: You don't think there has been enough out of the Royal Commission to suggest there are issues though in the construction industry?
LEIGH: First of all the ABCC is a civil regulator not a criminal one. I've got no tolerance for corruption whether it's occurring in the Victorian Liberal Party, whether it's in a union movement or in a company board room. But we have the Australian Crime Commission, we have strong police powers, and anyone who encounters wrong doing should immediately report it.
CONNELL: Coming back to cost as well, doesn't it? I think there's something like anything above three stories is where you have to have union involvement for construction sites. And that's where the building per metre or per room I'm not sure what the measurement is, but it goes up 26 or 27 per cent so why is that cost so much higher? Does that not suggest that something is going on within the industry that once you get the unions involved everything gets so much more expensive?
LEIGH: There have long been unions involved particularly in dangerous industries like mining and construction. Workers have been killed in these industries at alarming rates and we've got a memorial here in Canberra to some of those workers who have been killed. I've spoken to their families about what happens when a concrete pour goes wrong, young kids having concrete splashed in their eye, we had a bloke in Canberra impaled as he fell off a bridge in which the work site had not been set up safely. People have a right to expect that when they go off to work they'll come home to their family safe at the end of the day. One of the key roles that unions play in this industry is ensuring safety. They're not just the institution that brought you the eight-hour day and the weekend, unions are also playing an important role in reducing inequality and improving worker safety.
CONNELL: OK if we could look ahead to the budget, we've had all these indications that it's going to be about a company tax cut from the Government. Now again with your economist hat firmly on, this is one that many of you would say has the biggest economic impact in terms of growth.
LEIGH: Let's look at what Australia's company tax rate is. The average company tax rate across the 10 biggest economies in the world is 29 per cent. We have a rate of 30 per cent for big companies and 28.5 per cent for small companies. We've also got dividend imputation. Only New Zealand has that, most other countries don't so we give back a third of the company tax revenue. A 30 per cent rate with imputation is like a 20 per cent rate without imputation, so in that sense we are raising as much as we would if we had a 20 per cent company tax rate without imputation. I think given what we have seen at the moment – and the Panama Papers are just the latest example – we need to make sure that we've got firms paying their fair share and that's why Labor multinational tax plan that closes tax loopholes is an important part of tax integrity.
CONNELL: And very quickly, Labor has got a plan to lower company tax rates as well?
LEIGH: Labor's view is that taxes should be as low as possible in order to deliver services that Australians demand. Our view at the moment is that company tax cuts should be a priority, that Australians are concerned about the amount of tax that they pay, Malcolm Turnbull has been out there this year -
CONNELL: We've got to go to a break but it was your long term goal as well, to lower company tax still? In a word, yes?
LEIGH: We believe taxes should be as low as possible for the services they deliver and that has always been our philosophy.
CONNELL: OK we're going to go to a quick break, stay with us on AM Agenda.