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Land tax exposes GST flaw

THE proposed introduction of the Premium Property Tax in WA has highlighted a flaw in the GST agreement the Federal Govern-

ment signed with the States and Territories.

One of the key selling points of the GST was that it would allow state governments to remove a number of the micro economically distorting taxes they levied.

The governments signed the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations in 1999, which outlined how the GST revenues would be distributed to the states and which taxes would be abolished.

From July 2000 bed taxes were removed. This year, financial institutions duty and stamp duty levied on stocks and shares went.

Bank Accounts Debit tax – a tax on withdrawals from bank accounts with a cheque drawing facility – is expected to be removed by July 1,2005, with stamp duties on property conveyancing to be reviewed at that time.

The governments had considered removing most state taxes, including land and payroll taxes, but had a rethink after GST was removed from food. However, the Federal Govern-ment failed to include a clause to stop it introducing new taxes.

In fact, research by Business News reveals there is nothing to stop the WA Government, for example, removing FID and BAD and replacing them with new versions of these imposts.

A spokeswoman for Treasurer Peter Costello confirmed the Federal Government had no mechanism to prevent the States from introducing new taxes or reintroducing new versions of old taxes.

“If the States want to go out and commit electoral suicide that is up to them,” she said.

Institute of Public Affairs exec-utive director Mike Nahan said State Governments had enough scope to go in and levy a number of indirect taxes.

“The GST was supposed to get rid of a number of state taxes and that has proven to be a fake,” Dr Nahan said. “The state governments have shown they can easily raise new ones such as the Premium Property Tax.

“Was there a need for the Gallop Government to raise all this money? No there wasn’t.”

National Tax and Accountants Association president Ray Regan said there had actually been a mechanism in the GST to allow state governments to raise new taxes.

“If the GST collected less revenue than expected, the states were allowed to go out and raise extra taxes,” Mr Regan said.

“But we understood the GST was to remove things such as FID and a number of other state taxes.”

p See also pages 4 & 6.

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