Taxation arrangements
The primary reason for governments to levy taxes is to finance their operations and functions. Taxes are also powerful economic and financial tools, altering the distribution of income and the levels of spending in an economy. In addition, they have significant social impacts effecting individual and corporate behaviour (e.g. excise on tobacco reducing smoking).
The purpose of this section is to provide a broad oversight of who has access to the majority of Australia's tax dollars and to consider in general terms the efficiency of Australia's taxation system. A history of tax sharing arrangements between the Australian Government and local government is also included.
- Who has the dollars?
- A distinctive feature of the Australian federal system is that the Australian government levies and collects all income tax, from individuals as well as from enterprises. It also collects a portion of other taxes, including taxes on the provision of goods and services. The revenue base of state governments consists of taxes on property, on employer's payrolls, and on the provision and use of goods and services. The sole source of taxation revenue for local government is taxes on property.
- Why do we need an efficient tax system?
- Australia has progressed in the direction of a highly centralised taxation system particularly since the introduction of the Goods and Services Tax in 2000. This is an appropriate response for a country with such a dispersed population across a large area. However, it also means that the Australian government is primarily responsible for delivering horizontal and vertical fiscal equity.
- History of tax sharing arrangements
- With the introduction of the Local Government (Personal Income Tax Sharing) Act 1976 all local governing bodes were entitled to a fixed portion of Commonwealth personal income taxation revenue.
- How rates are calculated in each state
- The means by which property rates are calculated is different in each state and territory.
