Fiery Senate clash erupts after minister dodges questions on tax

[0:00] Mr Secretary, do the tax changes in this budget increase productivity? [0:05] MS EASTMANN So, Senator, I would come at that in a number of different ways. [0:16] There are a series of tax changes in this budget which are changes to the business tax [0:22] system. [0:25] Those are the reforms to the way in which losses are treated by businesses, changes [0:32] to the R&D tax incentive, making the instant asset write-off permanent and changes to things [0:46] like thresholds for venture capital investment. [0:49] All of those are targeted measures that I think are widely regarded as measures that will incentivise [1:01] productive and innovative activity in the economy. [1:06] That's the objective of all those reforms. [1:08] Mr Secretary, I'm not sure I've got an answer, but let's be more specific then. [1:13] Does the changes to negative gearing, capital gains tax and trusts, do any of those tax changes [1:22] increase productivity? [1:23] MS EASTMANN So, I think what we've outlined in the budget paper [1:27] for is that, in our assessment, moving from a capital gains tax system that has a 50% discount [1:39] to a capital gains tax system that has a discount which is based on inflation delivers a more [1:47] accurate adjustment for inflation across different assets and different time periods and different [1:54] individuals. [1:56] And that, we would expect, would reduce the extent to which tax settings are affecting [2:04] the way in which individuals are making decisions to allocate their savings to different investment opportunities. [2:13] Mr Secretary, I'm still not sure if I've got an answer. [2:14] Have you actually modelled this? [2:15] Have you got something quantitative that you've calculated to estimate the impact of those tax [2:23] changes on capital gains and negative gearing and trusts on productivity? [2:26] MS EASTMANN So, Senator, we have assessed that there are, and we have drawn on the cross-country [2:38] analysis that has been conducted by the OECD, which suggests, Senator, that there is really [2:46] mixed empirical evidence about whether changes to tax arrangements, such as capital gains tax [2:53] arrangements. [2:54] Mr Secretary, can I just get a clue? [2:55] We've only got five minutes to go. [2:56] I've got a call late, but have you modelled it? [2:57] MS EASTMANN So, our assessment is that, taken together, the reforms announced in the Budget [3:07] should help Australia move towards the long-run productivity assumptions that we have in the [3:15] medium-term forecasts. [3:16] Mr Secretary, I'm just struggling a little. [3:19] MS EASTMANN So, Secretary, have you modelled, have you estimated the impact of these tax [3:25] changes, the big ones, capital gains, negative gearing, trusts, on productivity? [3:29] MS EASTMANN So, we have assessed that these would move the system towards an allocation of capital, [3:36] which is more consistent with where economic returns would suggest that investments should [3:42] take place. [3:43] MS EASTMANN So, it doesn't give me a lot of confidence. [3:44] I know in your speech, Secretary, you quoted two previous reforms, big reforms, the mid-80s [3:50] introduction of capital gains and other things, and GST. [3:53] In both of those changes, you referenced the fact that those changes reduced, materially [4:00] reduced personal income tax rates. [4:02] Do these tax changes reduce, materially reduced personal income tax rates for Australians? [4:07] MS EASTMANN So, these tax changes reduce personal income taxes for most Australians in relation to the [4:15] working Australian tax offset? [4:16] MS EASTMANN Yes, it's not material. [4:17] MS EASTMANN Well, you're about to vote against it, from what I understand, Senator Canavan. [4:21] MS EASTMANN It's not material. [4:22] MS EASTMANN So, it's a bit rich coming in. [4:23] MS EASTMANN Compared to the GST and Paul Keating's changes, this is not touching. [4:27] MS EASTMANN So, it's not enough, but you're still going to vote against it. [4:28] MS EASTMANN Is there any change to the rates? [4:29] MS EASTMANN Is there any change to the personal income tax rates in these changes? [4:32] MS EASTMANN So, the two changes I've outlined are the two changes to personal income taxes. [4:37] MS EASTMANN The only other thing I would say, Senator, is that the Government has stated that [4:41] these reforms overall create the room for future taxes. [4:44] MS EASTMANN The big difference here is that these changes massively increase the amount [4:49] of revenue that the Government takes as a percentage of GDP, whereas the previous tax reforms you [4:54] mentioned reduce it. [4:55] And that is clearly why you can't say that these reforms will unequivocally increase productivity, [5:01] because they lead to a bigger government, a higher tax rate on the Australian people. [5:06] A basic economic theory says that cannot, cannot increase productivity. [5:10] MS EASTMANN So, Senator, happy to have this discussion. [5:13] MS EASTMANN When you're thinking about aggregate savings outcomes, aggregate investment outcomes, [5:23] aggregate productivity outcomes, it is important to draw upon the empirical evidence that exists. [5:29] MS EASTMANN The empirical evidence as we read it, and we might have to agree to differ if you have a different view, [5:35] is that there's actually, there is mixed evidence about the impact of different concessional CGT arrangements on those outcomes. [5:41] MR. [5:42] MS EASTMANN Just to summarize those different views, what concerns me is that the biggest [5:49] economic challenge we face is productivity. [5:51] We have never experienced negative productivity growth over a four-year period. [5:54] The first four years of this Government has not just been negative, it is a 5% drop. [5:58] MS EASTMANN Well, I know the Government likes to choose a different base point. [6:01] It doesn't matter. [6:02] It doesn't matter, Minister. [6:03] MS EASTMANN Well, take some responsibility. [6:04] MR. [6:05] It doesn't matter. [6:06] If it's 3% from June 2022, we have never had negative, never, over a four-year period. [6:10] MS EASTMANN Take some responsibility for the decade of inaction. [6:11] MR. [6:12] So at least three, maybe five, if you want to count the two months in that other quarter, [6:16] that the Government first came to power. [6:17] MS EASTMAN No responsibility for the decade of inaction. [6:18] MR. [6:19] If you look at the charts, and I'm just trying to ask—maybe Minister, you can ask this—what [6:23] elements of your budget help increase productivity? [6:26] MS EASTMAN So there is a glossy, an A4 there. [6:33] There are 14, 15 different measures, but I can take you through them. [6:38] MR. [6:39] So there's a glossy. [6:40] MS EASTMAN How does a glossy help productivity? [6:43] MS EASTMAN Okay. [6:46] Chair, I'm trying to answer his question seriously. [6:49] He's trying to make a joke out of it. [6:50] MR. [6:51] It's a very serious question, Minister. [6:53] MS EASTMAN Well, it doesn't sound like you are. [6:55] MR. [6:56] Let's table the glossy. [6:57] MS EASTMAN I was wondering whether or not you had read it actually, Senator Canavan. [6:59] MR. [7:00] I read it on the night, Minister. [7:01] MS EASTMAN Right, okay. [7:02] MS EASTMAN Thank you for your—yeah. [7:03] MS EASTMAN You just asked me what in this budget— [7:05] MR. [7:06] It should be a DICSA. [7:07] MS EASTMAN If you had a plan, it would be a DICSA. [7:08] MS EASTMAN Well, I can take you through them. [7:11] I'm very happy to take you through them, all of the elements that are involved. [7:14] MR. [7:15] We've got three minutes. [7:16] One last question, or would you prefer that Senator Canavan go through a document you've [7:20] already read? [7:21] MR. [7:22] I'm happy to—look, as I say, this should be an easy one for the Minister. [7:29] If she had a plan to increase productivity, tell us the plan. [7:31] MS EASTMAN Don't tell us it's a glossy. [7:32] MS EASTMAN Tell people what the plan is. [7:33] MS EASTMAN That's what this budget is about. [7:36] And you are voting against it. [7:39] So, you come in here and you raise the concerns, and then you vote against the steps that we [7:44] are taking to improve productivity. [7:47] You also don't take any responsibility for the decade of inaction. [7:49] MR. [7:50] Just tell me what they are. [7:51] MS EASTMAN Well, look in housing. [7:53] Look in energy. [7:54] Look in regulatory reduction. [7:55] Look in the simplified—sorry, the single national market. [8:02] Look across the board. [8:03] We're working across government. [8:05] We bring a bill to the parliament on regulatory form. [8:08] You vote against it. [8:09] And then you come in here and complain. [8:11] MR. [8:12] Okay. [8:13] Just look, limited time left, but it was this morning I spent time with a real estate agent, [8:18] a lovely real estate agent, Geraldine, 26 years here in the ACT. [8:24] She's very concerned at the moment. [8:26] And look, she recognised that things were doing it tough before the budget. [8:32] There was an anxiety there with the conflict in Iran, with escalating inflation even before [8:37] that, interest rates going up. [8:39] But what she expressed to us is that these changes, the uncertainty created by this budget, [8:45] has tipped people over the edge, has created enormous heartache. [8:48] She's hardly getting people turning up to inspections now of homes. [8:51] People are just so uncertain. [8:53] Minister, did the government ever reflect, during the budget process, that perhaps this [8:59] is not the right time for the biggest tax grab in Australian history, given the conflict [9:04] in Iran, the inflation that's been unleashed by your government, the escalating interest rates [9:10] that were already causing massive headaches for small businesses and average Australians? [9:14] Well, I don't accept the way that you have outlined the reforms. [9:23] The government has thought about this very carefully. [9:27] We have taken advice across government around the reasons, well, the decisions that we took. [9:34] And this is genuinely about ensuring that the opportunity for homeownership is not just afforded to generations [9:43] of my age, but continue to be available to generations younger than me. [9:48] And we had a problem in this country around how the tax system was interacting with the housing system. [9:55] And we have taken the decision to change that. [9:59] I accept that those on this side of the committee room want to maintain the status quo. [10:06] Understand that. [10:07] Understand that. [10:08] We have decided that the status quo is not working. [10:11] I think most Australians recognise that the status quo is not working. [10:16] And that's why we've taken the decisions we have. [10:18] Thank you. [10:19] Thank you, Jay. [10:20] Thank you, Jay.