11/12/2015 - 14:14

Slow COAG progress on tax reform

11/12/2015 - 14:14

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State governments have agreed taxes they control such as payroll and stamp duty could be targets as part of the federal government’s tax reform agenda next year, which many tip will involve an increase in the GST.

The federal government is seeking to undertake a major tax reform program.

State governments have agreed taxes they control, such as payroll and stamp duty, could be targets as part of the federal government’s tax reform agenda next year, which many tip will involve an increase in the GST.

The agreement was forged today, as part of a Council of Australian Governments meeting in Sydney, featuring Prime Minister Malcolm Turnbull, state premiers and territorial chief ministers.

The leaders’ communique kept to broad statements about fairness and efficiency in the tax system, with state leaders urging for a resolution in the next meeting in March.

There has been a variety of positions held by the state premiers, giving the prime minister a difficult task to unite the group to a common position.

One key thread, however, was that state premiers alleged there would be insufficient funding for health spending under the current system.

Leaders agreed to review hospital funding next year with a view to set up a new arrangement by 2017, in conjunction with the broader tax reform agenda.

Western Australian Premier Colin Barnett has said he wouldn’t support changes to the GST unless the distribution was reformed to include a floor, while arguing that the base could be expanded and rate increased to 12.5 per cent.

That move would reportedly raise $25 billion.

A floor would be of great benefit to the state government, which is in the run up to what it described as a "horror" mid year budget review later this month.

South Australian Premier Jay Weatherill wants to go a step further, with an increase in the rate to 15 per cent, which would raise $32.5 billion.

He warned that without funding changes, governments would be forced not just to reduce hospital beds but to close hospitals.

“Without this solution, we will have to cut services,” Mr Weatherill said.

Victorian Premier Daniel Andrews is taking a different approach, claiming a GST rise would be unfair, although he acknowledged it was a more efficient tax.

Earlier this year, he proposed instead a dramatic increase in income taxes through the medicare levy, doubling the rate from 2 per cent to 4 per cent.

That would raise $15 billion, it was reported.

Other ideas floated included returning part of the income tax revenue directly to the states.

COAG will additionally make changes to competition policy, drawing on the recent Harper review, which made a series of recommendations including for the taxi industry, for book import restrictions and pharmacies.

That report was broadly accepted by Treasurer Scott Morrison.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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