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14 Dec 12 Preamble - 14 December 2012

Yesterday The Tax Institute, in conjunction with the Australian Tax Research Foundation, hosted an important tax reform event: Revolutionising State Taxes - Finding a way forward.

The event provided an important platform for discussion and debate about the pressing need for the reform of State taxes.

The Tax Institute has long called for a national vision for the reform of inefficient State taxes such as stamp duties that stifle a productive society.  With the recent backdrop of the report of the Federal Government's GST Distribution Review Panel and next week's Treasurers' discussion of this report and also an options paper for State tax reform, the event provided a timely fillip to the debate.

The South Australian Treasurer, the Hon. Jack Snelling MP, called for a mature debate about how to reform the tax mix. He conceded that stamp duties were inefficient taxes and also called for the States and the Federal Government to start an open and transparent process of tax reform. He is in favour of discussing both the rate and the base of the GST and has drafted a reform plan with NSW Treasurer the Hon Mike Baird MP.

Bruce Carter, a member of the GST Distribution Review Panel, talked about the almost impenetrable concepts of horizontal fiscal equalisation and vertical fiscal imbalance - key factors in calculating the GST revenue share for each State. Whilst the GST distribution model tries to make sure all States are able to offer the same level of services, he said that the financial position for the States is only deteriorating. This was due to factors including increasing demand for services and reducing revenue streams; States will have to 'cut their cloth'.

Michael Butler CTA provided a detailed and compelling tax practitioner perspective on State tax reform. If the community genuinely wants reform, there must be a principles-based discussion where everybody rolls up their sleeves, gets into the detail, and expresses their views. Talk is cheap - if there is to be genuine reform, a lot of hard work needs to be done and some very hard decisions need to be taken, including with respect to the GST.

The event received widespread coverage in the national media (see below) and we look forward to further pursuing these ideas in the New Year as we continue to strive to improve Australia's tax system.

Please see below for details of other activities this week.

Kind regards
Robert Jeremenko CTA

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