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Premier calls for co-operation on tax reform

The Premier, Mr Kennett, has called for a meeting between State and Territory leaders and the Commonwealth to negotiate a new Intergovernmental Agreement on Tax Reform.

This follows the agreement reached between the Commonwealth Government and the Australian Democrats over the GST.

"I am obviously disappointed that the Senate has required major changes to the package the Prime Minister took to the election," the Premier said. "The package in its original form offered significant economic benefits to Australia in terms of simplicity, transparency and efficiency and offered a substantial boost to our export and import competing sectors."

"Unfortunately, the modified package which the Prime Minister has agreed with Senator Lees falls short in terms of these benefits and the major reform of Commonwealth/State relations promised in the original package has been significantly eroded," he said.

The Premier said that, in particular, the abolition of Financial Institutions Duty (FID) and Debits Tax has been deferred; and a range of business taxes such as stamp duties on conveyancing, mortgage, lease and rental duties may not be able to be abolished at all.

The Premier is concerned that the Commonwealth had unilaterally decided that the States should bear a large part of the burden caused by the reduction in GST revenue.

"GST revenue was to provide the States with sustainable revenue growth to improve health and education service delivery. It now appears that if we abolish all of the taxes previously agreed, it will be 2010 before all States start to see meaningful benefits," he said.

The main effect on the States will be that GST revenues will be $4 billion lower by 2002-2003. The Commonwealth has proposed to cover this revenue shortfall by itself retaining funding responsibility for local government ($1.4 billion per year), with any remainder being made up by deferring the abolition of State taxes.

"These issues directly effect the Inter Governmental Agreement all States and Territories signed in April. Obviously parts of the Agreement dealing with the dates of abolition of State taxes, funding for public housing, ATO administration costs and local government funding need to be substantially altered," the Premier said.

Despite the disadvantages of the modified package, the Premier still believes that Australia will benefit from its implementation.

(News Release, Office of the Premier of Victoria, May 31, 1999)