‣ PanelAustralia’s s Future Tax System– Secretary of Treasury, Ken Henry– Greg Smith, ACU– Heather Ridout, , AIG– John Piggot, UNSW– Jeff Harmer, FaHCSIA‣ Architecture Paper (August 2008); ConsultationPaper (Dec 2008);‣ Final Report due December 2009
AFTS Review‣ The comprehensive review of Australia’s s tax system willexamine and make recommendations to create a taxstructure that will position Australia to deal with thedemographic, social, economic and environmentaloutcomes of the 21 st century and enhance Australia’seconomic and social outcomes.‣ Review will consider:– Simplifying the tax system, including consideration ofappropriate administrative arrangements across theAustralian federation.
Sustainability‣ Each level of government should be able toraise revenue (or receive revenue) and makeexpenditure decisions on a sustainable basis.– This will mean different things for different levels ofgovernment‣ What do we mean by sustainable?– Institutionally acceptable– Flexible to changing circumstances– Conceptually coherent
Institutionally acceptable‣ Local government rates are relatively broad-based when compared with the more narrowland taxes imposed by the States.– Local government rates are relatively free ofcontroversy and accepted as well as any tax canbe (Carling 2008).‣ Closer connection and acceptance to servicesprovided by local governments.– Acceptance of tax may depend on quality ofexpenditure.
Flexible to changing circumstancesTax revenue as a percentage of GDP1.200.501.000.400.800.300.600.400.200.200.100.000.001989-90 1991-92 1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08Local government rates (LHS)Land tax (RHS)Rates appear to have been a more stable revenue source than the States’ land tax
Conceptually coherent‣ Rates arguably an appropriate tax base forlocal governments in Australia– Immobile base– Link between services provided and propertyvalues‣ But not the only revenue source for localgovernments– Uneven capacities of local governments– Role for efficient user charging
Summary‣ Property rates appear to be a sustainable taxbase for local governments.‣ But need to consider interactions with otherlevels of government:– Many state tax bases are not as sustainable.– Which level of government should finance localgovernment grants?
Housing affordability‣ What does it mean?– Access to housing regardless of means;• Ability to enter the housing market (first homebuyers)?• Minimum standard (income or capabilities)?• Some income left for consumption other thanhousing (all income earners)?‣ What makes housing special?
Roads and TransportCurrent arrangementsIntroduction of CPRSSystem based on targetedtaxes and chargesTarget Instrument Target Instrument Target InstrumentClimate changeCPRS Climate change CPRSCongestionLocation & timebased chargesGeneral revenueraisingFuel taxes, statetaxes on motorvehiclesGeneral revenueraisingFuel taxes, statetaxes on motorvehiclesRoad usageOther social costsMass, location anddistance basedchargesSpecific taxes,charges orregulationsEfficient revenueraisingFuel tax, annualregistration