The release of the Tax Discussion Paper on Monday this week marks the start of an important national debate about how we collect and distribute Australia's taxation revenue.
The Discussion Paper is the first step in the process of developing a White Paper on Taxation which will set out the Government's policy on tax reform and complement the White Paper on the Reform of the Federation, which is looking at how to improve the delivery of government services.
From a local government perspective there could hardly be a more important focus for reform. Councils are asked to deliver an increasing range of services and infrastructure, often because the other levels of government have withdrawn from areas, but we do this with a limited revenue base.
In fact, local government spends $32 billion annually (about 6% of public sector expenditure) and maintains infrastructure valued at more than $330 billion (more than 22% of the public sector total) while collecting just 3% of Australia's tax revenue.
ALGA, and state and territory local government associations, will be participating in the review of Taxation with the objective of ensuring, as far as possible, that our tax system delivers the revenue to local government which we need to meet local community needs. We will be highlighting the need to maintain the integrity of our rating system in the face of rate capping in some jurisdictions, the increasing pressure on councils for rate exemptions and concessional treatment and the imposition of levies by state governments. We will also be exploring how any potential reforms to land tax might impact on councils and what any changes to the GST might mean for local government.
A critical issue for ALGA is how to ensure that local government can access revenue streams which grow at the same pace as the economy and the local demand for services and infrastructure. For this reason, the distribution of tax revenue, not just its collection is important. The proportion of Commonwealth tax revenue going to councils through the Financial Assistance Grants has been falling since 1996 when it was 1% of tax revenue. It is currently less than 0.7% and is expected to decline to less than 0.55% over the next 4 years.
The Government has stated that all issues are on the table for discussion and has sought public submissions by 1 June 2015. The Government then expects to release a Green Paper on reform options in the second half of 2015 before finalising a White Paper next year.
It is important that local government’s voice is heard in this debate and I encourage all councils to make a submission on the Discussion Paper. This is an opportunity to ensure that the reforms which flow from this process strengthen rather than weaken local government’s ability to meet the needs of its communities.
Mayor Troy Pickard