Page 2247 - Week 06 - Wednesday, 9 May 2012
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . . Video
There are some who would say that we must base our responses to these reviews on a concerted effort with neighbouring jurisdictions. There are others who would suggest that we must rely on other national mechanisms to provide long-term budget sustainability. The government does not agree with that. Expecting national reforms on broad-based tax reform would be pinning our hopes on what has been so far an elusive national consensus.
Having said that, there are indeed some recommendations contained within the review that are best progressed nationally, and we do undertake to work on those at a national level. However, the ACT is not compelled to wait for wholesale national reform and to move only in concert with other jurisdictions. Indeed, in the context of last night’s federal budget, the time for reform has never been more opportune. Our unique features as a city-state provide us our challenge, but with those same features perhaps our greatest opportunity.
I think this jurisdiction of all in Australia is well placed to demonstrate how responsible tax reform can be undertaken. The Quinlan review builds upon the work of Dr Ken Henry and his future tax system review. The panel—Ted Quinlan, Professor Alan Duncan and the Under Treasurer, Megan Smithies—have done an outstanding job in pulling together a number of different strands of thinking and putting forward to the government, to the Assembly and to the community a number of important options for future reform.
Undoubtedly, what was identified within the Henry review—that a number of state and territory taxes are less efficient—is, indeed, the case. The Henry review has identified the possibility for reform. We are, of course, wary in relation to horizontal fiscal equalisation processes that inefficiencies contained within state and territory tax systems cannot be completely overcome through that HFE process.
The Henry review made recommendations that states and territories should transition away from inefficient transaction taxes and that these should be replaced with broader taxation bases, including on land, in large part because land is immobile. It is quite straightforward, really, Madam Assistant Speaker. There are three factors of production: land, labour and capital. Capital in this global economy is highly mobile. Therefore, sound principles are that it should be taxed lightly. Labour is becoming increasingly mobile. The review makes a recommendation to retain a form of payroll tax or a substitute tax as part of a national reform. But I think the evidence would appear that the incidence of payroll tax is, in fact, on consumers, as most businesses pass it on.
The third obvious factor of production is land, and it is highly immobile. The Quinlan review recognises these basic economic facts and makes the observation that inefficient transaction taxes dampen economic activity. The transactional nature places the budget at the mercy of property cycles, which jeopardise long-term sustainability. None of these are new debates or new discussions, Madam Assistant Speaker. If you accept the principles articulated in the tax review, then the real questions are around implementation, time frames and cushioning the effects of transition.
Next page . . . . Previous page . . . . Speeches . . . . Contents . . . . Debates(HTML) . . . . PDF . . . . Video