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Reduction of State gambling taxes ($1.43b.) In summary, about 60% of GST revenue will fund the abolition of the Federal WST and only about 40% will fund the
abolition or reduction of State taxes.
It has been a normal process in the past for the Australian Federal Government to pick up the blame for Federal taxes
being raised to finance State expenditures. The spin presented for the IGA by the Federal Government represents an
interesting reversal of the process, whereby the States shoulder the blame for a tax raised largely to benefit the Federal
Government. 124 Commission on Fiscal Imbalance 4. REVENUE AND EFFICIENCY ASPECTS OF THE IGA 4.1. State Revenues
A core effect of the IGA is to hypothecate all GST revenue to the States in order “to reform antiquated CommonwealthState financial relations and get rid of some of the State indirect taxes that are the most inefficient of all” (Costello, 1998,
p.9). This would provide the States “with access to a secure and growing source of revenue and the capacity in the
medium to long term to allocate additional funding for services, such as health and education” (ibid. p.16). This is a
worthy objective given that the States’ deficiency in broad-based tax revenue sources has led them to the use of taxes
which are narrow-based, inefficient and highly costly in terms of administration and compliance. The implications of the
above quotation are that the shift from the nominated State taxes to the GST would provide a revenue source that had
the following characteristics:
♦ Security. A secure tax base is one which is not liable to decline or disappear. The most likely reason for insecurity in a tax
base is tax competition, leading to a base moving partially or totally to other Australian State jurisdictions or out of Australia
completely. Two examples will serve to illustrate this potential difficulty. The unwillingness of Queensland to implement a
FID implied a substantial loss of revenue by other States, as financial transactions were shifted into the Queensland
jurisdiction. The development of internet gambling on an international scale threatens a serious erosion of State gambling
tax bases as Australians gamble outside any Australian jurisdiction. ♦ Growth. The statement that the GST revenue will give the States “the capacity in the medium to long term to allocate
additional funding for services…” clearly implies a prediction that GST revenue will eventually exceed the revenue which
would have been yielded by the replaced sources. A further characteristic which might have been added is “stability”. A characteristic of some State taxes, particularly
stamp duties, is that their revenues, while trending upwards over time, tend to fluctuate wildly. Australian State
Governments have generally been unable to resist the temptation to spend up in periods of high revenues, rather than
build up reserves as provision for the inevitable subsequent revenue downturns.
The really crucial question...
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