The release last week of two detailed reports on the state tax review has given an insight into the kinds of far reaching reforms the state government could have pursued, if it chose to.
The release last week of two detailed reports on the state tax review has given an insight into the kinds of far reaching reforms the state government could have pursued, if it chose to.
The failure of the government and the Department of Treasury and Finance (DTF) to pursue major reform was a disappointment to the chairman of the state tax review reference committee, Jackson McDonald partner Jonathan Ilbery.
Mr Ilbery said there was “frustration in the committee, reflective of the general community frustration of there being no substantive agenda for visionary reform”.
He said the committee generally agreed with one member, who said its position “could be likened to that of seagulls in a car park, each attempting to get their share of a chip”.
His views were outlined in a report to government, which assessed the department’s final report on tax reform.
Mr Ilbery was particularly frustrated by the failure to explore the possibility of a broadly-based tax on labour services, which could be part of a visionary reform agenda.
“It is disappointing that DTF have not taken the opportunity, over the two years of the current State Tax Review, to take up that recommendation,” he said.
Mr Ilbery said the department acknowledged the in-principle merit of a labour tax but “merely reiterated the need for a national approach”.
Commenting on the prospect of meaningful tax reform in future, Mr Ilbery acknowledged that one of the biggest constraints was the system of federal/state revenue sharing.
This meant that any growth in state revenue was largely offset by a reduction in federal grants.
He endorsed a DTF recommendation to establish a small, independent ‘alliance’ of business, community and union leaders to examine and make the public aware of the current federal/state system.
“The committee goes further, however, and recommends that the government establish and fund an independent research resource to advise the government upon future tax reform,” Mr Ilbery said.
A reform blueprint prepared by the Centre for Independent Studies’ visiting fellow Robert Carling would have provided a good starting point for more analysis, he said.
It suggested an increase in the GST rate to 12.5 per cent, with the states receiving 7.5 percentage points, and the introduction of a flat-rate state income tax, similar to the Canadian model.
This would enable the Commonwealth and the states to make sweeping changes to other existing taxes, with stamp duties able to be abolished.
Treasurer Eric Ripper has acknowledged the issue of federal/state financial relations, and is discussing a range of strategies with DTF to address the problem.
However, he has firmly ruled out the kinds of reforms canvassed by the CIS and Mr Ilbery and insisted the government has made a lot of progress on both tax reform and tax cuts.
“Over the last four years the government has consulted extensively with the Western Australian community on taxation, specifically through the Business Tax Review and State Tax Review processes,” Mr Ripper said.
“This has resulted in major tax reforms in WA, with five rounds of tax cuts and the revision of the Stamp Act.’’
