Page 1111 - Week 04 - Tuesday, 8 April 2008
tax a jurisdiction raises relative to its capacity to raise tax. The Commonwealth Grants Commission makes an assessment of taxation effort. The taxation effort is determined as a ratio of what a jurisdiction actually raises in taxes to its taxation capacity. The ACT’s taxation effort in 2006-07 was 105. I should draw members’ attention to a comparison of taxation effort and the level of service provision: taxation effort of around 106 per cent compared to a level of service provision of 122 per cent. The Grants Commission data show that the territory’s taxation effort declined during 2005-06.
One should also view taxation in comparison with other states and territories. Both the Australian Bureau of Statistics and the Grants Commission provide data that allow those comparisons. The ABS data indicate that the total state and local government taxation in the ACT is $2,386 per capita, lower than the national average of $2,594 per capita. The ACT’s per capita state and local government taxation is lower than in Western Australia, New South Wales, Victoria and South Australia.
Data from the Commonwealth Grants Commission indicate that the ACT’s taxation effort in 2006-07, at 105 per cent, was broadly in line with that of New South Wales, at 104 per cent; Victoria, at 103 per cent; and Western Australia, at 102 per cent. And it was lower than that of South Australia, at 112 per cent.
One could compare individual revenue lines, although some care has to be taken as the taxation mix varies across jurisdictions. For members’ information, I can provide comparisons on some revenue lines that have been the subject of much discussion.
Contrary to the suggestions of high taxation, general rates on the average land value in the ACT are about $140 lower than the rates on equivalent-value land in Queanbeyan. That is an interesting point to make to members: rates on average value land in the ACT are $140 less than on the same value land in Queanbeyan. The ACT’s taxation effort on land tax as assessed by the Commonwealth Grants Commission is 100.8 per cent. This means that land tax revenue raising is almost exactly in line with capacity, at 100 per cent.
In summary, no matter how one looks at it—whether it is with reference to expenditure, other jurisdictions or capacity—the ACT is not a high-taxing jurisdiction.
Members will have heard the argument that taxation receipts have gone up so how can the government claim that it is not a high-taxing jurisdiction? That is quite disingenuous. Taxation revenue has gone up in nominal terms. But in nominal terms state final demand went up by almost 10 per cent in 2006-07 and private gross fixed capital formation was up by over 15 per cent over the time. And that is not forgetting that the ACT recorded its strongest population growth in 14 years.
The government does not deny that it has increased taxation. It was part of the structural reform to put the territory’s finances and service provision on a sustainable footing. What is important is to remember that taxation relative to capacity did not increase; it actually decreased. It is also important to remember that the ACT’s taxation remains within the norm of the other states.