Reform focus turns to tax

The recent meeting of the Council on Federal Financial Relations in Canberra has put a focus on tax reform and the opportunities for more efficient and sustainable revenue arrangements to address the growing challenges and financial pressures facing all governments, including local government.

The Treasurer, the Hon Joe Hockey MP, outlined six principles for the taxation reform:

1. It must promote a stronger economy building jobs, growth and opportunity
2. Any reform must be fit for purpose in the modern economy
3. Tax changes must encourage workforce participation and ensure families control their own money
4. Generally, you should not be taxed until you have earned the income
5. Reform must encourage innovation and opportunity, and reward for effort
6. As best as possible, the revenue raising capacity of each tier of government should be aligned to responsibilities of funding and service delivery.

All the principles are important to local government, but the sixth in particular strikes an important chord. During recent meetings with Mr Hockey and Minister for Finance, the Hon Mathias Cormann, I urged that any revenue mechanisms and tax sharing arrangements being considered as part of the reform should acknowledge the essential role of local government as the third tier of government in delivering governance, services and infrastructure at the local level. We should not downplay the possible implications of the tax reforms on local government’s ability to raise the revenue necessary to deliver these important services. Our aim for the reforms should always be centred on achieving a well-designed tax system that is fair, efficient and sustainable.

This taxation reform process presents a vital opportunity to address the current challenges of revenue and service delivery facing all governments. We must ensure that both the tax reform and Federation reform proceed in parallel with the objective of aligning revenues and responsibilities where possible and providing greater transparency to intergovernmental transfers where necessary.