Page 1591 - Week 05 - Tuesday, 31 March 2009
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also suggests that this government are doing nothing to reverse this trend. The Stanhope-Gallagher government have not pursued reform of the ACT economy as they should have done and, as a consequence, the ACT is now in the position of being reliant upon a narrow revenue base when, in reality, we should have been in a much stronger position. (Time expired.)
MS GALLAGHER (Molonglo—Treasurer, Minister for Health, Minister for Community Services and Minister for Women) (3.21): I thank the member for raising the important issue of the ACT’s revenue base. I am not entirely clear on what the central argument was. I am not sure whether it was pro tax cut, changes to service delivery, any suggestions for diversifying the economy; rather, it was just 15 minutes criticising a whole range of unfounded allegations, in my view. It was. It was the opposition’s take. I guess Mr Smyth’s office have written it because it was the same thing that Mr Smyth has been going on about, certainly for the last few months that I have been Treasurer.
Revenue is an important issue but, unfortunately, it often gets discussed in simplistic ways, as we have just heard from Mr Doszpot. It is quite simplistic to suggest that taxes are high. Of course everyone would like to pay lower taxes or, indeed, no taxes at all. It is also quite simplistic to suggest that the ACT has a narrow revenue base. Of course that is due to the fact that we do not have mining and agricultural sectors. Such simplistic suggestions hardly provide a framework for any meaningful discussion in this place.
When we look at our own-source revenues, they can be broken up into two parts: taxation that funds general services, and fees, fines and user charges. There are well-accepted principles for the latter category, such as the efficiency of services for which cost recovery is being made and the effectiveness of regulation. Own-source taxation comprises around 31 per cent of the budget revenue in the general government sector, that is, less than one third.
Nevertheless, taxation is the main focus of discussion. In general, taxes do not have a justification in themselves. Governments raise taxes to fund universal services, redistribute income or wealth or change behaviour. Taxation serves social policy objectives of government and the primary reference in discussing taxes needs to be the expenditure on services and infrastructure.
There are number of other contexts in which the level and mix of taxation need to be viewed. The financial arrangements under Federation provide for an equal capacity to deliver services, although individual jurisdictions may make policy choices to deliver higher or lower than average levels of service. Comparison with other states, therefore, is a useful reference for assessing reasonableness of taxation levels.
Taxes invariably impact on the economic activity. The level of taxation relative to the size of the economy is a useful and widely utilised measure of taxation. Notwithstanding the generally accepted principle for taxation to be broad based, all jurisdictions tax different sectors of the economy differently. Further, states and territories are not able, under the constitution, to tax income, production or consumption, which leads to fewer taxation bases such as property, labour and transactions.
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