Andrew Leigh

E&OE TRANSCRIPT

TV INTERVIEW

SKY AM AGENDA

TUESDAY, 13 MARCH 2018

SUBJECTS: Dividend imputation reform.

KIERAN GILBERT: Welcome back to the program. With me now the Shadow Assistant Treasurer, Andrew Leigh. Thanks very much for your time. What do you think of the Government's argument that this is a double tax grab, that it's a distortion of the dividend imputation system now where some people will be double taxed and others won't be?

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Kieran it's worth taking a step back just to explain how we got here. In 1987 Paul Keating put in place dividend imputation which ensured that people weren't taxed twice, that individuals got a credit for company taxes previously paid. But then in 2000, a time when there was a structural budget surplus of 1-2 per cent of GDP, John Howard and Peter Costello decided to make that refundable. They put in place a system no other country in the advanced world has in which the tax office would cut you a cheque.

GILBERT: What's wrong with that?

LEIGH: Well it's pretty unsustainable at a time when we have the budget deficit now soaring. It's eight times larger than when it was forecast. Gross debt just crashed through the half a trillion dollar barrier and the Turnbull Government is saying we should be taking money away from pensioners - saying that these payments aren't affordable. I think if we're looking at cheques the Government cuts, we probably should look first to the cheques that it's cutting to people who are not paying tax but instead getting cash refunds for dividend imputations.

GILBERT: Your former boss, Peter Cook in 1999 in the debate with Peter Costello, supported the change; "Labor included this proposal prior to the last election therefore we have no difficulty supporting the proposal because it is our policy, it builds on the reform accomplished by Labor 15 years ago and it improves the current tax system faced by low income investors especially retired Australians", that's what your former boss said.

LEIGH: Kieran, when this was put in place two decades ago it's true that Labor supported it and the budget was strong at the time. The budget is anything but strong and this is a tax concession which then was about half a billion dollars a year and now is ten times that, about $5 billion. And it’s projected to grow to $8 billion a year. 

GILBERT: That will create a distortion where some will basically be taxed twice and others won't be?

LEIGH: This is an unusual system, to have dividend imputation in the first place. It’s particularly unusual to be handing out cash back through these cash refunds. It’s something which was small when it started – as I said, half a billion dollars – but it’s just metastasised since then. It’s the cane toad of tax policy - something which is unique to Australia, seemed good at the time but when we look at it in retrospect simply isn’t sustainable.

GILBERT: But it could hit low income, low net worth individuals – pensioners?

LEIGH: Three quarters of shares are held by people in the top tenth of distribution. Nine out of ten Australian taxpayers won’t be affected by this change-

GILBERT: The one in ten that are, it could affect some low income earners. Do you concede that?

LEIGH: This is a tax concession that going overwhelmingly to the top end, Kieran. I also think more important than the equity argument is the growth argument. This simply isn’t a tax break which is spurring economic growth.

GILBERT: But on the equity argument, the overwhelming to the top end, you could say that on everything – you could say that on property income, you could say that on shares, you could say it on everything because high income people generate the most. But that one out of ten, you could hit some low income earners?

LEIGH: I’ve looked at the numbers, Kieran. It looks very much to be as though this is skewed to the top end. What you’re seeing here is a tax concession which isn’t making Australia grow faster. At a time when the economy’s basically stalled over the last year, when we’ve got challenges of productivity and we’ve got a budget deficit, I just don’t think it’s sustainable to be handing out $5 billion a year in cash-

GILBERT: What do you say to the self-funded retirees who’ve paid taxes all their life and have planned for this arrangement and they feel now that you’re going to dump them? What do you say to them?

LEIGH: This is not raising tax rates. It’s simply saying that we’re not going to be handing back cash in a way in which no other advanced country does. It brings us into line with the way that dividend imputation was originally designed, it puts us in line with other advanced countries, it takes away a tax concession which isn’t adding to growth and it has strong equity implications.

GILBERT: Andrew Leigh thanks for your time. Appreciate it.

LEIGH: Thank you.

ENDS