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Wednesday, 31 March 1999
Page: 4827


Mr PROSSER (11:22 AM) —This legislation introduces the most far-reaching reforms to Commonwealth-state financial relations since Federation. This legislation is an integral part of a much larger plan for reform of Australia's taxation system—a taxation system that rewards effort with incentive, provides a secure source of revenue for Australia's states and territories, establishes a taxation system that is fair and consistent and simplifies taxation obligations for Australian business by harmonising taxation payment dates and reducing their frequency.

Since Federation, states and territories have battled with the problem of having to budget without a secure revenue base. This has resulted in an inconsistent system of indirect taxes levied by the states and territories and financial assistance grants provided by the Commonwealth. This inadequate financial relationship between the states and the Commonwealth has resulted in a range of inefficiencies and inconsistent taxes between different state and territories. Under this legislation, the Commonwealth will transfer the entire GST revenue to the states and territories and, in return, the states will abolish nine of their current taxes and accept greater financial responsibility for their affairs.

The introduction of the GST will fund the abolition of the wholesale sales tax and nine separate state taxes. This will reduce the tax burden on Australian business by just on $10 billion each year from 2001-02. With access to the entire GST revenue, states and territories will have a secure and growing source revenue. This will give the states and territories greater autonomy in their own financial affairs and greater financial independence from the Commonwealth, providing certainty in revenue and eliminating debate over the general purpose grants at the annual Premiers Conference.

An important area of reform covered in this legislation is the assumption of responsibility for the funding of local government by the states and territories. The states and territories currently have legislative responsibility for local government, and it is only appropriate they assume financial responsibility for local government as well. Under the measures contained in this legislation, responsibility for local government financial assistance grants will be transferred to the states and territories from 1 July 2000. The reforms to Commonwealth-state financial relations contained in this legislation will provide the states and territories with a strong, growing tax base that will improve their financial position. In return, the states and territories will forgo the current financial assistance grants and a range of inefficient taxes and assume additional expenditure responsibilities such as funding for local government.