There have been several attempts in the past to address these issues as Australia has changed quite dramatically since 1901 with a population of now some 23 million and with population growth supplemented with 50 per cent immigration, mainly from Asia.

The GFC of a few years ago set the scene for the need to review the way we operate and the reasons for needing a review and it is at a time that other countries around the world are reviewing their processes.

 Australia’s form of federalism which gives specific powers to the federal government and the residue to the States and which does not recognise local government is today proving to be inefficient in the way it has evolved and operates.

 The High Court of Australia has over a period of time broadened the federal government's powers to cater for a changing world and this combined with the states handing over their taxation powers for income tax has led to an imbalance of control,  responsibility,  and funding for Australia generally.

 There are no clear lines of responsibility between state and federal governments in some areas such as health, education, transport etc and there is duplication of costs with both levels of Government handling the same issues to the tune of about $9 billion a year which would be unnecessary if there were definite layers of responsibility without one level of Government overseeing the other.

 The federal government collects taxes in the form of customs and excise, personal income tax, company tax, GST, Superannuation Tax and other sundry taxes.

 The state governments supplement what they receive from the distribution of federal taxes with payroll tax, land tax, stamp duty, a partial rebate of GST, motor vehicle and insurance taxes and other sundry taxes.

 Both of the reviews refer to vertical and horizontal imbalance:-

a) Vertical imbalance is the devolution of responsibility in areas of government without adequate funding from monies collected by the federal government. 

The federal government retains 74 per cent of federal taxes collected; hands down 23 per cent to the state governments and 3 per cent goes to local governments.  

The states supplement their share of federal taxes with state taxes and with the sale or lease of assets to meet their additional infrastructure costs.                                                                                                        

b) Horizontal imbalance refers to the uneven distribution of monies back to the states so as to provide an equitable distribution between the States, in other words proportionally, some states receive less income than the tax they generated and others receive more and local government is not recognised in any of this distribution of federal taxes and relies on Rates and charges levied locally and specific grants that come through from time to time from both state and federal governments.

To more clearly define the specific responsibilities of both state, federal and local levels of government and to create a more equitable distribution of taxation received and at the same time reduce the number of taxes levied in Australia to 4  - being income tax, company tax, GST and land taxes and do away with other forms of taxation and the task that is created by what appears to be a simple proposition will lead to much angst and debate amongst political parties and those affected beneficially and detrimentally as the result of those changes.

One underlying and yet dominant reason for change is to be able to compete with the rest of Asia which has lower levels of taxation and carries  on business more economically but also does not provide the social backup that Australia does for its population.

Another underlying reason is, like the rest of the world, Australia has an ageing population which has to be catered for but does not necessarily generate the taxation income that is needed to support it, superannuation is insufficient and increased pressure goes on the provision of the old age pension and the associated costs that go with ageing. 

A third underlying reason is, Australia buys more from overseas than is sells in value and this combined with our inability to cost effectively manufacture internally, so as to compete with overseas products, makes Australia out of sync with its Asian neighbours.

The debate on taxation will be to rely more on the stable taxes referred to above, which are not subject to volatile movement dependent upon specific expenditure such as property booms and busts and the debate will include the lowering of income and company taxes so as to become more competitive and to increase indirect taxes such as GST to spread the cost of raising revenue across everyone.

I recommend we all take an interest in the debate that is about to commence as the results will affect everyone whether in a reduction in personal tax and company tax or in an increase in the GST either by a percentage increase or a more even inclusion of items subject to the GST.

Michael Britten

Mayor 

Bega Valley Shire Council