1301.0 - Year Book Australia, 2003  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 24/01/2003   
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Recent tax reforms

The tax reforms introduced from 1 July 2000, as part of The New Tax System, have affected GFS aggregates and the composition of taxation revenue from 2000-01. The main aspects of these taxation reforms are:

  • As part of the Intergovernmental Agreement on the Principles for the reform of Commonwealth-State Financial Relations (IGA) of June 1999, endorsed by the Prime Minister, all premiers and chief ministers, the Commonwealth Government enacted legislation to impose the GST from 1 July 2000 and provide for all of the GST revenue to be granted to the states and territories.
  • Under the IGA, the Commonwealth permanently ceased the Commonwealth wholesale sales tax and the so-called safety net tax arrangements from 1 July 2000. At the same time, state governments also permanently ceased bed taxes, financial institutions duties, and stamp duties on marketable securities, and adjusted their gambling taxes to take account of the impact of the GST on gambling operators. State debit taxes are to cease no later than July 2005, and the need to continue a number of state stamp duties on financial instruments and leases is also to be reviewed in 2005. As part of the tax reform, the Commonwealth retains income tax for its own purposes.

Federal-state financial relations

Table 27.17 shows the change in the components of state general government operating revenue between 1999-2000 and 2000-01, on an accrual GFS basis. The 13.8% decline in total taxes levied by state governments, from $37,826m in 1999-2000 to $32,604m in 2000-01, is due to the removal of certain state government taxes from 1 July 2000, as mentioned earlier.

The 33.6% increase in grants received by state governments, from $33,301m in 1999-2000 to $44,501m in 2000-01, reflects an increase in grants paid by the Commonwealth which includes the replacement of revenue lost by the removal of certain state taxes.


27.17 STATE GENERAL GOVERNMENT OPERATING REVENUE
1999-2000
2000-01
Change
Contributions to total
taxes 2000-01
GFS Revenue
$m
$m
%
%
Taxation revenue
37,826
32,604
-13.8
32.3
Current grants and subsidies
33,301
44,501
33.6
44.1
Sales of goods and services
9,321
9,542
2.4
9.4
Interest income
2,912
2,138
-26.6
2.1
Dividend income
3,430
3,105
-9.5
3.1
Other
8,356
9,129
9.3
9.0
Total
95,146
101,019
6.2
100.0
Source: ABS data available on request, Government Finance Statistics.


Composition of total taxation revenue

Table 27.18 shows the major components of taxation for the Commonwealth, state and local governments combined between in 1999-2000 and 2000-01, on a GFS basis.


27.18 MAJOR COMPONENTS OF TAXATION REVENUE, General government: All levels of government
1999-2000
2000-01
Change
Contribution to total
taxes 2000-01
$m
$m
%
%
Taxes on income
Income taxes levied on individuals
83,623
77,392
-7.5
36.2
Income taxes levied on enterprises
29,516
42,221
43.0
19.8
Income taxes levied on non-residents
1,276
1,242
-2.7
0.6
Employers payroll taxes
General taxes (payroll tax)
8,739
9,322
6.7
4.4
Other employers labour force taxes
3,467
3,537
2.0
1.7
Taxes on property
Taxes on immovable property
8,446
9,062
7.3
4.2
Taxes on financial and capital transactions
9,667
9,766
1.0
4.6
Taxes on provision of goods and services
General taxes (sales tax)
15,644
1,976
-87.4
0.9
Goods and services tax (GST)
. .
23,854
. .
11.2
Excises and levies
14,660
19,487
32.9
9.1
Taxes on international trade
3,799
4,606
21.2
2.2
Taxes on gambling
4,426
3,553
-19.7
1.7
Taxes on insurance
2,139
2,402
12.3
1.1
Taxes on the use of goods and performance of activities
Motor vehicle taxes
3,911
4,030
3.0
1.9
Franchise taxes
5,819
325
-94.4
0.2
Other taxes
1,016
992
-2.4
0.5
Total
196,148
213,766
9.0
100.0
Source: Taxation Revenue, Australia, 2000-01 (5506.0).


Major factors affecting taxation revenue in 2000-01 are outlined in the following sections. This information has been derived from budget statements and annual reports published by the Commonwealth Government and the state governments.

Taxes on income

Income taxes levied on individuals - The major cause of the 7.5% fall in income taxes levied on individuals was a decrease in Commonwealth government personal income tax collections, reflecting a decrease in personal income tax rates associated with tax reform.

Income taxes levied on enterprises - The 43.0% increase in taxes levied on enterprises was mainly due to strong company income growth and the introduction of the Pay As You Go system, which effectively brought some company tax assessments forward into 2000-01. This was in spite of a fall in the general tax rate for companies from 36% to 34% for the 2000-01 income year. The scheduled increase in the superannuation guarantee from 7% to 8% in 2000-01 also boosted tax levied on contributions from superannuation funds. Furthermore, the addition of fringe benefits to group certificates from 2000-01 increased revenue from the superannuation surcharge that applies to contributions from higher income earners.

Income taxes levied on non-residents - The 2.7% decrease in income taxes levied on non-residents largely reflects the impact of some large one-off dividend payments in 1999-2000 upon dividend withholding taxes, partly offset by a rise in interest withholding taxes.

Employers payroll taxes

Payroll tax revenues increased across all states. This was due to growth in employment and employee remuneration during 2000-01, partly offset by a reduction in payroll tax rates in many states.

Taxes on property

Taxes on immovable property - Revenue from taxes on immovable property increased in all states. Revenue from land taxes rose in all states except Tasmania, reflecting growth in taxable land values.

Taxes on financial and capital transactions - Revenue from taxes on financial and capital transactions increased in all states except Queensland and South Australia. There was a decrease in revenue from stamp duties on conveyances in all states, except Western Australia. These decreases were a result of a more subdued turnover in the property market than in the previous year when transactions were brought forward due to the introduction of the GST. There were significant one-off stamp duty transactions in the previous year associated with a restructuring of the electricity industry in Queensland, and stamp duty on conveyances in South Australia which included $103m received upon the sale of electricity assets. An increase in financial institutions transaction taxes occurred in all states except Queensland. The fall in Queensland was due to the trend toward non-cheque payments since the introduction of the Bank Account Debits Tax which is the main transaction tax for that state.

Taxes on provision of goods and services

General taxes (sales tax) - The 87.4% decrease in general taxes reflects the abolition of the wholesale sales tax from 1 July 2000.

Goods and services tax (GST) - In 2000-01, $23,854m was collected.

Excises and levies - The major cause of the 32.9% rise in tax revenue from excises and levies was a 35.0% increase in Commonwealth government excises, from $14,091m in 1999-2000 to $19,019m in 2000-01. Two factors largely contributed to this movement. The major contributor was changes in the arrangements under which the excise revenue previously collected on behalf of the states and territories has been retained as Commonwealth revenue from 1 July 2000 as a part of The New Tax System. In addition, an increase in revenues from unleaded petrol and diesel, reflecting continued growth in these products, contributed to the movement.

Taxes on international trade -. The 21.2% rise in taxes on international trade largely reflects an increase in the customs duty rates applying to imported alcoholic beverages from 1 July 2000. This increase in customs duty offsets the removal of the wholesale sales tax on beer and spirits which was levied at a rate of 37%, and mirrors an equivalent increase in excise on domestically produced beer and spirits.

Taxes on gambling - Revenue from taxes on gambling decreased in all states, reflecting adjustments to gambling taxation arrangements by the states to take into account the impact of the GST on gambling operators.

Taxes on insurance - Revenue from taxes on insurance increased in all states, reflecting higher premium levels which included GST impacts (both directly on premiums and indirectly through the change in the value of property insured), a higher level of natural disaster claims, and less competition due to several reinsurers going out of business.

Taxes on the use of goods and performance of activities

Motor vehicle taxes - The major cause of the 3.0% rise in motor vehicle tax revenues was an increase in revenue from stamp duty on vehicle registration. This increased in all states except Queensland, where it remained steady, and was in line with increased sales of motor vehicles which followed the replacement of the wholesale sales tax with the GST and the net effect on retail prices.

Franchise taxes - Revenue from total franchise taxes decreased across all states in 2000-01. The 94.4% decline in franchise tax revenues reflected new arrangements under which excise revenue previously collected on behalf of the states and territories and distributed to them as safety net taxes have been retained as Commonwealth revenue from 1 July 2000 and included as excises.