JOY 94.9 FM – Israel Embassy, Stage Three Tax Cuts, Tax Reforms


JOY 94.9FM

Subjects: Israel Embassy, Stage Three Tax Cuts, Tax Reforms

DAVID MACCA, HOST: Our next guest is the Federal Member for Wills. And in fact, my local member Peter Khalil. Good morning, Peter.

PETER KHALIL, FEDERAL MEMBER FOR WILLS: Morning Macca, morning Paul. How are you both?

MACCA: Pretty good.

PAUL HOWELL, HOST: Very good, thanks Peter.

MACCA: Look I wanted to kick off by actually delegating the first question to Paul because he was asking me this off air, earlier in the show. Off you go Paul.

PAUL: Yeah Peter, we were talking earlier the fact that you sit on a number of subcommittees in government. One of those you know in related to security, and Lidia Thorpe is now departing, probably one of those committees. But I was interested to read both in the UK and in Australia. The Chinese have been trying to recruit our top gun pilots to help train the Chinese pilots and clearly with looming tensions in Taiwan, it was a little disturbing. I just wanted to get your thoughts on that.

KHALIL: Yeah, that’s an interesting question, Paul. I’ve just got back from Indo-Pacific. Command at Pearl Harbour and I was actually speaking, before this story broke, with a 3-Star Air Force General and I actually asked the question. I said, you know, with the difference between 5th generation fighters and 4th generation, listeners who have been watching Top Gun, they’ll know what I mean. Is there really a difference between the pilot skill, that can make up the difference if you like? And do the Chinese pilots have because, of their cultural differences and growing up in a you know Communist regimes, they have less initiative, less decision-making maneuverability I suppose at that really tactical level. Do Western pilots for example outperform them? And they didn’t know. And then this story broke. And then I got my answer, which is that the Chinese Communist Party obviously have seen maybe a weakness in their pilots and are trying to get some advanced training from Western pilots. So, I think that’s where it’s coming from. I think it’s quite a problem. I know the British Government is actually moving to put strong penalties in place around that. It’s interesting because they’re a retired pilot, for example and they’re being offered a commercial payment, if you like, to go and train Chinese pilots. But I think in this space where you look at national security, this obviously has a huge impact and they’re passing on doctrine or tactics and things that could be detrimental to our pilots.

PAUL: That’s know how and that’s got a commodity, I know it’s price and you don’t want to stop anyone earning a living, however, it’s concerning because you could be giving away the ‘how to’, if you need to try and do that.

KHALIL: That’s right, and I know our government, the Defence Minister announced a review into the situation in Australia, were there any Australian pilots, there is some media that some Australian pilots have been approached. It was interesting that Andrew Hastie, the Shadow Defence Minister, the Opposition Defence Minister you know, made a bit of a song and dance about this and my response in the media as well, you were in government for 9 years if he knew about it, why didn’t you take action? Ironically, talking about it now.

PAUL: No, but it’s all your fault now. But it’s you know; history shows us there was some American and British pilots just prior to the Second World War. RAF and Army Air Force pilots that actually trained Japanese pilots. Some of them you know, who then you know visited Hawaii uninvited. I think. I think the challenge here is that one of the big differences, of course, is the Western world’s Air Forces are voluntary, the Chinese is a conscription Air Force, and I’m not saying people don’t join the Air Force or the defence force in China on a voluntary basis. But predominantly it is a conscription army. It’s interesting that the US Navy has, certainly the commander in this region, has been on record highlighting that difference between a volunteer military force and a conscripted one. Of course, we’re seeing, you know, in the Ukraine the different outcomes there, so I think it’s an interesting one to follow. And I don’t know how you actually stop people from taking up those opportunity. But it’s the information they may share, that’s the most damaging, isn’t it, Peter?

KHALIL: That’s right and there’s going to be a judgement call about whether that information is so sensitive that it is detrimental to our national security and our national interest. I actually met with Admiral Aqualina. You referenced the Indo-Pacific commander. He is a U.S. Navy pilot, he’s a Four-Star Admiral and you watch Top Gun and there’s this sort of cliché, of the A-list pilot or whatever, he’s that guy. You know, very New Yorker, you know, get things done kind of guy. You know he came out in his aviator suit and his name is long. Like Maverick, but a very smart guy as well and he understands that his whole perspective is about deterring crisis and deterring conflict. Making sure that we work together to maintain the stability and the security of the entire region and dissuade others from moving towards a crisis. Point or conflict point and that’s really important. People sometimes misunderstand.

PAUL: I was going to say, does that make you a quasi like Top Gun if you’re rubbing shoulders with such esteemed company does that make you a quasi Top Gun.

KHALIL: Paul. I think if I got in one of those planes there would be some mechanical difficulties because of my weight. I wouldn’t, probably I wouldn’t make the cut. But I was just saying people might misunderstand that when you do defence and you prepare capabilities for defence, you’re actually doing it to deter conflict. You want to make sure that we don’t move to a conflict situation. And you know, for a trading nation like Australia, where our imports and our exports, you know 90% of which go through, you know, maritime approaches and so on. Having that security in the region, that stability is actually quite important for our economic prosperity, frankly.

MACCA: It is. I want to ask you about tax Peter. We’ve seen, I’m not going to ask you whether or not the government is going to revisit the stage 3 tax cuts, because they’re not going to be revisited in the budget, but I suspect they might be down the track. The treasure has said that the cost of those stage 3 tax cuts has increased by $11 billion, $11 billion. Does that surprise you? Or is it, because of income growth and you know it’s just getting higher isn’t.

KHALIL: The way that the coalition set up the bill or the law itself was to reduce the tax bracket. You know reduce for example the top end from 32.5% to 30%. So, if you get more people in employment, you’re getting more tax coming in and so, on so it does shift the costings in that respect. Look my issue with that whole episode was that the Coalition, basically structured it in a way that the tax cuts and the tax relief for low and middle income earners, you know from 45,000 to 180,000 was tied together with the benefits that would go to higher income earners. And if you said no to it, you’re basically denying I think 80-90% of Australians that tax cut. But at the same time of course part of the tax cuts, a big part chunk of it, that go to very high income earners. And there’s this big debate going on about whether that’s appropriate going forward. As you said, they’re not coming into play, the stage three until 2024. So, I think the Treasure is right in saying, look my focus in this budget, particularly this mini budget in October is cost of living relief and all of the reforms that we need to do, given the fact that, you know there’s huge pressures on the budget. We’ve left with a trillion-dollar debt and you’re seeing even the interest bill on our debt is, Mac it’s like 17% or 17.5% of increases there on that. So, there’s massive pressures, the NDIS has to be paid for, there’s indexation rises for, the highest for 12 years on the pension and job seeker, which is a good thing for those people. But the point is that it’s adding further pressure on the budget and he has some big decisions to make and we’ll be revealing on Tuesday night. My view on tax reform, Macca is that and I’ve been arguing this publicly for a number of years now is that there is a big space of reform within multinational tax avoidance. A lot of these big multinational companies, either offshore their headquarters in low tax or no tax jurisdictions. You know some island off in the Caribbean, where they pay no taxes, but they’re making the profits here and they end up basically avoiding paying tax in the country in which they’re making you know their profits on their business. And that is unacceptable, I mean the end result of that as, well, as some clever accounting that they do. Were they you know load up subsidiaries with debt in order to do tax write offs in the country as well. The end result of that is some of these big multinationals are making you know, $800 million, 1.5 billion Australian and paying $0.05 on the dollar, whereas your local small businessperson is you know or your wage earners paying 30% of you know of their taxes so it’s unfair, it’s not equitable, and they need to be called to account and the OECD is working on this. There is an international effort to try and work this out because of the transnational complications and Australia needs to be front and centre on that and I know Jim is really keen on that.

MACCA: While we’re talking about tax Peter, you know we understand the level of debt. We understand that the tax system needs a big overhaul because it’s not fit for purpose. But you know I think I wrote to you recently about a proposal you know around something Treasury and the government are looking at. I am not a fan as you know of the current system of franking credits. I think it is over generous and you know, I argued that case on air actually, before the last election with Chris Bowen, he didn’t like what I said, but anyway. You know the Treasury is proposing a relatively small change to how franking credits work and look it’s a complex issue. It’s around capital raising and other things. By all means the government has a right to look at this, it didn’t flag this in the election. What troubles me Peter, is this legislation or this proposal is to be retrospective. Retrospective that is a very very bad idea if you want to change the law change it. But don’t change the law, you know, make it retrospective and make people pay for something that was legal and we’re not even talking about $100 million a year here, so why retrospective Peter, why retrospective?

KHALIL: Well, can I confess that I haven’t looked at that particular tax policy area. I’m certainly not an expert in the area either. You probably know more than me about tax reform and tax policy. But on the principle of retrospectivity, I am very averse to laws that go backwards, like it’s just, basically it’s bad practice. But I don’t know the circumstances of this one. I’m going off to Canberra tomorrow night for budget week. It’s one of the things I will be looking at, that you’ve raised it. But I don’t like, from a public policy standpoint retrospectivity in legislation.

MACCA: Yeah, it’s a bad road to go down. Well, Peter thanks, you know I always appreciate your time and I think you know we’re going to be you know the budget comes out on Tuesday night, we’ve got a Victorian election coming up. There’s no shortage of topics, but it’s always great to talk to you and.

PAUL: We could have chatted for another hour Peter, there’s so much on our list for you.

KHALIL: Thank you Paul. That’s very kind of you and. And I like how you let out, I notice your British accent, you let out with a question about the UK. I’ve met with the High Commissioner yesterday in Canberra and we’re doing a lot of work with the UK, but you’re an Aussie now, aren’t you Paul?

PAUL: Yeah, I’m a fully paid-up blue passport holder now. I was having tea with the British Consulate up in Sydney just a few months back actually obviously move in the same circles, but there you go. Anyway, we got to go Peter. Thank you ever so much for joining us this morning.

MACCA: Yeah, I always appreciate it.

KHALIL: Thanks Paul, thanks Macca.

MACCA: Thank you, take care.