This preview shows page 1. Sign up to view the full content.
Unformatted text preview: axes to be abolished
has been much reduced. The amendments appear to have reduced the revenue available to fund the abolition of
financial taxes and stamp duties by about 35%. As a result, only FID, stamp duties on marketable securities and debits
tax (from 2005, probably) remained on the schedule of financial taxes to be abolished, with the remaining stamp duties
on the above list to be reviewed by 2005. Given the inability of the States to increase the rate or extend the base of the
GST it is difficult to see where the extra revenue would come from to fund the abolition of these remaining stamp duties.
At the same time, the Democrat Amendments have rendered the GST less efficient by narrowing its base to exclude
basic foods, prescription medicines and some health and education services. The objective of the base-narrowing, to
mitigate the regressive impact of the tax change, could have been achieved more efficiently by higher targeted social
In terms of efficiency, the reduced tax substitution enforced by the Democrat Amendments is still a worthy exercise, in
the sense that it is better than nothing, since the State financial taxes to be abolished perform poorly. FID and debits tax
are imposed upon a relatively narrow range of financial transactions. Variations between States in rates and bases raise
compliance costs for businesses operating in more than one State and encourage inefficiencies through avoidance
activities. The absence of a FID in Queensland had been particularly damaging in this regard. Stamp duties on
marketable securities increased Australian share trading costs and reduced the competitive positions of Australian stock
exchanges compared with competitors overseas who do not bear these types of stamp duties.
The abolition of bed taxes was a useful reform, though their low revenue yield meant that they were little more than an
irritant. NSW bed tax revenue was forecast to be $72.4m. in 2000-01, while the NT forecast revenue for that year was
$7.0m. Many foreign jurisdictions levy accommodation taxes as a benefits tax, with revenue hypothecated to fund tourist
facilities and services. The NT tax was of this type and was reasonably broad-based. The NSW tax, purely on
accommodation in central Sydney, was a discriminatory tax whose only purpose appeared to be revenue-raising.
The narrowing of the range of State taxes to be abolished is regrettable, although blame can hardly be placed at the feet
of the present Federal Government. A great opportunity for an improvement in the efficiency of State taxes has been
Nevertheless, the overall efficiency of the Australian tax system has undoubtedly been improved by the tax changes
implemented in the IGA. With the Australian States having such inadequate taxing powers the search was always on for
new revenue sources, with consequent deterioration in tax efficiency. 129 Commission on Fiscal Imbalance 4.3. Implications for Stabilisation Policy
Fiscal policy, together with macroeconomic policy generally, is a Federal Government responsibility and so should
perhaps, be considered to be outside the scope of this...
View Full Document