Page 2236 - Week 06 - Wednesday, 9 May 2012
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taxation system. The review’s panel was headed by former ACT Treasurer Mr Ted Quinlan AM, Mr Quinlan being well qualified to lead such a review. As members know, Mr Quinlan was a member of this Assembly for many years, and in that role he ably represented the people of Molonglo. He also served as Deputy Chief Minister and Treasurer, in addition to a number of other ministerial roles. The review panel also included prominent academic Professor Alan Duncan and the ACT’s Under Treasurer, Ms Megan Smithies.
The government has now considered the review in detail and released its response on Monday this week. In its response the government has indicated that it will consider many of the recommendations in the budget context, as they have in some cases significant financial implications. But it is fair to say the government has certainly welcomed the review.
Before I turn to the review, I would like to point out that the ACT review, led by Mr Quinlan, built on a national review. That national review, titled “A future tax system”, was undertaken, as members would be aware, by Dr Ken Henry. Dr Henry is a former Secretary to the commonwealth Department of the Treasury, a former Reserve Bank board member, an incredibly qualified economist and a highly respected public servant. Dr Henry’s review made a number of proposals.
Some of these proposals have been picked up by the commonwealth government and will affect ACT households indirectly. Dr Henry’s review also identified a number of state and territory taxes as inefficient and inequitable. The Henry review recommended that state and territory governments transition away from inefficient taxes.
I would now like to turn to the Quinlan review’s report. The Quinlan review observed that state and territory governments have been left with inefficient taxes, partly for historical reasons. The commonwealth government covers a major part of the taxation of economic activity through income taxes and company tax. These are considered more efficient than other forms of taxation. However, there are things the ACT government can do. We have a great opportunity here in being a city-state. We have many advantages in our stable and strong economy and harmonious community. However, this means we have challenges as well as opportunities.
The review recommended that the government undertake structural reforms of the ACT taxation system. The first recommendation is that the ACT government should adopt tax settings that deliver stable revenue growth in line with economic growth. This will allow for improved levels of service provision over time and adjust for population growth. At the moment we have a reliance on inefficient transaction taxes. Their inefficiency dampens our economic activity. Their transactional nature places the government at the mercy of property price cycles. Obviously this jeopardises budget sustainability.
In previous years the ACT saw some record property prices and this has benefited homeowners. However, members will know that this property price bubble across the country came to an abrupt halt with the global financial crisis. This led to a budget challenge for the commonwealth government and for the ACT.
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