PREMIERS' CONFERENCE 1968
STATE TAXATION
Statement by the Prime Minister, Mr john Gorton
I thinkLl it is the proper time for me to make clear the
Commonwealth's attitude on this question of possible extension of the areas
in which the States levy taxation. In particular, I think i must ma-ke clear
our attitude towards the imposition of States receipts duties on wages and
salaries and similar receipts of personal icome which we regard as income
tax. We take as our starting point the arrangements which were
made in 1965 governing the payment of the financial assistance grants.
These arrangements, like the ones that preceded them, were made on the
' tahssumaptiton that the exerciseof taxing powers would remain unchanged and
the States and their authorities would continue to pay Commonwealth
pay-roll tax. An agreement on that basis was, 1 understand, explicitly
stated at the time. I believe that the States then knew that the Commonwealth
of was not undertaking to pay the agreed grants to the States unless the States
refrained from levying income taxes themselves. That was the position, and
as far as we are concerned that remains the position. We have em phasised
that the introduction of State income taxation would in our view be a serious
breach of the present arrazzgernents.
Over the whole period since World War 11, the Commonwealth
has adhered firmly to the principle of uniform, income taxation and opposed
any suggestion of double income taxation. M\ y own Government is convinced
Sthat this principle is sound and beneficial to the nation and that any multiplica-
Wtion of income taxes would be undesirable both economically and socially*
Because th~ e imposition of income tax and the rates of income tax imposed have
' nmaajor timipolicatnions, f or economic and social policies throughout the whole.
the Commonwealth will not stand by and permit its use of income
taxation for policy purposes to be impaired by the itroduction of State income
taxes. At last year's Conference, there was some discussion as to
what scope there might be within the terms of the present financial assistance
arrange ments for the States to extend their fields of taxation should they
desire to do so. In that context the question of State purchase taxes or turnover
taxes on business receipts was raised. The Commonwealth's attitude was that
it would not be opposed in principle to State taxation of this kind providedit was
not carried to the point where it would significantly affect Commonwealth
revenue collections or the carrying out of national policies.
Shortly afterwards, Victoria introduced its new receipts duty
which extended beyond taxation on turnover with which we have no quarrel
to taxation on wages and salaries and other personal incomes. The Commonwealth
stated its objection to this duty insofar as it applied to wages and salaries and
other comparable payments such as superannuation. I know that a tax similuir
-2
in many respects to the Victorian one was already in operation in Western
Australia, and I icnow, too, that the stamp duty legislation of other States
has at one time or another involved minor imposts on wages and salaries,
but we regard any impost on wages and salaries as in fact, substance 4nd
principle, a form of income tax. The Commonwealth is firmly opposed to
such a levy on wages and salaries and will continue to be so opposed.
In our view, such a levy is in breach of the preseat financial
assistance arrangements agree-d to by all States. W-e believe it is wrong
to impose more than one direct tax on Wages, salaries and related . forms
of income, and if such a practice were to become established and to spread,
it would not only add to the tax burdens on wage and salary earnlers which
already are by no means inconsiderable, but also it could give rise to all
of the evils of differential rates of income tax on citizens living in different
States, from which the system of uniform taxation has rid this country.
We want the States to refrain from imposing receipts duty
on wages and salaries and comparable payments. if these imposts are
still in existence when we come to review the present arrangements in
1970, that will be a decisive factor in determining our attitude on the
allocation to a State imposing that form of taxation. In the meantkme,
should a State that continues this impost on wages and salaries impose it
a higher rate than at present, we would mnove forthwith to amend our
legislation and seec to reduce that State's grant.
1 have already said that we do not object in principle to
modest extensions of State taxation into the general field of business
receipts or business turnover, provided it is not carried to a point where
it could significantly affect the Commonwealth's ability to carry out
national policies or to raise Commonwealth revenue. Subject to that
proviso, there would be -no conflict with the present grants arrangement
if any State decided to move into this field. But we do not suggest or urge
this. We are ready to accept it within the limits I have stated.
In recent times there have been suggestions that some States
might impose a tax on pay-rolls, presumably on the lines of the Commonwealth
pay-roll tax. We have studied that possibility and the various
implications it could have. It is right that i should tell you that the Commonwealth
does not look with favour on such action by any State. " We would
regard it as cutting across major Australian interests and purposes.
Pay-roll taxation is an important source of national rexenue and it is also
an instrument that can be used to promoite activities and developments of
benefit to our economy. For example, the rebate of pay-roll tax is
basically involved in the Commonwealth's scheme of export incentives,
which has been of marked success in promoting the growth of exports,
especially of manufactures, and this in turn has helped all of us. W-e
regard that as a kXind of tax that ought to be reserved to the Australian
Government and administered on a nation-wide basis.
0?
FINANCIAL ASSISTANCE GRANTS
million
N. S. W.
Victoria
Qld. S. A.
W. A.
Tasmania Six States 1966-67
275.1 207.5 124.8 93.8 85.9 34.5
821. 6( b) 1967-68
302. 8
228.3 139.6
102. 7
96. 1
38.0
907. 5( b) 1968-69( a)
Amount 328.9 247.7 153.9 111. 1
106. 2
41.2
989.0 Increase 26. 1
19.4 14.3 8.4
10. 1
3; 2
81.5
Assumes an increase of 5. 5 per cent in average
wages for the twelve months ended March 1969
and the same increase in each State's population
during 1968 as during 1967
In addition, the following amounts of special revenue
assistance were provided in 1966-67 and 1967-68 to help
offset effects of drought on State revenue
N. S. W.
Victoria
QId. S. A. 1966-67
$ million 8.0
2.75
10.75 1967-68
$ million 5.1 4.8 2.3 1.7
14.0
The following reimbursements have also been made
to the States by the Commonwealth to meet the cost of drought relief
measures: 1965-66
million 14.2 7.5 1966-67
million 13.0 4.9
21.7 17.9
N. S. W.
Victoria
QId. S. A. 1967-68
million 7.6 8.0 3.0 1.0
19. 6 Total million 34.8 15.4
59.2