Unformatted text preview: he day; and ♦ Passage of relevant legislation by both Houses of Commonwealth Parliament. It is extremely unlikely that these requirements could ever be simultaneously satisfied. Even if they were, it would only
be as a result of the Commonwealth’s approval of State recommendations. Thus the IGA arrangements completely
remove from the States the power to control this revenue-raising source, which will have replaced taxes whose bases
and rates were exclusively under the control of the States.
But is not the same also true of the impact of the IGA arrangements on the discretionary tax powers of the
Commonwealth? The Federal Government had full control over the rate structure and base of the WST but the States
and Territories will have the power of veto over rate and base changes of its substitute tax, the GST. In a sense then, it
131 Commission on Fiscal Imbalance could be argued that the GST will be a non-discretionary tax instrument, with neither the Commonwealth nor the States
having effective control over the structure of the tax or its revenue.
However, the significant difference between the situations of the Commonwealth and the States is that the IGA
arrangements are enshrined in Commonwealth legislation. Since these are not constitutional provisions, they can also
be changed or repealed by Commonwealth legislation. It will always be possible for the Commonwealth Government to
change the IGA legislation, assuming that it can obtain the agreement of the Senate. The Commonwealth’s Agreement
with the States does not contain, nor could contain, provisions for sanctions to be imposed in the event of the Agreement
being broken. This the Commonwealth has the power to change GST provisions while the States and Territories have
no such powers.
The Australian Bureau of Statistics, approaching the same issue from a different perspective, has reached the same
conclusion. It faced the question of whether, in presenting Australian taxation statistics, it should treat the GST as a
Commonwealth or a State tax. In addressing this problem it applied the International Monetary Fund (IMF’s) five specific
rules for attribution of taxes to the appropriate level of government. It concluded
that the Commonwealth exercises considerable influence and discretion over the setting of the GST
and the distribution of its proceeds. […] individually, the States and Territories do not have sufficient
influence or discretion over the setting of the GST and the distribution of its proceeds. GST revenues
will be distributed in accordance with the Commonwealth Grants Commission fiscal equalisation
principles in a similar manner to that already applied in the distribution of income taxes. This situation
does not fit the IMF guidelines relating to the attribution of tax revenues to beneficiary governments,
which means that GST revenues should not be treated as individual State or Territory tax revenue.
Thus, the GST should be treated as a Commonwealth tax for government finance stat...
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