Report calls for State tax review

A RESEARCH report highlighting rapid growth in State tax collections over the past decade has set the scene for the release this week of the State Budget.

The Institute of Chartered Accountants in Australia called for a further review of State taxation in light of the report’s findings.

The ICAA and accounting firm Ernst & Young jointly prepared the report, which found the most rapid growth had been in stamp duty on insurance policies, which grew by 273 per cent to $220 million.

Stamp duty on property transfers and on motor vehicle registrations had also grown rapidly over the past decade.

E&Y tax principal Scott Grimley said all key State taxes had increased faster than the economy.

Gross State Product rose by 41 per cent over the decade while total State taxes increased by 57 per cent.

ICAA WA manager Con Abbott said the research findings highlighted that the benefits of the State’s economic growth over the past decade had not been returned to the community in the form of lower taxes.

“The scope and scale of the increases raises a question mark regarding whether this situation is sustainable for both industry and the community,” Mr Abbott said.

The ICAA said an independent board should be established to examine the capacity of State taxes to influence economic and investment decisions.

The report also recommends an independent evaluation of the methodology used to prepare tax forecasts because of consistent and significant variations between actual and forecast revenue.

Treasurer Eric Ripper is expected to release a ‘good news’ budget this week, with spending increases and tax cuts.

The Government has an unusual degree of flexibility this year, with strong economic growth and previous increases in tax rates boosting revenue collection.

The buoyant housing market has substantially boosted stamp duty collections, while wages and employment growth have lifted payroll tax collections.

When Mr Ripper released the mid-year financial review in December, he said the projected surplus for 2003-04 was $142 million, up from a Budget time estimate of $83 million.

Looking ahead, the 2004-05 budget will be affected by public sector wages growth, the higher exchange rate, which reduces mining royalties, and an easing in the property market.

On the positive side, grants from the Federal Government will increase by $231 million in 2004-05.

This week Dr Gallop pledged to freeze household charges, for water, electricity, motor vehicle registration and so on, for the next financial years. On the spending side, Mr Ripper said last week that Western Power would be a winner from the budget, with extra spending on its transmission and distribution network to improve the reliability of electricity supplies.