8 April 2015
Transcript - #2015042, 2015

Interview with Rafael Epstein, 774 ABC Melbourne

SUBJECTS: Pension, public figure salaries, tax minimisation

RAFAEL EPSTEIN:

Joining me in the Melbourne studio for the first time in a little while is Bruce Billson; he is the Minister for Small Business in Tony Abbott’s Government.  He is the Liberal Party Member for the seat of Dunkley.  Bruce welcome.

MINISTER BILLSON:

Great to be with you Raf and your listeners.

RAFAEL EPSTEIN:

And Mark Dreyfus joins us, he is the Shadow Attorney-General, he is part of Bill Shorten’s Shadow Cabinet, a senior member of the Opposition, he is the Labor Member for the seat of Isaacs.

MARK DREYFUS:

Good to be with you Raf.  Hello Bruce.

MINISTER BILLSON:

Hello Mark.

RAFAEL EPSTEIN:

Look let’s start with news that was in The Australian this morning.  There’s a lot of people speculating a lot of different things about how you’ll plug holes in the Budget Minister.  The idea of tightening the pension assets test, there is lots of complicated ways that we assess whether or not people get a part pension… Is that a good idea in the Government’s view?

MINISTER BILLSON:

We think we need to make sure that the pension and the income support system is sustainable. 

Now at least there is an acknowledgement that doing nothing is not really an option.  We had some ideas in the Budget, they have not flown.

RAFAEL EPSTEIN:

That was about indexation?

MINISTER BILLSON:

Yes that was about changing the rate of pension increase so there would still be twice annual increases in pensions, but linked to movements in inflation and consumer price index. 

That has not got off the ground, the task still remains and many groups have brought forward ideas, including ACOSS, about how to go about a different approach.

RAFAEL EPSTEIN:

It’s not just a different idea is it, because it is deliberately targeting people who have already got a lot; if you change the indexation that affects everyone.  This sort of asset test, you’re talking about people that have already got a house and they have already got about half a million dollars in other assets, so it is a very different idea isn’t it?

MINISTER BILLSON:

Yes, similar goal.  The objective I think is one that is generally widely appreciated: That if we want to make sure that the safety net is there and it is affordable and we have got an ageing population and fewer people in the workforce. For those that are not, we need to make sure we can fund that into the future. 

ACOSS brought forward an idea that is called the ‘taper rate’ – sorry for the jargon – but for each $1,000 of assets above, beyond your home, that should be producing an income would have an impact on reducing the amount of the part-pension.  ACOSS were proposing that that taper rate be adjusted and that was a proposition.

RAFAEL EPSTEIN:

Is it going to happen?

MINISTER BILLSON:

Well it is a proposition, we are talking with ACOSS.  We welcome input, no one can say we are not without ambition and a clear sense of what is needed for the county. 

A few different views, including from Mark about what the action plan should be, but at least there seems to be a general acknowledgement that getting our budget on a sustainable footing so we can be certain that income support is able to be afforded and is reliable and dependable into the future- that is something worth doing and ideas are coming forward.

RAFAEL EPSTEIN:

Is it a good idea Mark Dreyfus?

MARK DREYFUS:

This is the fifth thought bubble from Scott Morrison in a month.  This is from a Government that promised no change to pensions before the election and I was very heartened to hear Bruce say a moment ago that the cut to indexation of pensions is an idea that hasn’t got off the ground.

MINISTER BILLSON:

I think change was the word I used.

MARK DREYFUS:

Okay, change, well it is refreshing to hear…

RAFAEL EPSTEIN:

It is a cut.

MARK DREYFUS:

… it’s a cut but it is refreshing to hear Bruce accepting that this was a change to pensions, something Tony Abbott has had trouble getting his head around it seems.  I want to hear Tony Abbott unreservedly rule out that change to pension indexation.  That cut that was going to see a reduction over time to the pension.

RAFAEL EPSTEIN:

I think the Treasurer has argued actually that it’s not a guaranteed cut, is it?  The two figures that you use to index the pension actually, over recent times, the change proposed by the Government actually would have left pensioners better off, not worse off. 

MARK DREYFUS:

Let’s get down to tin tax.  The system introduced by Labor is that the higher of three different indexes – male average weekly earnings, or a pension basket index, or CPI – was to be the one that was used.

RAFAEL EPSTEIN:

Whichever was the highest?

MARK DREYFUS:

Whichever was the highest.  As it happens, the CPI has produced in the most recent figures, the highest amount so it’s the one that’s being used, but over time it’s absolutely clear that it would have led to a severe reduction.

RAFAEL EPSTEIN:

But let’s just get out of the detail - Is it a good idea, the assets test, tightening the assets test effectively for pensioners who are wealthy by comparison – is that a good idea?

MARK DREYFUS:

I want to see the detail of all of these ideas that Scott Morrison has been floating.  We can’t govern by floating ideas, we’ve got to have detail and if we’re going to talk about sustainability of pensions, let’s talk about the superannuation system, let’s talk about why this Government decided to freeze the increase in the superannuation guarantee because over time that’s what’s going to produce sustainability.  Let’s talk about why…

RAFAEL EPSTEIN:

That’s having the employers pay more into super?

MARK DREYFUS:

Yes, that’s right, let’s talk about why this Government decided to scrap the low income superannuation supplement.  Those two measures, which Labor had in place, which would have seen over time the superannuation guarantee rise to 12 per cent and contributions to the lowest paid workers’ superannuation – we’ve calculated – would be worth $1 trillion over the term of the Intergenerational Report. 

RAFAEL EPSTEIN:

Forty years or something?

MARK DREYFUS:

Forty years.  That is what you need to do to deliver sustainability of the entire system.  We don’t accept that the pension is unsustainable, at all.  So I’ve got a problem about the way the Government has approached this whole policy area.  I’m heartened to hear Bruce accepting that what is before the Parliament is a change to pensions.  Tony Abbott needs to drop it.

RAFAEL EPSTEIN:

You have got a fairness problem.  This is trying to address the fairness problem isn’t it Bruce Billson?

MINISTER BILLSON:

Well we have many challenges.

RAFAEL EPSTEIN:

I’m talking about the political challenge though.

MINISTER BILLSON:

One is trying to make sure the Budget is sustainable into the future. There is a task to be dealt with. We had a proposal.    It doesn’t seem to be thrilling the Senate.  That doesn’t mean the objective needs to go away.

RAFAEL EPSTEIN:

Is it still official policy?

MINISTER BILLSON:

Well it is. And we are discussing that with the Senate.

It is a bit disingenuous of Mark to have a crack at well intended thoughtful, community organisations bringing forward their ideas.

No one could accuse Labor of putting an idea on the table. There is no suggestion of that.

But others are. And are turning their mind to what is the national interest in making sure that the income support system that we must have, that needs to be sustainable and robust and resilient, can be funded into the future.

And that is the discussion that is going on. 

RAFAEL EPSTEIN:

It is a drastic change of rhetoric isn’t it?  When Tony Abbott was in Opposition and attacking, I think it was changes around the health insurance levy and family tax benefits. It was all about class welfare.

That people getting some hand out from the Government it was tax justice for families, not handouts. Yet you are proposing precisely the same thing you oppose.

MINISTER BILLSON:

I’m not quite sure- your listeners can’t quite pick the bewildered look on my face… Your segway is spectacular and heroic, I’m not quite sure those are there.  The issue…..

RAFAEL EPSTEIN:

Well you opposed means testing on health insurance and family tax benefits….

MINISTER BILLSON:

Yes because there is a net benefit. Let’s talk about it.

It is an income support system. It is a safety net. An income support system. You are getting it completely confused with a private health incentive where individuals choose to put their own resources into a health system that needs both a strong public and private system.  

Totally different concepts and if we are having an income support system, what is right and proper is that it targets those that are most in need.

And also we need to make sure it is able to be funded and it is secure, and people can count on it in the future. 

RAFAEL EPSTEIN:

You can address Mark Dreyfus’s point that the pension is entirely sustainable and isn’t in danger according to him.

MINISTER BILLSON:

Well I don’t think we should spend a lot of time on that comment from Mark, because he must be the only person who thinks there isn’t a task to be dealt with here. 

Community organisations are stepping up with ideas, we are engaging constructively and collaboratively, not only with the cross bench and the Senators but people of goodwill - who recognise that in the seventies we had seven people in the workforce for every one retiree. Today it is five.   And by the middle of the century it will be 2.7.

RAFAEL EPSTEIN:

Two and a half.

MINISTER BILLSON:

2.7 people in the workforce for every retiree.  Now what we need is to have a system that is sustainable, it’s durable, it’s fair, it’s affordable – that is the work that we are focused on.

Mark is quite right, about superannuation being part of that – but that is why we are making sure it is part of the conversation as well.

So I am not quite sure what Mark’s point is. There is a task to be pursued here, and we are engaging constructively in that task.

RAFAEL EPSTEIN:

I’ll get to callers in a moment, but a quick response?

MARK DREYFUS:

Well you need to make superannuation more robust. I haven’t heard an explanation from anyone in this Liberal Government, not from Bruce, as to why the low income superannuation supplement was dropped.

I haven’t heard an explanation as to why the superannuation guarantee increase has been frozen.

Over time, they are the things that we need to do. By making superannuation better than it is now. That is the way to deliver the sustainability of the whole system. But this suggestion, repeated from the Liberals all the time that the age pension is unsustainable is plain wrong. It is completely sustainable.

MINISTER BILLSON:

See when Labor…

RAFAEL EPSTEIN:

Let me get to a few calls. I am sure you will be able to round off some of Mark Dreyfus’s points after we have heard from Greg who has called from Glenroy.   Hi Greg. Greg are you there – Hello?

I’ll tell you what, let’s try Terry in Nagambie.

Terry are you there?

CALLER TERRY:

Yes I am. Listen, I haven’t heard either side of politics, I am 72 – I am a pensioner, I never went on that until I was 70.   I haven’t heard one politician say, that if you accept what we are trying to put through to save my pension, we will give back to the Australian people some of our ‘gilt edge’.

I mean I read the other day that when Mr Hockey goes, he will get $200,000 or something a year. Well that will take me ten years on my pension to reach that. And that is not my fault. I mean they vote for themselves this wonderful gold watch retirement where they just keep dipping into our money, and then they say ‘you poor people at the bottom of the chain give up your money’.

RAFAEL EPSTEIN:

So you want them to give up a little if they are asking you to give up a little essentially.

CALLER TERRY:

Well I think they should give up a lot. They should match a pensioner.

RAFAEL EPSTEIN:

Ok.

MARK DREYFUS: 

Terry it is Mark Dreyfus here.  

Terry hangs up.

For other listeners, Bruce and I represent a sharp divide in the Australian Parliament. Bruce being elected before 2004, has a non-contributory pension.  I was elected in 2007 – I don’t.   The only thing I and all my colleagues elected after 2004 receive is a superannuation contribution that is tied to our salaries.

RAFAEL EPSTEIN:

But you do get access to that super earlier than other people, at 55 is that right?

MARK DREYFUS:

No it goes into superannuation. 

RAFAEL EPSTEIN:

So you don’t get access to it any earlier?

MARK DREYFUS:

No. It is dealt with the same way. So there is quite a sharp divide.  And it is a regret to me. I understood the policy behind eliminating the non-contributory pension for politicians. The only public servants who still receive it….

RAFAEL EPSTEIN:

That’s a pension you don’t contribute to.

MINISTER BILLSON:

Well that is not right. Mark is pointing to a historical arrangement, I don’t know anyone who goes into public life thinking about their retirement arrangements…

RAFAEL EPSTEIN:

I want to get to Terry’s point. Let’s not get too stuck up on how much money Bruce Billson has 15 years from now.

MINISTER BILLSON:

Ha, it might reflect value for money.

RAFAEL EPSTEIN:

The rhetorical point, which I think a lot of people express whenever we talk about these things. Should it be part of the conversation?

Both of you have got ideas about super and pensions.  Is it necessary for you to say ‘well listen we are asking you to have a bit less, we are going to have a bit less as well as politicians’. Is that something that is important to address Mark?

MARK DREYFUS:

Oh I don’t think that you need to address public policy questions by looking at the pay of members of parliament or ministers.

I think there is a quite separate question that arises; it’s the same question as for judges.

I am firmly of the view, I know this is not particularly popular, that Members of Parliament and ministers should be adequately paid, even well paid.

It is important that there be not low pay for MPs, but adequate pay, and I’m not suggesting they be at the top of the income bracket either. Same as for judges. There are issues there about removing incentives for corruption. Issues there about making sure that Members of Parliament, MPs who serve the Australian community are adequately paid.  I’d say the same for public servants.

RAFAEL EPSTEIN:

Bruce do you need to address that point and say ‘we are giving up a bit when we are asking you to give up a bit’?

MINISTER BILLSON:

Well I think that is why you had that high income surcharge that was part of the budget repair.

RAFAEL EPSTEIN:

That is temporary though.

MINISTER BILLSON:

Well you asked me the question and I am just giving you the answer.

And that was part of it. There was also an issue around the old superannuation surcharge which is still hanging around on any.

So it depends how you want to slice and dice those things.

I know there will be many in your listening audience that think a dollar paid to an elected representative as income is a dollar too much.

I understand that. You will never win that argument. And we are in fact the worst persons to be making that argument.

So what we need to do is get the systems right. Our income is treated no differently from anyone else in any other vocation that has the same income.

Mark has touched on some historical arrangements relating to one part of it.  So we can have that conversation and I think….

RAFAEL EPSTEIN:

Let me try one other general point. The three of us, earn a lot more than most of the people listening, that is just basic fact. Is that a problem?

That the people who are conducting the conversation be they in whatever political party or the media have a lot more money, a lot more disposable income, a lot more opportunities than most of the people who are affected by these conversations.

Is that a problem?

MARK DREYFUS:

And that is one of the great challenges of politics.  Is for those who are elected representatives to put themselves in the shoes of others.  To understand what the lives of all Australians are like.

To feel what it might be like to live on the poverty line or below the poverty line.  We need to have policies that pick up and care for all Australians. I’d like to think I have come from a party which has always understood that issue.

That is why – to go back to the topic at hand, we are going to fight against cuts to the pension. We don’t think there should be cuts to the pension. We have been incredibly clear about that. I’m going to go on being clear about it.

But yes, of course it’s a challenge for someone that is earning a lot more than average, to really understand what it might be like. But I’m up for that challenge. I try to make myself conscious of it and I’m sure Bruce does too. 

MINISTER BILLSON:

Yes that is right. We are well renumerated now for the work that we do. It’s not a point to reminisce on our backgrounds and where we have come from. And where we mix and mingle. That is why political life means engagement with the community.   A whole range of issues to be taken into account. That is why voices like ACOSS’s. I mean we were talking earlier about their propositions being respectfully taken into account and embraced, and collaboration around them.

I think that is all part of the process. It is also worth remembering that we should be proud of something we have in our country.

We have one of the most redistribute tax and transfer systems in the world. There are very few, in fact I can’t think of one, where public support is so overwhelmingly focused on those most in need and that levels of income tax and the revenue that Government spend is so incredibly skewed to those that are higher income earners.…. Now we can always look for opportunities to improve that but let’s not turn our back on just how supportive those systems currently are.

RAFAEL EPSTEIN:

Look I want to give you some news and traffic and I will get to more of your calls to both Bruce and Mark in just a moment.

News and traffic report 

RAFAEL EPSTEIN:

Mark Dreyfus is with me from Bill Shorten’s Opposition. Bruce Billson is part of the Prime Minister’s Cabinet.

I want to get one more quick question in and I do want to get on to the interesting corporate tax hearings in Sydney.

But first Greg has called from Glenroy.

Greg go for it.

CALLER GREG:

Hello Rafael, Bruce and Mark how are you?

MINISTER BILLSON:

Good thank you Greg.

MARK DREYFUS:

Hello Greg.

CALLER GREG:

I have got a question on tapering, or something similar to tapering. At the moment the Australian Valuation Office was closed about 12 months ago and they stopped valuing about 11 months ago.

I want to know who is valuing the pensioners’ investment properties now that that is closed. I understand a few jobs are being done by private companies but the majority aren’t.

MINISTER BILLSON:

Yes I think that is right Greg, I think it has been tendered out. Because there is quite an experience in the property sector the same sort of valuation systems that banks and other lenders use to make sure they are not overly lending for a property that is concerned with that transaction.

So I think that same machinery operates. Beyond that in areas like shares they have a tradeable value and that is not difficult to identify. And then in terms of bank deposits and other things of that kind….

RAFAEL EPSTEIN:

The rules haven’t changed but the people doing it have?

MINISTER BILLSON:

That is right because I mean there is a whole capacity out there that can be done efficiently. So that is the machinery that is in place now.

RAFAEL EPSTEIN:

Can I ask both of you: Google, Microsoft, Apple, News Corp are the people who I saw – there may have been others at this Senate committee hearing in Sydney.

A few points on whether or not they are actually paying enough tax. I will start with you Bruce Billson. Should we know the companies who are minimising their tax? They aren’t doing anything illegal, but they are paying a lot less than the headline corporate tax rate. The Labor head of the committee says we should know the names of those companies that the ATO is interested in.

Why don’t we?

Joe Hockey backed the Tax Commissioner. Why don’t we know the names of those companies?

MINISTER BILLSON:

Confidentiality is an important integrity measure and for people to be confident with their interactions with the tax office. They don’t want to disclose material and information and have someone blab it around the countryside when they have done nothing wrong.

That was a key tenant of Bill Shorten’s work when he was Assistant Treasurer.  Putting in place the current arrangements and saying that confidentiality was important for disclosure and the interaction that happens between the tax office. 

RAFAEL EPSTEIN:

But wouldn’t that actually boost confidence? If we knew that the tax office was saying ‘listen, they are not doing anything illegal but we are having a really close look at them’.  Doesn’t that actually boost confidence? Because many people, I mean they are paying less than 10 cents in the dollar.

MINISTER BILLSON:

Well what happens now is the tax office has an enforcement regime. It often is articulated in the media. So you know what types of businesses or types of taxes.

RAFAEL EPSTEIN:

But you don’t know the names?

MINISTER BILLSON:

No you don’t know the names. Because you don’t want to prejudge those issues.

Secondly we have got tax officials imbedded in many of these companies to make sure they are seeing first-hand what is going on and making sure there is compliance with the law and I think that is quite useful.

And thirdly this isn’t just an issue for our country. And that is why Australia through Joe Hockey led a lot of the work at the G20 about tax minimisation, profit shifting, base erosion.  And we are optimistic that we are getting there, but it needs to be done collaborative way with other jurisdictions.

And we need to make sure we are not hanging out to dry businesses or individuals that are doing the right thing in accordance with the law. If there are problems with the law, change the law.  But don’t go out and trash talk someone just because they are doing what the law enables them to do.

RAFAEL EPSTEIN:

Mark Dreyfus is it official Labor policy to in some way name and shame corporates that aren’t paying enough?

MARK DREYFUS:

The law has been pretty clear on this matter for some time. It is a fundamental proposition in income tax legislation that individual tax confidential information doesn’t get revealed.

It is actually an important principle because we have a largely involuntary disclosure system in our tax arrangements.

We need people to be sure that when they disclose and give information to the tax office it is not going to be disclosed.

RAFAEL EPSTEIN:

So Sam Dastyari who is Chairing the Senate committee he is not expressing ALP policy when he says he wants to know the names of these companies?

MARK DREYFUS:

He is enquiring there, by having the individual companies, who, all of them, clearly fall within the category of the very large corporations about which there has been a general disclosure by the tax office and a general disclosure by Treasury as to that group.

RAFAEL EPSTEIN:

Although we now know the three tech companies are being audited. They said that today.

MARK DREYFUS:

Many of them already make disclosure, because all of them are multinational corporations which have got filing obligations in countries throughout the world. And they do file, they do make reports and it is possible to learn a great deal about their tax arrangements from their public reports.

RAFAEL EPSTEIN:

So let me ask you both this quick question.  Let’s focus on the tech companies because it is tougher to talk about Rio and BHP.

Apple, Google and Microsoft they are all in general paying around 10 cents in the dollar or less.  It is all entirely legal.

It is unethical Mark Dreyfus, to pay that little?

MARK DREYFUS:

We want to see tax paid on income earning activities that occur here in Australia.

RAFAEL EPSTEIN:

Is what they are doing now unethical?

MARK DREYFUS:

It is a fundamental proposition. And they would say nothing unethical because we are complying with the law.

So the question to be determined is do we need to change the law – that may well require the co-operation of a number of other countries. I was disappointed to see this government on coming to office scrap a package of measures that were in our 2013 budget, to collect more tax from multi-nationals.

We put forward another package costed by the independent budget office recently as possible raising $1.9 billion. I want to see the Government talking more about that.

RAFAEL EPSTEIN:

Bruce, unethical behaviour by the big tech companies or not?

MINISTER BILLSON:

Behaviour that is permitted under the law and if the law’s wrong change it. We think where income is earned is where tax should be paid…

RAFAEL EPSTEIN:

Well they’re not breaking the law so it’s all ok then?

MINISTER BILLSON:

Their obligation is to uphold the law and to pay their tax liabilities in accordance with the law.

We’ve got quite a big programme in place that we think will bring in about billion dollars of extra revenue from these multinational companies.

The other thing too is we recently put to the Parliament an idea that some of the tax concessions around R&D tax offsets shouldn’t be available to the 20 largest businesses in the country.

That was a $1 billion savings measure and Labor voted against it.

So we thought, pay your taxes but if there is going to be extra incentives we didn’t think the biggest 20 companies actually needed more encouragement.

RAFAEL EPSTEIN:

Maybe there will be some bipartisanship in that committee. I need to get to the weather briefly. Bruce Billson, Mark Dreyfus thanks for your time.

MARK DREYFUS:

Good to be with you.

MINISTER BILLSON:

Thanks to you and your listeners Raf.