ABC News Breakfast (1)

13 March 2018



SUBJECT/S: A fairer tax system through dividend imputation reform; minimum wage; Adani; population strategy

MICHAEL ROWLAND: The Federal Opposition is vowing to rip up a Howard-era policy that pays out $5 billion a year in cash refunds to shareholders. Now, when companies pay dividends, they include franking credits to ensure the company's profit is not taxed twice.

VIRGINIA TRIOLI: The Opposition says a re-elected Labor government would abolish that policy, which allows shareholders to convert franking credits into cash, even if they don't pay any tax. Joining us from Brisbane is the Shadow Finance Minister, Jim Chalmers, to explain the proposed policy. Jim Chalmers, good morning and welcome to News Breakfast.

JIM CHALMERS, SHADOW MINISTER FOR FINANCE: Good morning, Virginia. Thank you for having me.

TRIOLI: So why are you targeting this cash refund?

CHALMERS: We're proposing to make the tax system fairer by closing down what is a very generous tax concession for those who use franking credits to get, often, quite big cash refunds from the Tax Office. And the reason we're doing that is because this system has become unsustainable. It's become unaffordable. What used to cost something like $550 million a year, now costs north of $5 billion a year and it will be $8 billion a year before too long. So we've taken what we think is a pretty difficult decision, but a good decision, to close down this tax loophole because the alternative, if we want to fix the Budget and we're serious about fixing the Budget, the alternative is to go down the Government's path which is to jack up income taxes on millions of workers and cut hospitals and schools and pensions and we think this is a better way and a fairer way to go about fixing the Budget.

TRIOLI: This of course most strongly affects those self-funded retirees at a time of historically low interest rates, which makes life tough enough for them to make a living for what they've got. Are you not at all worried about how hard you're hitting them, and potentially losing their political support?

CHALMERS: We don't take any of these sorts of decisions lightly. We've made a number of policy announcements during this term of Opposition. What we're trying to do is make the tax system fairer. There are no easy decisions when you're making economic policy in the interests of the whole country. More than 92 per cent of Australians won't be affected at all by what we're proposing to do today. And so, yes, there will be some people affected. They will generally be at the top of the scale and we think, when you're making decisions about the Budget, that's about priorities and it makes much more sense as a country to close down and crack down on very generous tax concessions at the top end rather than attack middle Australia with other cuts to hospitals and schools or to jack up their income taxes.

TRIOLI: As you say, it certainly affects some - a particular group of particular taxpayers. Let's add up this suite of taxation measures and have a look at them all together. Curbing negative gearing you've proposed, capital gains tax deductions for investors, clamping down on the tax treatment of trusts, boosting the top marginal tax rate, limiting the tax deduction that can be claimed for preparing a tax return - how does that not amount to what the Government will surely call "class warfare"?

CHALMERS: We get that kind of breathless hyperbole from the Government whenever we take the policy initiative and we take the policy initiative frequently.

TRIOLI: Jim Chalmers just to jump up for a second, yes, that's the line they take but you're handing that line to them with your philosophy and ideology, aren't you?

CHALMERS: I'm not actually too fussed about the political line that the Government takes from day to day. They've largely vacated the space on serious policy for the future of the country. All they've got is this $65 billion tax hand-out to big multinational corporations, most of which will be sprayed overseas in the form of executive bonuses and share buybacks and dividends. So they can take care of themselves. They will make a political argument today and we expect that, we anticipate that. But the problem we've got, Virginia, is we've got record and growing debt in this country. The deficit for this year is eight times bigger than Joe Hockey predicted in 2014. Net debt under this Government has more than doubled since they came to office. And gross debt has crashed through half-a-trillion dollars for the first time in Australian history. So we've got to make difficult decisions and we've got to make choices, and the Government's choice is to give that hand-out to multinationals and to cut hospitals and schools and jack up income taxes. And we've made a series of different choices and we're prepared to put them out well in advance of the election, as we're doing today, so people can judge us on them and try and work out which party has a fairer way of going about fixing the Budget, which party has a better way of changing the tax system so that we don't have these unsustainable and unaffordable tax concessions, which are blowing big holes in the budget at the expense of everybody else.

TRIOLI: I want to quickly get to some questions if I can before we let you go, Jim Chalmers. Does Labor support the ACTU's push they've announced for a $50-a-week increase to the minimum wage?

CHALMERS: We support an increase to the minimum wage. The minimum wage has ceased to be a living wage in this country.

TRIOLI: Does $50 seem reasonable?

CHALMERS: We haven't nominated a figure. We don't generally make a submission in conjunction with the ACTU. They've got a series of very good arguments, as they generally do, about wage justice in this country. But we haven’t nominated a figure the way that the ACTU does. We're participating in that Fair Work Commission process at the moment and getting our submission in order.

TRIOLI: So you will make a submission in relation to this?

CHALMERS: Absolutely. We will make a submission and we'll make that submission public. We'll be arguing for a rise in the minimum wage. We don't work in conjunction with the ACTU in nominating that same specific figure they have.

TRIOLI: OK. And re Adani, are you concerned that Labor's position on the Adani mine in your home state could hurt the party's chances in the next election?

CHALMERS: No, I'm not, Virginia. I think we have a well-considered position which is that the Adani mine has to stack up commercially and environmentally. They haven't been able to raise the necessary funds to date and Bill has expressed some scepticism that they will. But our position has been the same - that it needs to stack up and if and when we come to Government, if it's up and running, if they are able to get it up and running, we're not in the business of ripping up contracts or creating sovereign risk. That's our position. 

TRIOLI: And just a quick last question - does Labor agree with many demographers, and a big discussion that we're having here on the ABC all this week,  that it's time for Australia to have a national population strategy and, if so, what would the focus be in your mind?

CHALMERS: Yes, we need to make sure that as the Australian population grows that we've got the infrastructure to keep up with that growth. That's the most important part of having a population strategy. Population growth is crucial to growing the economy but we need to make sure that's sustainable as well.

TRIOLI: I'll leave it there. Jim Chalmers, thanks for your time.


CHALMERS: Thank you, Virginia.