Senator the Hon Mathias Cormann

FRAN KELLY: Finance Minister Mathias Cormann is the Deputy Leader of the Government in the Senate. As such it is part of his job to round up the numbers for the Government’s legislation. He is in our Parliament House studios. Minister, welcome back to Breakfast. 

MATHIAS CORMANN: Good to be back. 

FRAN KELLY: Twice you have ruled a line in the sand on the backpacker tax. Twice that has been rejected. Now Derryn Hinch and Rod Culleton are proposing a new compromise tax rate of 13 per cent. Will you accept it?

MATHIAS CORMANN: The deal that is on the table for the Senate is a 15 per cent rate. If it is not 15 per cent it will be 32.5 per cent, which is the rate which Wayne Swan put in place for non-resident foreign workers back in 2012-13

FRAN KELLY: So no more compromise. Are you sure about this? Are you sure that these two Senators haven’t been talking to the Treasurer or someone else last night. Don’t think they are on the verge on getting acceptance for 13 per cent?

MATHIAS CORMANN: Derryn Hinch voted for a 19 per cent tax rate last week. The One Nation party locked themselves in with the Government at 15 per cent. That is why the expectation yesterday was that this issue could be satisfactorily resolved and certainty provided to farmers. 15 per cent is well and truly an internationally competitive tax rate when it comes to non-resident foreign workers. That is the tax rate that seasonal workers from the Pacific Islands and Timor Leste pay from the first dollar earned, when they work on farms, picking fruit or whatever. We believe that the deal that is on the table is fair. The Senate can take this deal today. If it is not today, they can take it at any time in the future. If they do not go for 15 per cent, it will be 32.5 per cent. 

FRAN KELLY: Okay, why? Why would you condemn our growers to 32.5 per cent? When the gap, let’s talk about the dollars, the gap between 15 and 10 per cent, 10.5 per cent is only $85 million over the forward estimates. It is even less between 13 per cent. It is debatable whether much of that extra tax will actually ever get paid declared anyway. Why not accept 10.5 per cent for that matter, which is the rate in New Zealand, there is a competitive logic to it, why not just do it and be done with it and make the growers happy? Why punish them?

MATHIAS CORMANN: The growers were happy at 19. The growers are certainly happy at 15 ... interrupted

FRAN KELLY: Not all of them. Not some of the ones we spoke with.

MATHIAS CORMANN: There is absolutely no question that at 15 per cent that is an internationally competitive rate. The truth is, if you keep cutting taxes by more for foreign workers what you force us to do is to increase taxes or cut spending for Australians by more to make up the difference. That is the point that all of us have made consistently.

FRAN KELLY: It is not a lot of money though Minister, between these amounts is it? And there is a point about whether these backpackers at 32.5 per cent are just going to say that they are not foreign workers and wait for the ATO to chase them and the ATO has already said probably won’t manage that in time. 

MATHIAS CORMANN: As the President of the National Farmers Federation was saying earlier today, we would put in another different tax rate on the table for farmers to manage. There is a 15 per cent tax rate for seasonal workers. It is simplest if the tax rate that applies for Pacific Island and Timor Leste seasonal workers, which is 15 per cent from the first dollar earned, is the same as the tax rate for holiday makers who come here from Europe and other places. 

FRAN KELLY: So you would be prepared to rise today with nothing for the growers? For your base, for the National party base in particular, but the Coalition, a large part of the Coalition’s base. 

MATHIAS CORMANN: Our preference is to have 15 per cent legislated today. That is available. Don’t believe that Bill Shorten here has got some genuine policy perspective on this. He is playing political games. He is not focussed on the national interest. He is not focused on doing the right thing. He is just having a bit of fun, which is creating a lot of unnecessary uncertainty for farmers. It is Bill Shorten that actually should reflect on his actions here. It is Bill Shorten who should reflect on what is the right thing to do here.  

FRAN KELLY: How did this happen? How did you get it wrong yesterday? As you said Derryn Hinch had voted for 19 per cent. One Nation had voted for 15 per cent. So I can see why you assumed that you might get it through. But is assumptions going to be enough. Was this mismanagement, or do you believe you were double crossed?

MATHIAS CORMANN: We did not just assume. We had indications that a majority of Senators would be supporting the compromise position of a 15 per cent income tax rate.  

FRAN KELLY: So were you doubled crossed?

MATHIAS CORMANN: We respect the right of every individual Senator to make their judgements at the time when legislation has to be voted on. Certainly, we went into this week, on Monday, with indications that there would be a majority of Senators in support of the compromise position of a 15 per cent rate. You have to remember that compared to the rate that Wayne Swan has put in place, this is less than half. This is a tax rate... interrupted

FRAN KELLY: Minister, we are a long way from Wayne Swan. Joe Hockey announced this in the Budget before last. I think we don’t need to reach back there do we?

MATHIAS CORMANN: What Joe Hockey announced was an attempt to provide certainty around the status of working holiday makers as non-resident foreign workers. The tax rate for non-resident foreign workers was set at 32.5 per cent by Wayne Swan. If the Parliament doesn’t resolve this issue today, that is the rate that will apply. 

FRAN KELLY: Okay, so the Government will not shift from 15 per cent. 

MATHIAS CORMANN: The choice that is in front of the Senate is whether the tax rate is 15 per cent or 32.5 per cent. We would have thought that when you have a choice between 32.5 per cent and 15 per cent that everyone in the Senate should opt for 15 per cent. 

FRAN KELLY: A lot of people are probably wondering why you are going after backpackers with a higher tax when there are much bigger fish to try. Look at the National Audit Office advice this week that major multinational oil and gas companies operating have claimed $5 billion in tax deductions. $5 billion that the office said they did not always deserve to receive. You could get a lot more revenue if you clamp down there. 

MATHIAS CORMANN: We are not going after backpackers for starters. We are just ensuring that there is integrity in our tax system, that the tax system is applied fairly and equitably across the board. That applies also incidentally to oil and gas companies. The Treasurer the other day announced a review into the PRRT arrangements. If there are incidences where any taxpayer is seen to be doing the wrong thing or is doing the wrong thing then there is action taken against that. 

FRAN KELLY: A couple of other issues. The ABCC passage of legislation was a significant moment for the Government. You had to agree to about twenty amendments to get it through. Some major employers, we have heard this morning on AM are not too happy with the two year transition period, so called union friendly measures and the EBAs. Some of the Commission’s coercive powers have been curtailed. This new watchdog as it stands now, will it lack some of the teeth that you believe were necessary to clean up the construction industry?

MATHIAS CORMANN: We believe it will be a strong and effective cop on the beat. It will ensure that there is law and order on construction sites. It will help ensure that important infrastructure projects can be delivered on time and on budget. The Government would have preferred for us to be able to get this legislation passed through the Senate without amendment, but that is not the reality that we were facing. In terms of the transition arrangements, it is important to note that every new contract from the time of Royal Assent which will happen today is going to be forced to comply with all of the relevant requirements in this legislation. In relation to pre-existing contracts, there is a two year transition period effectively, which gives people time to become compliant. On balance we accepted that amendment that was put forward by Senator Hinch. That was the reality of the situation that we had to deal with. 

FRAN KELLY: On another matter the Senate has set up an inquiry into the Attorney-General George Brandis and the Bell Group affair. You are almost certain to be called as a witness. You are a senior WA Minister. Did you give undertakings or are you aware of any undertakings to the WA Government about the Commonwealth forsaking $300 million owed to the tax office? 

MATHIAS CORMANN: No.

FRAN KELLY: So the West Australian Treasurer Mike Nahan tells the WA Parliament in May he thought the Government had a deal with the Commonwealth? You did not think the Commonwealth had a deal? 

MATHIAS CORMANN: I am not aware of any such deal. There is no evidence of any such deal. I do not know why he would say that. 

FRAN KELLY: Minister, thank you very much for joining us.

MATHIAS CORMANN: Always good to talk to you.