2GB MONEYNEWS WITH SCOTT HAYWOOD
THURSDAY, 9 NOVEMBER 2023
SUBJECTS: Taxation; Inflation; Triathlons.
SCOTT HAYWOOD: Andrew Leigh is the Assistant Minister for Competition Charities and Treasury and has been driving the charge to make the tax system more fair. And he joins us for a chat on this Thursday night to discuss these issues. Andrew, great to chat to you again here on Money News.
ASSISTANT MINISTER FOR CHARITIES, COMPETITION AND TREASURY ANDREW LEIGH: Thanks, Scott. Great to be back with you and the MoneyNews team.
HAYWOOD: Andrew, there's quite a lot to digest in the numbers today. Firstly, does this transparency about the state of corporation tax help to hold companies to account?
LEIGH: Certainly does, Scott. Providing a bit of sunlight is never a bad thing. These corporate tax reporting rules came in place as a result of a decision by the Gillard Government, opposed by the Coalition, to require large firms to have published the amount of tax that they pay. I think it's appropriate that those firms report back to Australians as to the contribution they've made, given that they're beneficiaries of the infrastructure - legal and physical - that we have in this country. We're also working to tighten the rules around multinational tax avoidance, providing more resources to the tax avoidance task force, tightening up rules around debt deductions. And then next year we'll be moving to implement the 15 per cent floor under corporate tax worldwide, which will again make it harder for multinationals to avoid paying their fair share.
HAYWOOD: Andrew, you know, a lot of the corporate tax is owed to the miners and keeping commodity prices high a priority.
LEIGH: Commodity prices will come and go. They're largely outside the control of Australia. It has to do with the demand in the Chinese, Indian, other economies. What we need to do as a government is to make sure that the tax systems are fair. I was pleased to see the Australian Taxation Office a couple of years back strike deals with Rio and BHP, which cumulatively saw them pay around a billion dollars of back taxes and agree to cease the use of marketing hubs operating out of Singapore. That provides greater integrity to our tax system and it also ensures fairness. If you're a small miner starting up, you might not be making use of those marketing hubs. This ensures that everyone's on a level playing field. So, it's about both revenue and fair competition in the economy.
HAYWOOD: Andrew, there are a large range of organisations who aren't paying anything at all. Now, there are a variety of reasons for that, and this may be because of legitimate, there might be a loophole in there, but do you think the government needs to act more to close some of these loopholes?
LEIGH: We certainly do, and we're doing exactly that. So, closing the debt deduction loophole will add hundreds of millions of dollars to the government bottom line, but also ensure that we've got more fairness. Now for Australia, which derives a relatively large share of our tax revenue from company tax, it's really important to be an early adopter of the 15 per cent minimum floor, the so-called second pillar of the OECD's Two Pillar agreement. We need to be at the forefront of transparency, so we'll be a world leader in country-by-country reporting. And already, we're requiring firms tendering for big government contracts to disclose their country of tax domicile and large public companies, to disclose their subsidiaries. Again making it tougher for firms to stash profits in lower no-tax jurisdictions: a lurk that we know has gotten worse over recent decades.
HAYWOOD: You say the word lurk. So, how much have the government lost in terms of dollars by not having the right foreign tax system?
LEIGH: One estimate suggests that there's some US$400 to US$600 billion being lost globally. For Australia, our measures are, of course, a small fraction of that. But if you look at the revenue that flows from our debt deduction change, that's hundreds of millions of dollars. It's a significant boost to the coffers. And that sits alongside other reforms who were put in place. The change to petroleum resource rent taxation, which was in Jim Chalmers' Budget this year, will finally see west coast gas projects paying Petroleum Resource Rent Tax this decade where otherwise they wouldn't have been due to pay it until next decade.
HAYWOOD: But we are a nation needing tax reform. Let's pivot to the question about inflation, interest rates that we've seen this week. Now, I know you're going to talk about the spending on childcare or energy subsidies, et cetera, that your government has provided in its budgets, and I think it's right that you can claim it hasn't added to inflation. But do you get that if your government doesn't make more hard decisions, then you'll also not be doing anything to decrease inflation either?
LEIGH: Well, our measures aren't just failing to add to inflation, they're actually taking away from inflation. The experts say they've taken about half a percentage point off inflation. And just to take one specific example, the Australian Bureau of Statistics says that childcare costs in the last quarter would have gone up 13 per cent without our measures. With our measures, they went down 6 per cent. And they've also said that our Commonwealth Rent Assistance increase, our energy bill rebates are materially reducing inflation in those areas.
What we're doing with cheaper medicines matters as well. 60-day prescribing means people with a long-term health condition go to the doctor half as often and pay half as much for their medications. The increase in the bulk billing rebate, the biggest increase in Medicare bulk billing in 40 years, provides a tangible benefit to people who are under the pump and having to go to the doctor. All of those things, though, are targeted, Scott, because we don't want to engage in a big unfunded cash splash.
So, that's why we've brought down the first surplus in 15 years in the last budget, a remarkable turnaround for the government budget compared to where it was when we came into office.
HAYWOOD: Andrew, to keep it simple, there's a lot of areas you've just mentioned then, but could you do more?
LEIGH: We will certainly look at doing more in the next budget, but it's important for your listeners to know that a range of these benefits are just flowing out now. The energy bill rebates are showing up in people's bills this month and will continue to do so. The childcare changes are already showing up and providing relief for people with kids in care. That 60-day prescribing measure took effect in September. The bulk billing increase took effect just a few days ago at the start of November. So, we're aware of the pressure that Australians are facing. We're aware that the pressure of this further interest rate rise. Our job isn't to second guess the Reserve Bank. It's not to try and act at cross purposes from it, but it's to provide that responsible government budget relief that we can targeted in such a way that we're not blowing up the inflation and making the Reserve Bank's job harder.
HAYWOOD: Well, you talk about targeted, and I'm going to talk about the one-third of Australians who have a mortgage who technically are doing the heavy lifting, and they feel it's unfair on them because the government may be not doing enough. What do you say to them?
LEIGH: Monetary policy in Australia flows through in a couple of channels. The most visible is through households with a variable rate mortgage. It also has an impact on business borrowing. It also has an impact through the exchange rate. All of that puts pressure on Australian households. What the Reserve Bank would say is that if we don't get on top of inflation, then we have an ongoing cost of living crisis. You want to deal with the cost of living crisis, got to get inflation under control. And when you get inflation under control, then you're able to have that businesses that plan and invest for the future.
Inflation is pernicious in terms of long-term planning. It erodes the value of savings and can be damaging even to income inequality. So, we've got to get inflation under control. And the government's forecasts are for inflation to be coming back towards the Reserve Bank's target band. It's certainly well below that terrible quarterly inflation figure that we had in the former government's last term in office.
HAYWOOD: Andrew, there's a number of solutions out there to the problem. But wouldn't broader solutions, such as lifting the GST, or even extra contributions to saving or superannuation accounts, to spread the burden wider? Like, what is your solution?
LEIGH: Well, our solution is to provide cost of living relief and to work alongside the Reserve Bank. I know people speculate about raising the GST. That's not the government's plan. Frankly, a lot of these plans to raise the GST, Scott, you've probably seen them. There’s a bit of Magic Pudding economics in them, because they plan to spend the revenue on compensating the states and then to fund their favorite federal program, and then to fund those people who are hurt by a raise in the GST. We don't think that's the best avenue to go down for tax reform. Instead, our priority with tax reform is making multinationals pay their fair share.
HAYWOOD: Just finally, Andrew, now, you're a triathlete, you're a long-distance runner. So, let's ask the obvious question to end our little interview on Money News here tonight. How does our economic fitness as a nation stand at this point?
LEIGH: Well, I think we're looking pretty healthy. We've got the unemployment rate sitting below 4 per cent, which is a remarkable figure. I'm into activity. I'm training for the Western Australian Ironman at the moment. So, activity is a good thing. And we know in the labour market, activity is a great thing as well. A job isn't just a source of income, it's also a source of meaning and fulfilment, that sense that you're giving something back to the community. And so, with unemployment below 4 per cent, we’ve got full employment now sustained throughout the government's time in office. We've created over 500,000 jobs, and we're spreading the benefits of work to people who wouldn't get a look in if unemployment was double digits. People with disabilities, people from minority backgrounds, people who just don't look like other job applicants get squeezed out of the labour market when unemployment's too high. Full employment allows those people to have a go. And I think, from an activity standpoint, that's fantastic.
HAYWOOD: Well, Andrew, wish you best on your triathlon in WA. Andrew Leigh, Assistant Minister for Competition Charities and Treasury. Thank you so much for your time on this Thursday night on Money News.
LEIGH: Thanks so much, Scott.