With the Federal Election campaign in full swing, tax reform continues to be a major issue. The Coalition is arguing that, as we move towards the next millennium, Australia needs tax reform with a GST. On the other hand, the Labor Party asserts it can deliver tax reform but without the need to introduce a new tax.
In the lead up to the release of the Tax Packages, intense lobbying by the Australian Local Government Association (ALGA), and its member State and Territory LGAs, paid off with the Coalition announcing that, under its Package, Council rates, water, sewerage and regulatory charges would be GST free. However, ALGA believes that despite this exemption Councils and their communities would face a massive GST bill of hundreds of millions of dollars per year on Council services.
But of greater concern is that, under the Coalition’s Package, the States would receive all revenue raised from a GST, with Local Government becoming wholly reliant on the State Government for Financial Assistance Grants (FAGS).
ALGA President, Councillor John Campbell, believes that under this scenario the Federal Government is walking away from its responsibilities to local communities ‘by handballing the grants system to the States, without a sufficient long term guarantee that they will be maintained’.
The Coalition’s policy to hand over all GST revenue to the States is no doubt aimed at averting a repeat of the infamous walk out by the States at the Premiers Conference. However, with the States already strapped for funding in health, education and so forth, throwing Local Government into the pot does not auger well.
The Coalition’s estimate of how much will be raised from a GST also needs to be questioned. If a GST is introduced and it falls short of estimations, it will then be fairly easy to convince the States that an increase in the GST rate is necessary.
Reliance on State hand outs, together with the possibility of the Federal Government washing its hands of Council funding, would have major repercussions for Local Government as a player in the national arena. A return to ‘Creatures of the State’, through both legislation and funding control, would undermine the enormous work by Local Government to ensure that the local communities it represents are considered in national policy making forums.
Under the Labor package FAGs would remain with the Federal Government, however, the fact that Local Government grants are at an historically low level per capita has not been addressed.
It is for this reason that ALGA is lobbying that, if a GST is introduced, Local Government, like the States, should have a guaranteed share of revenue raised, and similarly, under the Labor proposals, Local Government should also have a guaranteed fixed percentage of taxes raised.
As is happening across the nation, Councils and their communities need to carefully evaluate all aspects of the two Packages, and how each would impact on them and their locality.
