With both State and Federal governments failing to wake up to the realities of the new economic normal far too late, it was only a matter of time before the stoush over taxation revenues began.
State treasurers are to push for the first significant extension of the GST as an international survey finds its earning power embarrassingly low.
The Organisation for Economic Co-operation and Development survey, Consumption Tax Trends 2012 finds that Australia’s GST accounts for just 14 per cent of nationwide tax collections, compared with an average among developed nations of 19 per cent.
Britain’s Value Added Tax brings in a more typical 20 per cent. The New Zealand GST brings in 27 per cent.
Among developed nations only Canada, Japan and Switzerland charge less GST than Australia. The typical rate is 18 per cent, almost double Australia’s 10 per cent.
The report mentioned can be found here which contains the following chart which is sure to be used by the states as ammunition.
Last week the OECD also released their Australia 2012 report in which they too recommended an increase in the GST takings, however, they also suggested the removal of state-based stamp duties and the broadening of the land tax base to owner occupiers. This is something Wayne Swan has focussed on over the last week.
Wayne Swan has called on the states to “do their share of heavy lifting” on tax reform and urged treasurers to follow an ACT government move to phase out stamp duties on home sales over time.
The states in reply:
State governments have rejected a demand by federal Treasurer Wayne Swan that they pay for winding back their own inefficient state taxes by lifting property rates rather than be compensated by an increase in the goods and services tax.
NSW Treasurer Mike Baird rejected Mr Swan’s plan to use today’s meeting with state treasurers to get rid of the stamp duty on home sales and shift towards the ACT government model of phasing out the duty in return for a quarterly property tax.
“You can’t compare the ACT with other states like-for-like,” Mr Baird said, “We would argue you need Commonwealth co-operation if we want to take a quantum leap.”
NSW, Tasmania and South Australia have called for a comprehensive review of the GST, in line with an Organisation for Economic Co-operation and Development report on Friday. They said they would look at stamp duties and insurance taxes in tandem if the Commonwealth committed to a trade-off like lowering the GST threshold on imported goods, which includes online purchases
So the cherry picking of taxation recommendations continues as it appears no level of government actually wants to take on the responsibility of serious tax reform, preferring to defer to another party to keep the cash flowing.
But given the monumental joke of the current resource tax architecture and what looks like a structural new normal in stamp duties it is inevitable that governments will be forced into agreement of some kind soon enough. The OECD is recommending a package of changes:
- Reduce corporate tax rate and a possibly extend loss carry-back scheme to unincorporated firms
- Review tax credit for business for excise taxes on fossil fuels in sectors not covered by the new carbon tax
- Broaden the minerals resource rent tax coverage
- Consider replacing state royalties with a mining rent tax modelled on the federal approach, allowing states to set their tax rates
- Rationalise other state taxes such as reducing or removing conveyance duties
- Broaden the base of the goods and services tax (GST) and consider increasing its relatively low rate
But the point is they are a package of changes. You can’t just pick the one you like.