Federal treasurer Joe Hockey looks set to double down on his push toward a fresh debate on tax reform, a higher GST and more state independence in raising revenue in a speech today at a PwC tax reform forum.
Fairfax reports this morning that Hockey will pressure the states to look at increasing their ability to tax to more closely align with the increases in expenditure they are experiencing.
“As best as possible, the revenue-raising capacity of each tier of government should be aligned to responsibilities of funding and service delivery,” Mr Hockey is expected to say.
Hockey highlights that the concentration of revenue raising capacity at the Federal level leads to “vertical fiscal imbalance (which) is higher in Australia than in other federations”.
In a line that could have come from the current leader of the tax reform debate in Australia, the Grattan Institute’s John Daley, the Treasurer’s speech notes say:
Not only do the states and territories raise considerably less revenue than they spend, around a third of their tax is from inefficient taxes: stamp duties on real and intangible property, insurance duties and so forth.
That fits neatly with new research from the Grattan Institute which shows the states could raise $7 billion per annum and GDP would increase $9 billion if stamp duties were phased out and a new broad-based land tax implemented.
Hockey is expected to say that it is time for states to take responsibility “for their own budgets in order to ensure they can afford their ever-increasing expenditure”.
Next week’s Commonwealth leaders’ summit will have plenty to discuss.
You can read the full Fairfax article here.