Boom keeps taxes at bay

A NEW study by a high-profile think tank has found Western Australia is one of the best-managed states, but says it can largely thank the resources boom for THE good outcome.

The Centre of Independent Studies’ REPORT entitled Tax, Borrow, Spend: How the States Compare compared the recent performance of the states in fiscal management, based on debt, spending and taxation.

For the financial year ending 2009-10, WA was ranked in the equal top fiscal management position, along with Victoria.

WA was ranked second to Tasmania over three years.

However, CIS senior fellow Robert Carling said there was no clear fiscal frontrunner among the states.

“No state is a clear success story, in fact, most states have chosen more debt and more spending post the global financial crisis and this is unsustainable,” Mr Carling said.

He credits WA’s lead to its low taxing and net debt rates.

“Western Australia enjoys financial strength in the form of relatively low levels of net debt and negative net financial worth, having recorded the smallest increases in these burdens among the mainland states since 2007,” he said.

WA’s resources sector was one of the main reasons the state had been able to stay fiscally sound, he said.

“WA has only managed the combination of strong spending growth, tax restraint and moderate increases in debt because of the strong revenue flows from the resources boom,” Mr Carling said.

The CIS study mirrored a previous analysis by the Institute of Public Affairs, which found that state taxes were lowest in WA and Victoria and highest in South Australia.

The Chamber of Commerce and Industry WA disagreed with the IPA findings and insisted WA had the highest tax regime in the country.

CCIWA chief executive James Pearson said the chamber’s analysis found that WA was the highest taxing state on a per capita basis.

Alternatively, the IPA and CIS studies measured the state tax obligations of a “reference business” at current tax rates and thresholds in each state.

This put the tax liability on a reference business in WA at $256,195.

In addition to low taxation rates, the CIS study showed WA had cut more tax than any other state since 2007.

These cuts included land tax and property transfer stamp duty cuts and raised thresholds for motor vehicle stamp duty by $5,000.

However, WA’s average growth of real per capita expenses and public sector employment has been one of the fastest compared to other states.

The CIS study said all the states recorded strong growth in general government expenses in the three years to 2009-10, partly because of federally funded fiscal stimulus programs such as school building.

WA and South Australia stood out as having the highest expenditure growth rates and received low scores.

All states recorded jumps in the number of state public sector employees per capita in the three years to June 2010.

Victoria, Western Australia and Tasmania all stood out with particularly large increases.