State Taxes in the cross hairs

The countdown is on to the Government's tax forum in October. I will be representing members at the forum and will be contributing strongly to the debate on the priority areas for reform.

There are 125 taxes across all levels of government in Australia, yet just 10 of them collect 90 per cent of all revenue. The other 115 'rats and mice taxes' potentially stand in the way of a simpler tax system.

The tax system should not be getting in the way of people getting on with their lives and getting on with their businesses; efficiency, equity and simplicity are the goals.

Reform of some of the least efficient and worst designed taxes in Australia - State taxes - particularly stamp duty on property conveyances, is a priority area for reform. Why is there a disincentive for people to move homes in order to move closer to locations that give them better work prospects? Huge sums of money being payable as stamp duty on property purchases act as a brake on labour mobility. Insurance duties are also ripe for the shredder - it is perverse that people who are doing the right thing and insuring against risk are penalised with a stamp duty on their insurance contracts.

The GST is one of the biggest revenue raisers for the federal government, which it hands to the States and Territories; $50 billion a year and rising and yet it is constantly ruled out-of-bounds. The Federal Government says that while it won't be changing the GST rate or base, "we still expect and welcome a broad and constructive discussion" at the tax forum - as long as it doesn't include the tax that dare not speak its name. The GST was an effective mechanism for doing away with many messy and inefficient State taxes. The GST is the States' revenue lifeline and they have precious few alternatives to raise cash. So if the GST remains untouched, most of those badly designed State taxes seem likely to be spared the axe.

What do you think? Which State taxes should be abolished? Which ones should be kept?

Robert Jeremenko
Senior Tax Counsel

Comments

  1. http://www.afr.com/p/national/pc_gst_would_raise_bn_study_fBTal7KdENU6PsLBS6uswL

    ReplyDelete
  2. Stamp duties on conveyances are inconsistent with the needs of a modern tax system. ........
    Stamp Duty

    ReplyDelete
  3. Unlikely to get rid of payroll tax, it's a large revenue earner and a fairly efficient tax to administer. Perhaps a unified code of duties law and payroll tax (which has been achieved to some extent, especially between VIC and NSW) is the short term solution.

    Getting rid of stamp duty isn't a viable option, as it's unlikely to ever occur. Ultimate tax reform would be achieved by changing government structure - make state government functions a federal responsibility, keep local councils and provide them with increased powers/responsibilities, and do away with state governments.

    ReplyDelete

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