The Federal Government led by Prime Minister Malcolm Turnbull has floated the radical idea of allowing states and territories to collect a portion of the income tax to help them fund social sector services such as healthcare and education.
The PM is hoping that the new idea will reduce the government’s burden on income tax collection as states and territories can collect a part for services like hospitals and schools instead of pressing Canberra for funds. This will also reduce the states’ dependence on Commonwealth grants.
The prime minister is hoping that the new idea will not only reduce the federal government’s burden of income tax collection but also allow states and territories to collect the remainder for funding services like hospitals and schools.
But since this is just being floated around, nobody can be sure how many states will get on board.
According to media reports, Cabinet Department head Martin Parkinson has briefed state and territory officials about the proposal. They will be given more details ahead of the Council of Australian Governments (COAG) meeting on Friday, reports The ABC.
Reacting to questions from media persons, Treasurer Scott Morrison said the matter is under consideration.
“I’m a pragmatist on all of these issues and a pragmatist always focuses on solving the problems,” he said.
However, Morrison stressed that the policy of the federal government is not to increase the overall tax burden.
The Prime Minister has already spoken about taxation reforms to many state leaders including Western Australia’s Premier Colin Barnett.
“So if the Prime Minister can get the states to agree I think it could be quite a significant COAG,” Barnett said.
ACT Chief Minister Andrew Barr said it was a positive idea.
“Income taxing powers would be part of a broader tax mix for state and territory governments,” he said.
While NSW Premier Mike Baird said he is against allowing states to levy the income tax, SA’s Jay Weatherill said it will not work. Queensland Premier sought more details. Victorian premier Daniel Andrews dismissed the idea as a “tax policy thought bubble.”
Opposition leader Bill Shorten said the government taking up hospital funding band-aid just before the election is a backdoor attempt to increase taxes on Australians.
Greens leader Richard Di Natale called it political cowardice and said state income tax is a ruse to dump the budget problems on states and territories, reports the SBS.