State, territory leaders urge national tax reform after Mike Baird’s barb

The Australian, January 20, 2017:

State and territory leaders are urging the federal government to urgently continue the task of national tax reform, as outgoing NSW Premier Mike Baird labels the failure to achieve any significant changes to the system one of his biggest disappointments in office.

Having argued alongside South Australian Premier Jay Weatherill for a lift in the GST to help plug health and education funding shortfalls, Mr Baird said not achieving reform through the COAG process was among his biggest regrets.

“I think there was a big opportunity there to do something very significant in terms of the competitiveness of the economy and the sustainability of funding services in the long term, and that’s something I’m disappointed (about),” Mr Baird said.

“I certainly gave it a crack.”

The Premier had argued that lifting the GST to 15 per cent while maintaining its current tax base would have raised $100bn extra for the federal government to distribute to the states for health and education spending, while also allowing for compensation and tax cuts.

Other state and territory leaders yesterday praised Mr Baird for his role in trying to make progress on federal-state tax relations, with Mr Weatherill saying his advocacy at COAG would be a “huge loss”.

Western Australian Premier Colin Barnett told The Australian that Mr Baird had shown “consistent support and leadership on tax reform” and he would be missed.

“I was pleased Mike Baird raised the issue of GST. He and I agree that GST should be allocated largely on the basis of population. That is fair to all states and all Australians,” Mr Barnett said.

Reform of the national tax system was abandoned by Malcolm Turnbull after state leaders rejected a plan for them to levy a share of income tax instead of raising the GST.

Northern Territory acting treasurer Natasha Fyles said changes to federal-state tax arrangements were still needed and called for a “national approach”.

“It’s desperately needed to bridge the rapidly growing gap between the cost of delivering education and health and the amount of funding provided by the Federal Government,” she said.

“However, the transfer of untied Commonwealth revenue from any reforms to the States and Territories would need to be based on the principles of Horizontal Fiscal Equalisation — so the NT is not disadvantaged in any way.”

An ACT government spokesman said that while most jurisdictions recognised there were problems with the country’s tax system, “there isn’t a lot of political consensus and courage to address them.”

“Premier Baird has helped drive a national discussion on tax reform over the past few years, and these discussions must continue,” he said.

Business Council of Australia chief executive Jennifer Westacott called for the new NSW Premier, expected to be Gladys Berejiklian, to assume Mr Baird’s leadership role on tax reform.

“In Australia new business investment is falling at rates not seen since the 1990s recession. Our continued prosperity demands policies that support competitive businesses, including globally competitive tax rates and unshackling business from overregulation,” Ms Westacott said.

“Our 30 per cent company tax rate is already uncompetitive. It will become even more so under Donald Trump’s company tax plan.

“The alternative — to maintain our uncompetitive company tax rate and price ourselves out of the market for investors — would most harm those workers who need better jobs and higher wages to support themselves and their families.”

Arguing that Mr Baird’s zeal for reform made him sound like a Labor politician, Bill Shorten said Mr Turnbull should follow his lead.

“We know that one of the key issues is housing affordability and negative gearing and I think Malcolm Turnbull should listen carefully to Mike Baird and should reconsider his outrageous defence of negative gearing, which sees first homeowners treated as second class to investors when it comes to housing affordability,” the Opposition Leader said.