Page 1592 - Week 05 - Tuesday, 31 March 2009
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Individual taxes should also be assessed against some key principles such as economic efficiency, vertical and horizontal equity, administrative simplicity, financial adequacy and sustainability. The overall taxation system needs to be assessed against these principles, recognising that not all taxes need to satisfy all of these principles for the overall system to provide an appropriate balance. It should also be acknowledged that it is impossible to identify a perfect mix of taxes, given the fact that taxes themselves are imperfect. However, the need to assess the appropriateness of the taxation mix remains, given the question of fairness of taxation burden for various sections of the community.
The Commonwealth Grants Commission assesses states’ and territories’ revenue and expenditure efforts relative to their capacities and provides a benchmark for the national average. According to the latest assessment from the Commonwealth Grants Commission, published in the 2009 update of relative fiscal capacities of states, the level of government service provided in the ACT is assessed at 121 per cent. That is well above the national average.
The taxation effort of the ACT in 2007-08 was 107.5 per cent. That is also above the national average, which by definition sits at 100 per cent, but should be put in the context of the level of service delivery. The ACT’s total own-source revenue effort is also assessed at 121 per cent. The ACT’s above average level of service delivery is assessed as being in balance with its total own-source revenue efforts.
The difference between the taxation effort of 107.5 per cent and the total own-source revenue of 121 per cent reflects other non-taxation fees and user charges. The consistency between our own-source revenue-raising effort and the level of service provision ensures that the high quality of government services currently provided in the ACT are sustainable. And the 2009 update shows that, over the past three years, the ACT has progressively aligned its total own-source revenue-raising effort with its high level of service delivery.
The mix of taxation in the ACT is broadly consistent with the mix in other jurisdictions. The ACT’s payroll tax, land tax and general rates, and share of total revenue, are all within one percentage point difference from the national average. The most significant differences are for conveyances and gambling taxation.
In 2006-07, the conveyancing share in the ACT, at 26 per cent, was 3.6 percentage points higher than the national average of 22.4. While the ACT conveyance share was above the national average in 2006-07, it is important to note that there is a relatively large variation in the conveyance share across the jurisdictions. The 3.6 per cent deviation from the national average was within the statistical measure of spread across jurisdictions, which is 5.1 percentage points. In other words, this is within the norm.
For gambling taxation, the share was 3.0 percentage points below the national average. As with the conveyance share, there is a relatively large variation in the gambling share across jurisdictions and, again, the deviation from the national average is within one standard deviation.
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