Page 2248 - Week 06 - Wednesday, 9 May 2012
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In considering and responding to this review, the government has been governed by certain core principles. In that context, we believe that any reforms that are made to our tax system should create a tax system that is fairer, a tax system that is simpler and a tax system that is more efficient.
What do I mean by this? Taxes should be fair. They should be progressive rather than regressive. They should be tied to some level of benefit or consumption enjoyed. In aggregate, they should be tied to the service levels that society expects. Taxes should be simple. They should be easily understood by the community and they should be easily administered by the bureaucracy. Taxes should also be economically efficient. They should not unduly distort economic behaviour, particularly decisions relating to production or investment. More importantly, they should not discourage prudent behaviour.
Tax reform should be undertaken over time. This allows the community and the economy time to adjust, to gather information and to make informed decisions. But it also allows time for the concessions system to ensure that those Canberrans on lower incomes are cushioned from any adverse distributional impacts of a transition. This is a critical part of ensuring fairness in any reform approach.
I will be holding a number of community roundtables with stakeholders and interested parties in the coming weeks and months to discuss the short, medium and long-term reform objectives. I have indicated, though, that the government’s aim through this process is revenue neutrality. There will be revenue lines that will be reduced in some areas and revenue replaced in others. This is the only responsible course to ensure budget sustainability.
In the time remaining let me make some observations on some of the specific recommendations. The report recommends considering significant structural changes to the entire territory tax system, including abolishing some transaction taxes. These taxes represent a barrier at times to sensible economic behaviour and are highly dependent on cyclical movements in the economy.
Stamp duty, for example, does present a barrier to transition between appropriate housing types. But it is important in making changes that any change to stamp duty is implemented and phased in over a significant period. The reason for that, as many have observed, is that it would not be fair to those who have recently purchased to shift away from stamp duty overnight.
On the subject of rates, the review notes that our rates system does have a disproportionate impact on those with lower property values. The high, fixed charge component and the flat rate act regressively, hitting those with lower value properties harder comparatively. Changes to the rates system should counter the regressive effects of the large, fixed tax component and a flat rate charged across all properties. There is undoubtedly scope to introduce greater progressivity into the rates system as recommended by the review. On the questions of fairness, it is also important to pick up on the issues of pay parking in the parliamentary triangle. If you pay in the CBD and town centres, it is only fair that that policy be extended across the parliamentary triangle.
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