KELLY: Finance Minister Penny Wong has carriage of the mining tax in the Senate. Minister, welcome back to Breakfast.
WONG: Good morning Fran, good to be with you.
KELLY: Minister, the company tax rate is funded by the mining tax, but its not part of the legislation for the MRRT. Why not?
WONG: We put into the Parliament the Minerals Resources Rent Tax, a very complex piece of legislation, legislation which has been the subject, as you know, of a very extensive period of consultation. In terms of what we are going to be spending the minerals tax on, weve made that very clear publicly. We did, however, as you know, set up a Business Tax Working Group that came out of the Tax Forum. And as the Treasurer has made clear, its our intention to ensure that we look at their recommendations in the context of bringing forward the company tax reforms which are part of the MRRT.
KELLY: But time is tight, the tax for the 2.7 million small businesses, the tax cuts due to come in on the 1^st of July, if its not legislated in this fortnight, youve only got 3 weeks at the most to get this through the Parliament before its due to start. How will you manage that? How can you guarantee that?
WONG: What were saying to the Parliament is two things. One, pass the minerals tax. Its already passed the lower house. We need to pass it through the Senate. This is a very important reform, Fran, this is about spreading the benefits of the boom to all Australians; its about making sure Australians get more superannuation, tax breaks for low-income Australians into their superannuation, as well as the tax benefits to small business. These are the reforms which are up for grabs, and thats why the minerals tax needs to be passed in this fortnight.
KELLY: Sure, but its all very well to say were saying to the Senate pass the minerals tax because were spreading the benefits of the boom, part of the spread is to that tax cut to small business, and youre asking the Senators to pass it, and take your word for it that that tax cut will come. Will you give an ironclad guarantee to small business and to the Greens and the Senate, that the 1% tax cut will be legislated in time for the 1^st of July?
WONG: The Government is absolutely committed to reducing the company tax rate, particularly for small business. We have said that. And
KELLY: That 1% tax cut will be legislated in time for the 1^st of July?
WONG: In terms of timing, ultimately thats a matter for the Parliament. We
KELLY: Well you cant pass it until you produce it.
WONG: We dont control, as you know, the Parliament. We do rely on the independents and the Greens, just as we did when the minerals tax passed the House of Representatives, the Greens and the crossbenchers supported it. And we look forward to the Senate doing the same, because this is a very important policy and a very good policy.
I accept therell be continued discussions between the Greens and the Government about various matters, but I dont think its a fair thing to say to Australians were going to stand in the way of taxing wealthy miners, were going to stand in the way of making sure we get that revenue stream for the benefit of small business and for the benefit of Australian workers.
KELLY: Im just trying to get some certainty for all the small business operators listening here. The Senate cant pass the tax cut Bill until its put into the Parliament. Im wondering, Im asking you again, will you give an ironclad guarantee to small business, and to the Senate and the Greens, that this 1% tax cut will be introduced and legislated in time for the 1st of July?
WONG: The Government will obviously bring forward its company tax cut legislation.
KELLY: When?
WONG: We will do that after we have considered the full package, including the Business Tax Working Group, as Ive discussed. But the Government has already made very clear our commitment to the small business tax cut. We want to give small business a tax cut.
The only people who dont want to give small business a tax cut are Tony Abbott and Joe Hockey, who would rather see higher taxes being paid by small business, and lower taxes being paid by wealthy miners. Its a pretty wrongheaded approach, Fran.
KELLY: So thats a guarantee of the 1% tax cut for small business, and also a guarantee of the 1% tax cut slated for July 1^st next year for bigger business?
WONG: Im not going to play word games here. The Government has set out its package. Our package includes a 1% reduction in the company tax rate, with a head start for small business. It also includes things like the Instant Asset Write Off, so other tax breaks for small business. That is our package. But we first want to get the minerals tax through. And what were saying to the Senate is, this is a good policy. This is a policy that is about getting miners to pay their fair share, and spreading the benefits of their profits to Australians working Australians and small business. This is a good reform. It should be supported.
KELLY: You mentioned the Business Tax Working Group, and its due to deliver its report later this month, I think. Some measures reportedly being considered by the Working Group include a crackdown on tax deductions claimed by multinationals, abolishing accelerated depreciation, and winding back exploration deductions from miners. Can you rule any of those in or out for us?
WONG: Im not going to do that, Fran. This is a bit like budget speculation, isnt it? People put propositions up, and the Governments asked to rule them in or our immediately. We did ask, as a result of the Tax Forum, for the Business Tax Working Group to look at a number of issues. In particular, we wanted to look at, are there ways in which we can assure that the tax system better reflects the needs of an economy that is going through a lot of change.
We know that our economy is undergoing a profound amount of transition as a result of whats occurring globally. And we did ask the tax group to look at what tax measures might facilitate that, might help business through this. But Im not going to pre-empt their recommendations, nor the governments response.
KELLY: The mining tax will be debated in the parliament this week. The Greens also say they want the MRRT to be extended to include gold and uranium. And I think weve discussed this before on the program, the Greens point out that more than 80% of gold mined is Australia is done so by foreign-owned companies which reap the profits of current record gold prices. If the Governments committed, and the whole point of the mining tax is to spread the benefits, why wouldnt you get as many benefits as possible and tax gold as well?
WONG: Well we dont think its practical
KELLY: Why?
WONG: Well the reality is gold and uranium are often found in mines where a number of other minerals are also mined. And weve made very clear that we think the current design of the minerals tax is a sensible one. I appreciate the Greens always want to extend it, but that is the policy the Government has made very clear publicly. Its a policy I think theres a significant amount of public support for. And its a policy well be putting to the Parliament this week.
KELLY: Its twenty to 8 on Breakfast, our guest this morning is Finance Minister Penny Wong. Minster, WA, New South Wales, the Northern Territory, and Tasmania have all so far indicated they will plan to increase their state or territory royalties on iron ore or coal mining. Under the term of deals with the miners and the mining tax the Commonwealth will fund those royalty hikes. Is that factored into the $10.6 billion that the mining tax is slated to rise?
WONG: Well, look, future royalties thats obviously something that will have to be dealt with. But I would say very clearly, this is a position that the Opposition has been putting, theyve been talking about the revenue and that its not enough. I always think its interesting, the tax they want to oppose theyre now claiming wont help people. But what I would say is this: we have factored the policy position of the Government into the budget bottom line. There are always swings and roundabouts when you look at tax revenue, when you look at a policy like this, but the important thing is that we have factored that in. And, as you know, the budget is slated to return to surplus in 2012-13.
KELLY: I just need to clarify this though, because it is a clear element of this tax now that the Government the Commonwealth will have to refund the royalty hikes which the state governments are increasing, as weve seen in their budgets over the last six months. Just trying to be clear whether repaying those royalties is coming out of the $10.6 billion that Treasurys estimated the tax will raise.
WONG: Weve already factored in royalties that were announced at a particular date Fran, but you wouldnt expect us, for example
KELLY: But these royalties have come since then since then
WONG: Well, hang on. You wouldnt expect us to factor in royalties which havent been announced and which havent been quantified. Such as those which were spoken about in NSW, where the quantum is not clarified. I think thats not a reasonable position. Weve set out our policy very clearly, weve set out how we intend to handle royalties and weve set out how we want to spend the revenue.
Im not going to get drawn into what ifs around various state governments making a range of assertions. Whats important here is that we have a very significant mining boom. We have over $450 billion dollars of investment in the resources sector. We need to ensure that there is sufficient sharing of the benefits of that boom across Australians and this is the policy that does that.
KELLY: Minister, on another issue, representatives from the solar hot water industry will be in Canberra today to lobby for more financial support for the Government close-down with little notice of the subsidies scheme. The Oppositions Greg Hunt says hell introduce a Private Members Bill today to restore the solar hot water rebate. Can you say as Finance Minister, any money left over from the hot water scheme, will that be used to help the industry adjust?
WONG: We have already factored in the closure of the scheme into the budget and I think Mr Dreyfus has spoken about that. But can I just make this comment about Greg Hunt: I think Greg Hunt should be more focused on the CSIRO report which has been released today, which shows, yet again, how unworkable his climate policy is. I mean, Tony Abbotts climate policy will cost tax payers more and will cost the Australian economy more. And what we have today is a CSIRO report which makes clear, yet again, that Mr Hunts policy is simply not going to be sustainable and wont achieve what he says it will.
KELLY: Well, theres competing reports in The Australian today, theres also a report or research commissioned by the Minerals Council that has been modelled by the Centre for International Economics, which shows that the impact of the emissions scheme, the Governments carbon emissions scheme, will be double the hit to GDP than the Treasury modelling suggests, because of the high fixed price and the lower EU trading price for carbon. Do you concede that?
WONG: I stand by the Treasury modelling. We had the largest modelling exercise in Australias history. We then revised it. What that shows is very simple: we can grow our economy, we can grow jobs, we can grow our incomes, and have a carbon price. And a carbon price will be the signal to investors to invest in the clean energy economy that provides jobs tomorrow, so
KELLY: Isnt the problem that when Treasury did the modelling, the European carbon price was around $17 a tonne, and its now under $10?
WONG: You would anticipate that the European carbon price would respond to the current financial position in Europe. But lets remember, were going through a period first of a fixed price, and then there is a floating price. We think this is the right architecture for the times, and certainly we think a carbon price just as John Howard thought is a much more economically efficient, less-cost way of adjusting to a clean energy future than the bureaucratic, taxpayer-funded model that Tony Abbotts putting forward.
KELLY: Penny Wong, thank you very much for joining us on Breakfast.
WONG: Good to be with you Fran.
ENDS