Broadening the base or increasing the rate of the GST and scrapping stamp duty are among reform options raised in a tax discussion paper released by the NSW government on Monday.
Warning that Australia must prepare for the era of electric cars that will slash fuel excise revenue, the push to reform federation warns the states will no longer be able to fund schools and hospitals properly without change.
The NSW Review of Federal Financial Relations discussion paper aims to explore how NSW and the Commonwealth “can work together to build a stronger economy, encourage state-led reform, and ultimately, deliver better value for taxpayers”.
“We have seen GST revenue eroded over time, have a complicated series of funding arrangements and partnerships with the Commonwealth, and face significant challenges as our population ages, technology advances and work patterns change,” Treasurer Dominic Perrottet said.
“The challenge for the expert panel is to identify options and ways we can improve the system and at the same time ensure we maintain a stable and reliable revenue base to fund essential services and infrastructure into the future.”
The review is being chaired by businessman David Thodey.
“We want to hear what people have to say and welcome everyone to have their say on issues that matter to them,” Mr Perrottet said.
The discussion paper warns that doing nothing is not an option.
“Good policy now can avoid hard choices later, leaving a legacy of intergenerational opportunity and fairness,” the report says.
“With limited revenue-raising powers, states depend on revenue streams that can be volatile, unpredictable and damaging to productivity. Many are on the decline, and nearly all will be affected in some way by the unfolding changes to society and our world.
“Like all states, NSW depends on Commonwealth funding to fill the gap between how much revenue it can raise, and how much it spends on providing essential services. This accounts for almost 40 cents in every dollar of revenue. The future of these revenue streams, including the amount of funding, the number of conditions attached, and the degree of continuity, will be critical to ensuring future generations can benefit from the same, or better, services.”
The push to debate the GST follows Prime Minister Scott Morrison previously considering the option during the Turnbull government, when he served as Treasurer.
Last year, Mr Morrison and Finance Minister Mathias Cormann ruled out GST reform without a mandate from voters at an election.
It followed a push by the Australian Tax Office to debate anomalies, including the fact that the GST is applied to brioche burger buns but hamburger buns are tax-free.
“We have no plans at all to broaden the base of the GST,” Senator Cormann said.
“If we had such a plan we would have taken it to the Australian people before the election.”
Former South Australian premier Jay Weatherill has also previously called for discussions on the states securing a proportion of income taxes or broadening the base of the GST to services.
Mr Morrison is yet to comment on the NSW discussion paper.