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Home Features Percy Allan: reforming the Australian federation like dominoes
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TAGS Joe Hockey, Mike Baird, Jay Weatherill, income tax, Goods and Services Tax, Public economics, National Commission of Audit, economic policy, Political economy
Some hope a Hawke-style grand bargain can bring about reform to our federal-state tax problems. It’s more likely change will come in the form of domino-like self-interested reactions, says former NSW Treasury secretary Percy Allan, and indeed it’s already underway.
Reforming the Australian federation is not easy because it requires near unanimity by all governments. So the question is not only what should be done, but more importantly how it will come about?
Any academic specialising in this area will say the challenge is correcting “vertical fiscal imbalance” and simplifying “horizontal fiscal equalisation”. But my guess is that most people don’t understand, let alone care about VFS and HFE. Instead they are concerned about news reports that:
These burning platforms are realities, not fabrications. Attempts to ignore them won’t boost confidence and make the economy grow faster, but rather make voters lose trust in their leaders. We need to acknowledge that the above problems pose a threat to both our economic growth and social fabric. The federation faces a crisis that won’t go away without a national discourse and hard decisions.
Lobby groups are pushing for either tax relief (businesses calling for a higher GST to reduce company tax) or higher spending (welfare groups asking for higher income taxes to fund social programs). But such pleadings won’t win broad support because their demands are too narrow and sectional.
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Percy Allan AM is the former secretary of the NSW Treasury. He now runs a consulting practice advising on policy, economics, finance and management in the public sector and writes a regular column for the Eureka Report.
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