Comments on Richard Eccleston "Modelling shows why premiers are wary of Turnbull’s tax proposal", 3/04/2016
The PM's proposal for the States and Territories to levy their own income taxes, unsurprisingly, hit snags of State and Territory leaders, not just because of many of its potential faults, but more importantly also because of the poor processes the PM has got into.
How could such a significant change to Australian taxation and federation financial relations labelled by the PM as a reform to the Australian federation in generations be announced by the PM only one day before the COAG meeting, with no prior consultations at all?
It reflected either unprecedented creative genius, or perhaps sheer stupidity!
Certainly it was not the way national policies should be made at the top of the Australian government.
Having said that, virtually all the issues raised in this post could potentially resolved without too much difficulty. That is to say, the States and Territories could be allowed to have the capacity to raise their own income taxes in whatever rates they each deem as suitable and desirable, then the federal government only provides enough fund for horizontal fiscal equalisation.
Giving the States and Territories the capacity to levy their own income tax would resolve vertical fiscal imbalance. Horizontal fiscal equalisation, in a way similar to what Canada does, would achieve horizontal fiscal imbalance.
Showing posts with label federation. Show all posts
Showing posts with label federation. Show all posts
2015-07-15
States are better positioned to run public hospitals
Comments on Peter Breadon "Forget health takeovers, here’s how to fix hospital funding and chronic disease care", 15/07/2015
The best approach still remains to have one layer of governments to be responsible for funding and running public hospitals and it would be better for the state and territory governments to do it with a reallocation of taxes so that the states and territories have a greater tax revenue share than its currently have, so the funding of state level public services comes from their own revenue as opposed to from the Commonwealth.
Alternatively as a second best, it can be shared in terms of funding with a fixed ratio between the states/territories and the Commonwealth, and the states and territories still run the public hospitals.
The Commonwealth should not be given the responsibilities to run public hospitals, given that it lacks the local knowledge and the relevant other expertise to do so. It is not well positioned to run the public hospitals in Australia. With the states and territories retaining the responsibilities to run the public hospitals, there will continue to be the inter-states competition and that is a good thing for the efficiency and quality of public hospitals services.
The Commonwealth should not be greedy in terms of both responsibilities and tax revenue. Otherwise Australia would end up to be a poorer place in terms of health and Australians will suffer from that as a result.
The best approach still remains to have one layer of governments to be responsible for funding and running public hospitals and it would be better for the state and territory governments to do it with a reallocation of taxes so that the states and territories have a greater tax revenue share than its currently have, so the funding of state level public services comes from their own revenue as opposed to from the Commonwealth.
Alternatively as a second best, it can be shared in terms of funding with a fixed ratio between the states/territories and the Commonwealth, and the states and territories still run the public hospitals.
The Commonwealth should not be given the responsibilities to run public hospitals, given that it lacks the local knowledge and the relevant other expertise to do so. It is not well positioned to run the public hospitals in Australia. With the states and territories retaining the responsibilities to run the public hospitals, there will continue to be the inter-states competition and that is a good thing for the efficiency and quality of public hospitals services.
The Commonwealth should not be greedy in terms of both responsibilities and tax revenue. Otherwise Australia would end up to be a poorer place in terms of health and Australians will suffer from that as a result.
2015-07-13
Make reforming Australian federation simple
Comments on Cheryl Saunders "Let the Constitution and democratic principle guide us to renew federalism", 13/07/2015
We need to approach the reforming of the Australian federation in a practical and effective way and there is no need to make or describe the current problems unduly harder or unnecessarily complex than they need to be.
Many of the real and perceived problems in the Australian federation have its origin of the relatively large fiscal imbalance between the federal and state and territory governments as a whole. To make the federation work better, therefore, should focus on this key issue. There is no need to change the constitution in any substantial way, given that the constitution has adequate provisions (alternatively the absent in prohibiting a change to the fiscal imbalance) to deal with most issues the federation faces including the revenue realignment.
Correcting the vertical fiscal imbalance by allowing the states and territories a sharing of some taxes such as the income tax to a reasonable degree so that the vertical fiscal imbalance is largely resolved, will suffice for the reform of the federation. All other issues remain in the proper domains of the federation's constituents including both the federal and State and Territory governments.
The paper will benefit from making this point clearer than the current form. It is also advisable to those who have prepared the issues paper and the discussion paper: don't make the reform unnecessarily difficult than it should be and take a simple and realistic approach.
Don't overdo it and don't introduce unnecessary details to distract from that main task.
The Australian federation is not broken, but a further reform of it by addressing the vertical fiscal imbalance will make it work better. And that will benefit all the governments through better accountability and effectiveness and as a result, all Australians will benefit from such a simple yet effective reform.
Bureaucrats have a tendency to make and are used to making things more complicated than they are. And this should be avoided in the processes of reforming the Australian federation. Political leaders should display the required leadership including disallowing bureaucrats' unnecessary complexity.
Why is it called a draft discussion paper? It is an indication of an immature bureaucratic approach and the tendency to avoid accountability of actions and results.
If you cannot make it a discussion paper, just say it!
We need to approach the reforming of the Australian federation in a practical and effective way and there is no need to make or describe the current problems unduly harder or unnecessarily complex than they need to be.
Many of the real and perceived problems in the Australian federation have its origin of the relatively large fiscal imbalance between the federal and state and territory governments as a whole. To make the federation work better, therefore, should focus on this key issue. There is no need to change the constitution in any substantial way, given that the constitution has adequate provisions (alternatively the absent in prohibiting a change to the fiscal imbalance) to deal with most issues the federation faces including the revenue realignment.
Correcting the vertical fiscal imbalance by allowing the states and territories a sharing of some taxes such as the income tax to a reasonable degree so that the vertical fiscal imbalance is largely resolved, will suffice for the reform of the federation. All other issues remain in the proper domains of the federation's constituents including both the federal and State and Territory governments.
The paper will benefit from making this point clearer than the current form. It is also advisable to those who have prepared the issues paper and the discussion paper: don't make the reform unnecessarily difficult than it should be and take a simple and realistic approach.
Don't overdo it and don't introduce unnecessary details to distract from that main task.
The Australian federation is not broken, but a further reform of it by addressing the vertical fiscal imbalance will make it work better. And that will benefit all the governments through better accountability and effectiveness and as a result, all Australians will benefit from such a simple yet effective reform.
Bureaucrats have a tendency to make and are used to making things more complicated than they are. And this should be avoided in the processes of reforming the Australian federation. Political leaders should display the required leadership including disallowing bureaucrats' unnecessary complexity.
Why is it called a draft discussion paper? It is an indication of an immature bureaucratic approach and the tendency to avoid accountability of actions and results.
If you cannot make it a discussion paper, just say it!
2013-01-07
A better Australian federation shouldn't be difficult to make
Comments on Henry Ergas “Tony Abbott should flesh out plan to fix federalism”, 7/01/2013, http://www.theaustralian.com.au/opinion/columnists/tony-abbott-should-flesh-out-plan-to-fix-federalism/story-fn7078da-1226548558033
The Australian federation has worked reasonably well, even though it could do even better.
I think there is likely a small window of a good opportunity for reforming the federation, in terms of roles, responsibilities and revenue arrangement should the coalition win the next federal government - it could work together with the 4 largest states to undertake reforms, along the line of a more efficient federation with clear responsibilities and the means they each can use to raise revenue.
Fiscal imbalance should be restricted to largely nominal, like the GST and possibly a sharing of income taxes including company taxes. A new inter-governmental agreement should be made to protect state rights. Once made, any change can only be by a consensus agreement.
The federal government's role and functions should be in national defence, foreign policy and external trade, national social security, macroeconomic policies, and possibly inter-state policies. The rest should be with the states.
Fiscal equalisation should gradually decrease in proportion to state total revenues and move to almost equal per capita distribution or proportional by population shares.
The Australian federation has worked reasonably well, even though it could do even better.
I think there is likely a small window of a good opportunity for reforming the federation, in terms of roles, responsibilities and revenue arrangement should the coalition win the next federal government - it could work together with the 4 largest states to undertake reforms, along the line of a more efficient federation with clear responsibilities and the means they each can use to raise revenue.
Fiscal imbalance should be restricted to largely nominal, like the GST and possibly a sharing of income taxes including company taxes. A new inter-governmental agreement should be made to protect state rights. Once made, any change can only be by a consensus agreement.
The federal government's role and functions should be in national defence, foreign policy and external trade, national social security, macroeconomic policies, and possibly inter-state policies. The rest should be with the states.
Fiscal equalisation should gradually decrease in proportion to state total revenues and move to almost equal per capita distribution or proportional by population shares.
2011-05-25
Discord over WA increase in royalties and the Review of GST Distribution
Comments on Julie Bishop “Swan conjures up a Black Swan from the West”, 25/05/2011, http://www.smh.com.au/opinion/blogs/the-bishops-gambit/swan-conjures-up-a-black-swan-from-the-west-20110525-1f2y4.html
Maybe, the reactions by Swan, Gillard and Ferguson could be explained by the review of GST distribution commissioned by Gillard and Swan and announced in Perth by Gillard on 30 March 2011.
There might have been some understanding/misunderstanding or expectations (or false hopes) that that review would have WA to rethink about its scheduled increase in royalties of its fines iron ore.
The timing for that review is a draft report by February 2012 and the final report by August/September 2012 for consideration for 2013.
It is interesting to note that the final report is expected to be available after the introduction of the MRRT and the carbon tax, assuming both legislations will pass the parliament.
WA may think it will be too uncertain to rely on that review to secure a better funding for it.
Of course, the WA government is a liberal/coalition government and on the opposite political side of the Gillard ALP government.
PS: this fascinating discord involves politics, economics and taxation, as well as federal financial relations. Arguably, it is a very difficult issue even at the best of times of federal politics, not to mention the fact it is at a time the federal government has been experiencing serious difficulties.
Maybe, the reactions by Swan, Gillard and Ferguson could be explained by the review of GST distribution commissioned by Gillard and Swan and announced in Perth by Gillard on 30 March 2011.
There might have been some understanding/misunderstanding or expectations (or false hopes) that that review would have WA to rethink about its scheduled increase in royalties of its fines iron ore.
The timing for that review is a draft report by February 2012 and the final report by August/September 2012 for consideration for 2013.
It is interesting to note that the final report is expected to be available after the introduction of the MRRT and the carbon tax, assuming both legislations will pass the parliament.
WA may think it will be too uncertain to rely on that review to secure a better funding for it.
Of course, the WA government is a liberal/coalition government and on the opposite political side of the Gillard ALP government.
PS: this fascinating discord involves politics, economics and taxation, as well as federal financial relations. Arguably, it is a very difficult issue even at the best of times of federal politics, not to mention the fact it is at a time the federal government has been experiencing serious difficulties.
2011-05-23
Respect the constitutional rights of states
Comments on Kenneth Wiltshire "WA pays heavy price for a problematic federation", 23/05/2011, http://www.theaustralian.com.au/national-affairs/wa-pays-heavy-price-for-a-problematic-federation/story-fn59niix-1226060664190
Professor Kenneth Wiltshire is one of few rare voices to acknowledge the constitutional rights of the states in mineral resources in the mining royalty/tax debate.
Most people ignore the constitution issues and simply argue that mineral resources belong to all Australians. It has become a complex issue with the MRRT/RSPT.
The MRRT/RSPT should have been designed as a replacement of the current less efficient state royalties and belong to the states, as opposed to the designs adopted by Canberra. In that way, the states including WA would have been on side and land their strong support.
In terms of further tax reforms, it is important that the Commonwealth learn from the GST experience to focus on national efficiency and national outcomes, as opposed to attempt to use it to further strengthen the revenue power of the Commonwealth as typified by the MRRT/RSPT designs.
As Professor Kenneth Wiltshire argued, it should consider how to address the vertical fiscal imbalances between the Commonwealth and the states and territories, currently to the tune of about $100 billion.
Swap the GST and personal income revenue is an option. Alternatively, a well designed income tax sharing arrangement may also work, still leaving the GST revenue to the states and territories as currently the case.
This, together with a new design of GST distribution, hopefully resulting from the current review Commissioned by the Prime Minister and the Treasurer, will rationalise the federal financial relation, to make it more efficient by better aligning service responsibilities with adequate revenue sources at the two levels of govenrment in the federation.
Professor Kenneth Wiltshire is one of few rare voices to acknowledge the constitutional rights of the states in mineral resources in the mining royalty/tax debate.
Most people ignore the constitution issues and simply argue that mineral resources belong to all Australians. It has become a complex issue with the MRRT/RSPT.
The MRRT/RSPT should have been designed as a replacement of the current less efficient state royalties and belong to the states, as opposed to the designs adopted by Canberra. In that way, the states including WA would have been on side and land their strong support.
In terms of further tax reforms, it is important that the Commonwealth learn from the GST experience to focus on national efficiency and national outcomes, as opposed to attempt to use it to further strengthen the revenue power of the Commonwealth as typified by the MRRT/RSPT designs.
As Professor Kenneth Wiltshire argued, it should consider how to address the vertical fiscal imbalances between the Commonwealth and the states and territories, currently to the tune of about $100 billion.
Swap the GST and personal income revenue is an option. Alternatively, a well designed income tax sharing arrangement may also work, still leaving the GST revenue to the states and territories as currently the case.
This, together with a new design of GST distribution, hopefully resulting from the current review Commissioned by the Prime Minister and the Treasurer, will rationalise the federal financial relation, to make it more efficient by better aligning service responsibilities with adequate revenue sources at the two levels of govenrment in the federation.
2011-05-20
Challenges and opportunities for Australian federal relations
Comments on Rob Burgess “WA opens a new front for Abbott”, 20/05/2011, http://www.businessspectator.com.au/bs.nsf/Article/Coalition-Treasury-budget-MRRT-GST-revenue-mining-pd20110520-GZT5S?OpenDocument&src=sph&src=rot
To a person with little knowledge of federation politics, I would think the front that Rob Burgess identified should be handled with a similar principle to the GST agreement that Howard/Costello reached with the state and territory governments.
And that is, in the national interests of reforms to be more efficient, Canberra should provide more growing resources to the states and territories as not only incentives but also an implicit recognition of the rights of the states and territories in the federation.
Further, this front could be combined with the tax reforms front.
In that perspective, it would be wise for Canberra to reconsider its approach to the MRRT proposal.
PS: we have on the one hand that Canberra has been saying that the states and territories would not have the required financial resources to meet the future challenges of healthcare, on the other hand Canberra has been trying to get more and more revenue sources from the states and territories, such as the MRRT or its immediate philosophical predecessor, the RSPT.
Under this kind of approach, how can and will the states and territories have the required financial resources to provide sources including healthcare like public hospitals?
Isn’t the message from Canberra contradicting itself and confusing to the public, knowledged in the field or not alike?
To a person with little knowledge of federation politics, I would think the front that Rob Burgess identified should be handled with a similar principle to the GST agreement that Howard/Costello reached with the state and territory governments.
And that is, in the national interests of reforms to be more efficient, Canberra should provide more growing resources to the states and territories as not only incentives but also an implicit recognition of the rights of the states and territories in the federation.
Further, this front could be combined with the tax reforms front.
In that perspective, it would be wise for Canberra to reconsider its approach to the MRRT proposal.
PS: we have on the one hand that Canberra has been saying that the states and territories would not have the required financial resources to meet the future challenges of healthcare, on the other hand Canberra has been trying to get more and more revenue sources from the states and territories, such as the MRRT or its immediate philosophical predecessor, the RSPT.
Under this kind of approach, how can and will the states and territories have the required financial resources to provide sources including healthcare like public hospitals?
Isn’t the message from Canberra contradicting itself and confusing to the public, knowledged in the field or not alike?
2011-04-29
Australian federal relation issues
Comments on Rob Burgess “What's behind Gillard's new waste line?” 29/04/2011, http://www.businessspectator.com.au/bs.nsf/Article/Labor-BER-spending-bill-funding-pd20110429-GCSU7?OpenDocument&src=sph
You may be right in saying "the disastrous home insulation scheme with the much less disastrous Building the Education Revolution scheme", but in dollar terms, the much less disastrous Building the Education Revolution scheme may be higher in total in terms of wastage.
Even leaving the normal and conventional definition of wastes aside, the effectiveness of many of those school halls to the so called "building the education revolution" is highly questionable - another form of effective wastage.
That is the first point.
The two indiscretions the Gillard government is committing reflect the long term trend and very unhealthy development in federal relations, that is, the federal government has been invading into states constitutional powers. The fed has been bullying and abusing the states on various matters.
That has not been helped by a pro-fed high court that has often sided with the fed on a number of federation relation issues.
Unfortunately, many Australians falsely and naively believe that many of the current problems with state government services can be resolved by further centralisation of government power to Canberra. It is illogical to think that a central government can do a better job where eight duly elected state governments have had difficulties to achieve.
That is a fantasy, especially after the huge wastage that the fed government did in the not so distant past and that government is still in government after the last federal election!
You may be right in saying "the disastrous home insulation scheme with the much less disastrous Building the Education Revolution scheme", but in dollar terms, the much less disastrous Building the Education Revolution scheme may be higher in total in terms of wastage.
Even leaving the normal and conventional definition of wastes aside, the effectiveness of many of those school halls to the so called "building the education revolution" is highly questionable - another form of effective wastage.
That is the first point.
The two indiscretions the Gillard government is committing reflect the long term trend and very unhealthy development in federal relations, that is, the federal government has been invading into states constitutional powers. The fed has been bullying and abusing the states on various matters.
That has not been helped by a pro-fed high court that has often sided with the fed on a number of federation relation issues.
Unfortunately, many Australians falsely and naively believe that many of the current problems with state government services can be resolved by further centralisation of government power to Canberra. It is illogical to think that a central government can do a better job where eight duly elected state governments have had difficulties to achieve.
That is a fantasy, especially after the huge wastage that the fed government did in the not so distant past and that government is still in government after the last federal election!
2011-03-29
Need to fundamentally reform federal financial relations
Comments on George Williams “O'Farrell needs to prove that states can do things better”, 29/03/2011, http://www.smh.com.au/opinion/politics/ofarrell-needs-to-prove-that-states-can-do-things-better-20110328-1cddj.html?posted=successful
It is true that money is the key determinant in the federal state relations.
Assuming that will continue to be true into the future, then what the states should and can do is to renegotiate with the federal government to iterate the state's role in many of the existing services and to realign revenue responsibilities between the two levels of government to relinquish some of the federal's financial power over the states by specifying more revenue sources transferred to the states as their own revenues.
For example, the MRRT is a resource rent tax, that is, a mineral royalty supposedly to be in a more efficient form, should belong to the states. Equally, the states should be given a fixed share of the income taxes, agreed by inter-governmental agreement, or a constitution reform, should it be necessary.
Past experiences from the performances of both federal and state governments indicate that each of them has provided poor services and wasted taxpayer’s money and neither has been perfect. For the federal government, the wastes and some disasters in the more recent pink batts and the BER programs have demonstrated its serious deficiencies in providing services.
Only when the financial resources of each and every level of the two levels of government in Australia are guaranteed to be adequate to the tasks of services, the Australia federation would function properly and in the most efficient way to provide the best services to all Australians.
There is no point for either the federal or the states to have an unfair advantage over the other, especially from the financial point of view.
While health reforms, education, infrastructure can all be short term targets for O’Farrell to work on in his fight with the federal government to reclaim state rights, he, and all other state and territory leaders should set their eyes on the longer term solution.
PS: of course, these fundamental reforms in the federal financial relations should be considered in the overall tax reforms that may include reforms to some state taxes to make the tax system more efficient and reduce distortions.
It is true that money is the key determinant in the federal state relations.
Assuming that will continue to be true into the future, then what the states should and can do is to renegotiate with the federal government to iterate the state's role in many of the existing services and to realign revenue responsibilities between the two levels of government to relinquish some of the federal's financial power over the states by specifying more revenue sources transferred to the states as their own revenues.
For example, the MRRT is a resource rent tax, that is, a mineral royalty supposedly to be in a more efficient form, should belong to the states. Equally, the states should be given a fixed share of the income taxes, agreed by inter-governmental agreement, or a constitution reform, should it be necessary.
Past experiences from the performances of both federal and state governments indicate that each of them has provided poor services and wasted taxpayer’s money and neither has been perfect. For the federal government, the wastes and some disasters in the more recent pink batts and the BER programs have demonstrated its serious deficiencies in providing services.
Only when the financial resources of each and every level of the two levels of government in Australia are guaranteed to be adequate to the tasks of services, the Australia federation would function properly and in the most efficient way to provide the best services to all Australians.
There is no point for either the federal or the states to have an unfair advantage over the other, especially from the financial point of view.
While health reforms, education, infrastructure can all be short term targets for O’Farrell to work on in his fight with the federal government to reclaim state rights, he, and all other state and territory leaders should set their eyes on the longer term solution.
PS: of course, these fundamental reforms in the federal financial relations should be considered in the overall tax reforms that may include reforms to some state taxes to make the tax system more efficient and reduce distortions.
2011-03-28
Gillard needs to be reasonable and flexible on NSW rail funding
Comments on “Gillard vows to work with NSW”, see NEWS – Politics & IR – comments 28/03/2011, http://www.businessspectator.com.au/bs.nsf/Article/PM-Gillard-pledges-to-work-with-OFarrell-FD26W?OpenDocument&src=hp1
Gillard may be right to believe "the people of NSW know the difference between state issues and federal issues."
But it is also true that sometimes both state and federal issues can get together in a state election.
Unfortunately for Gillard, her announcement of the carbon tax plan during the NSW state election campaign just made the issues of the two levels of government combined by the heightened concerns over costs of living and taxpayer's reluctance to see more taxes.
It was appalling for her to do that. It worsens Labor's internal divisions. It showed Gillard's weakness in leadership and political judgement.
She should learn from it to avoid more policy blunders.
If she refuses to learn from it, her numbers as prime minister may be further diminished.
To the NSW rail transport issue, Gillard should allow the policy priority of the O'Farrell government to change to the different link in Sydney's North West, even though the health deal and education issues may be different beasts altogether. The election outcome gives a clear endorsement for the NSW coalition government's policy package.
Gillard may be right to believe "the people of NSW know the difference between state issues and federal issues."
But it is also true that sometimes both state and federal issues can get together in a state election.
Unfortunately for Gillard, her announcement of the carbon tax plan during the NSW state election campaign just made the issues of the two levels of government combined by the heightened concerns over costs of living and taxpayer's reluctance to see more taxes.
It was appalling for her to do that. It worsens Labor's internal divisions. It showed Gillard's weakness in leadership and political judgement.
She should learn from it to avoid more policy blunders.
If she refuses to learn from it, her numbers as prime minister may be further diminished.
To the NSW rail transport issue, Gillard should allow the policy priority of the O'Farrell government to change to the different link in Sydney's North West, even though the health deal and education issues may be different beasts altogether. The election outcome gives a clear endorsement for the NSW coalition government's policy package.
Need to define Australian federal state relations clearly
Comments on Imre Salusinszky and Matthew Franklin “I'll take fight to PM, says Barry O'Farrell”, 28/03/2011, http://www.theaustralian.com.au/national-affairs/state-politics/ill-take-fight-to-pm-says-barry-ofarrell/story-fn7r7bxz-1226029077595
Federal-state relation is an important issue to consider and to get it right, although it now appears to have a partisan look that shouldn't have to be like that.
Over the past years, federal government of both main political persuasions has centralised or attempt to centralise too much power unnecessarily to Canberra. The most typical was Rudd's now failed health reform package that would take 30% of GST from the states to enable the federal government to be the dominant funder of public hospitals and primary healthcare.
There should be clearer demarcation of federal and state responsibilities and revenue power. Canberra is not suited to provide many services that states do and cannot and shouldn’t invade state issues too much. The debacles and wastes in federal government’s pink batts and even the BER programs are just reminders of how federal government could do worse than state governments.
It is astonishing and extraordinary to see that some people would think that the federal government could do it better when most state government that are equally subject o electoral test and also have inter-state competition as benchmarks couldn’t fix certain services to the satisfaction of the residents.
It is just like to some ill persons having difficult to cure the disease may go to any alternatives in the hope to find a cure. It is more likely to make the matter worse rather than improve it.
Federal-state relation is an important issue to consider and to get it right, although it now appears to have a partisan look that shouldn't have to be like that.
Over the past years, federal government of both main political persuasions has centralised or attempt to centralise too much power unnecessarily to Canberra. The most typical was Rudd's now failed health reform package that would take 30% of GST from the states to enable the federal government to be the dominant funder of public hospitals and primary healthcare.
There should be clearer demarcation of federal and state responsibilities and revenue power. Canberra is not suited to provide many services that states do and cannot and shouldn’t invade state issues too much. The debacles and wastes in federal government’s pink batts and even the BER programs are just reminders of how federal government could do worse than state governments.
It is astonishing and extraordinary to see that some people would think that the federal government could do it better when most state government that are equally subject o electoral test and also have inter-state competition as benchmarks couldn’t fix certain services to the satisfaction of the residents.
It is just like to some ill persons having difficult to cure the disease may go to any alternatives in the hope to find a cure. It is more likely to make the matter worse rather than improve it.
2011-01-15
In defence of states' rights in federation
Comments on Peter van Onselen “States' rights back on table”, 15/01/2011, http://www.theaustralian.com.au/news/opinion/states-rights-back-on-table/story-e6frg6zo-1225988004962
An interesting article on the state of federation politics.
There should be some remake or amendments of the constitution to safeguard the most proper federation structure and the rights of each levels of government.
The mining tax is dressed up by centralists or the federal Labor government as: 1. a more efficient tax on use of natural resources, 2. a policy response to the two speed economy.
But it disguises the real invasion of or grab by Canberra into states taxing power on natural resources.
If the core purpose of the new mining tax is for an efficient minerals tax, then the revenue should belong to the states where the minerals are. That will certainly avoid the dilemma that states may want to increase their royalties and shift the burden to the Commonwealth that has been a controversy for sometime with the MRRT.
The Labor government's messing up in the SRPT and MRRT will make tax reforms even harder, given the tax grab tendency by Canberra and the states will be very wary about reforms that erode their tax powers in the guise of more efficient taxes.
Canberra should give up its tax grab tendency and stay true with improving national efficiency. That will be assist in getting the states on board of economic and national taxation reforms.
An interesting article on the state of federation politics.
There should be some remake or amendments of the constitution to safeguard the most proper federation structure and the rights of each levels of government.
The mining tax is dressed up by centralists or the federal Labor government as: 1. a more efficient tax on use of natural resources, 2. a policy response to the two speed economy.
But it disguises the real invasion of or grab by Canberra into states taxing power on natural resources.
If the core purpose of the new mining tax is for an efficient minerals tax, then the revenue should belong to the states where the minerals are. That will certainly avoid the dilemma that states may want to increase their royalties and shift the burden to the Commonwealth that has been a controversy for sometime with the MRRT.
The Labor government's messing up in the SRPT and MRRT will make tax reforms even harder, given the tax grab tendency by Canberra and the states will be very wary about reforms that erode their tax powers in the guise of more efficient taxes.
Canberra should give up its tax grab tendency and stay true with improving national efficiency. That will be assist in getting the states on board of economic and national taxation reforms.
2010-12-27
Gillard and Swan should learn from Rudd's mistakes
Comments on Paul Sheehan “A blunder to top all the others”, 27/12/2010, http://www.smh.com.au/opinion/politics/a-blunder-to-top-all-the-others-20101226-197tz.html
Rudd tried to further centralise power to Canberra and failed.
His successor and some federal politicians still continue that unfortunate trend. They, and some of their supporters, think that Canberra can do a better job than its states counterparts in delivering services, whenever services by the states are not satisfactory.
They forgot the history of failures of Canberra in services delivery, as the past three years have showed.
More importantly they neglect an important factor, that is the states face stronger competition than the federal government in terms of services delivery, not only the comparison and competition between the federal and states governments in terms of performance, but between the state governments as well in delivering the same services.
The stronger competition, besides and beyond the fact state governments are closer to their respective residents and naturally understand better their needs, keeps each state government work harder than just one Canberra government to do all the services with no alternative horizontal competition.
The competition between state governments works in the same way as business competition to bring out innovations and lowering costs.
I hope those people having the view that power concentration to Canberra and weakening the states should think again and carefully, because they will be very disappointed if that really happens and the costs will be very high.
Abandon those unrealistic wishful thinking and strengthen the Australia federation, please!
Rudd tried to further centralise power to Canberra and failed.
His successor and some federal politicians still continue that unfortunate trend. They, and some of their supporters, think that Canberra can do a better job than its states counterparts in delivering services, whenever services by the states are not satisfactory.
They forgot the history of failures of Canberra in services delivery, as the past three years have showed.
More importantly they neglect an important factor, that is the states face stronger competition than the federal government in terms of services delivery, not only the comparison and competition between the federal and states governments in terms of performance, but between the state governments as well in delivering the same services.
The stronger competition, besides and beyond the fact state governments are closer to their respective residents and naturally understand better their needs, keeps each state government work harder than just one Canberra government to do all the services with no alternative horizontal competition.
The competition between state governments works in the same way as business competition to bring out innovations and lowering costs.
I hope those people having the view that power concentration to Canberra and weakening the states should think again and carefully, because they will be very disappointed if that really happens and the costs will be very high.
Abandon those unrealistic wishful thinking and strengthen the Australia federation, please!
2010-12-22
Use the Mining tax to reduce vertical fiscal imbalance
Comments on Dennis Shanahan “Gillard retreats on levy to save hide”, 22/12/2010, http://www.theaustralian.com.au/gillard-retreats-on-levy-to-save-hide/story-fn6nj4ny-1225974698079
While it is obviously a moot point to move the fight from with the miners to with the states, one would hope that is only a face saving tactics.
If the Gillard government really wants to fight with the states on mining royalties, they may well lose that war constitutionally, given that the states are custodians of their land including the mineral wealth embedded in the land. What it means is that the states are entitled to mining royalties and if the mining tax is a form of royalties, then they should belong to the states as opposed to the Commonwealth.
Even leaving the constitution issue aside, the existing vertical fiscal imbalance suggests that it is not wise for the Commonwealth to grab more tax powers from the states. Rather, it should do the opposite, that is, to give more tax powers to the states to strengthen their finance for meeting the future challenges of services provisions.
This is particularly clear in the wake of the national health / public hospitals reform, which used the prospect of the states’ inability to have the necessary revenue in the longer term to meet the needs of public health in the future.
Further centralisation of revenue powers is not necessarily good for the nation. It blurs the already unclear responsibilities and accountability between the two important layers of government in Australia.
The Commonwealth should not act as a big brother and treat the states with contempt. A truly cooperative federation requires the Commonwealth to be wiser and altruism, focusing on what it should do and do them better, as opposed to bully the weaker states.
While it is obviously a moot point to move the fight from with the miners to with the states, one would hope that is only a face saving tactics.
If the Gillard government really wants to fight with the states on mining royalties, they may well lose that war constitutionally, given that the states are custodians of their land including the mineral wealth embedded in the land. What it means is that the states are entitled to mining royalties and if the mining tax is a form of royalties, then they should belong to the states as opposed to the Commonwealth.
Even leaving the constitution issue aside, the existing vertical fiscal imbalance suggests that it is not wise for the Commonwealth to grab more tax powers from the states. Rather, it should do the opposite, that is, to give more tax powers to the states to strengthen their finance for meeting the future challenges of services provisions.
This is particularly clear in the wake of the national health / public hospitals reform, which used the prospect of the states’ inability to have the necessary revenue in the longer term to meet the needs of public health in the future.
Further centralisation of revenue powers is not necessarily good for the nation. It blurs the already unclear responsibilities and accountability between the two important layers of government in Australia.
The Commonwealth should not act as a big brother and treat the states with contempt. A truly cooperative federation requires the Commonwealth to be wiser and altruism, focusing on what it should do and do them better, as opposed to bully the weaker states.
2010-12-20
MRRT and revenue for the states
Comments on Dennis Shanahan “All eyes on Gillard to produce the goods as Labor's vote goes into reverse”, 20/12/2010, http://www.theaustralian.com.au/national-affairs/all-eyes-on-gillard-to-produce-the-goods-as-labors-vote-goes-into-reverse/story-fn59niix-1225973588561
Gillard clearly should stick to her bargain on the MRRT that replaced the flawed RSPT started by Swan and Rudd and ultimately brought down Rudd.
The key must be no or little retrospectivity, that is to say, to make a distinction between existing mining production and future increased mining production.
With that in mind and starting with the agreed MRRT as an intermediate step, the strategy is to design an optimal transition for a mining tax.
The government should not be too greedy in terms of tax grab.
Another key is that the tax mining proceeds should go to the states where they are generated.
The federal government has used the fear of no future revenue for public health in its negotiation with the states, so now we have an increase in mining tax and mining royalties are in the domain of the states, any increased proceeds should go to the states to boost their revenue power to meet future challenges from increased demand for public health.
The Henry tax report should have make this point clear in terms of tax reform to also reform the vertical fiscal imbalance between the two levels of government.
If it didn't, that is a pity and that should be addressed in the planned tax summit next year.
Gillard clearly should stick to her bargain on the MRRT that replaced the flawed RSPT started by Swan and Rudd and ultimately brought down Rudd.
The key must be no or little retrospectivity, that is to say, to make a distinction between existing mining production and future increased mining production.
With that in mind and starting with the agreed MRRT as an intermediate step, the strategy is to design an optimal transition for a mining tax.
The government should not be too greedy in terms of tax grab.
Another key is that the tax mining proceeds should go to the states where they are generated.
The federal government has used the fear of no future revenue for public health in its negotiation with the states, so now we have an increase in mining tax and mining royalties are in the domain of the states, any increased proceeds should go to the states to boost their revenue power to meet future challenges from increased demand for public health.
The Henry tax report should have make this point clear in terms of tax reform to also reform the vertical fiscal imbalance between the two levels of government.
If it didn't, that is a pity and that should be addressed in the planned tax summit next year.
2010-12-02
Two sides of Sheridan's analysis
Comments on Greg Sheridan “No lurch to the left in Victoria”, 2/12/2010, http://www.theaustralian.com.au/news/opinion/no-lurch-to-the-left-in-victoria/story-e6frg6zo-1225964138058
While it is rare for me to agree with many of Greg Sheridan's views especially when foreign affairs are concerned, I find at least one point in this article agreeable. It is that a well functioning federation needs strong states contained in the second last paragraph when he states the following:
"One thing federal Opposition Leader Tony Abbott has got completely wrong is his preference for Canberra power over state power. Federal systems, such as the US and Australia, derive their dynamism from the innovation and policy competition of states."
In recent times, both major political persuasions in Canberra tend to over-centralise power to Canberra at the expenses of the states that undermines the health of the Australian federation.
It is highly unlikely that further concentration of power to Canberra will improve the quality of services to the public. On the contrary, if anything is more likely, it must be the pink batts fiasco.
On the main issues that Sheridan discussed, he probably ignored a number of important facts. They include the Obama win of the US presidential election in late 2008, Labour in Britain had been in power for a long time, the federal ALP was troubled by Rudd policy back flips especially on climate change and the emissions reduction scheme as well as the blunders in some of its stimulus programs such as the pink batts and the BER wastes.
Another fact was that Rudd’s popularity was very high up to Copenhagen late last year.
In summary, Sheridan seems to only choose what suits his points and ignore important facts that contradict his views.
That is typical of his analysis and opinions. That is not good and balanced analysis!
While it is rare for me to agree with many of Greg Sheridan's views especially when foreign affairs are concerned, I find at least one point in this article agreeable. It is that a well functioning federation needs strong states contained in the second last paragraph when he states the following:
"One thing federal Opposition Leader Tony Abbott has got completely wrong is his preference for Canberra power over state power. Federal systems, such as the US and Australia, derive their dynamism from the innovation and policy competition of states."
In recent times, both major political persuasions in Canberra tend to over-centralise power to Canberra at the expenses of the states that undermines the health of the Australian federation.
It is highly unlikely that further concentration of power to Canberra will improve the quality of services to the public. On the contrary, if anything is more likely, it must be the pink batts fiasco.
On the main issues that Sheridan discussed, he probably ignored a number of important facts. They include the Obama win of the US presidential election in late 2008, Labour in Britain had been in power for a long time, the federal ALP was troubled by Rudd policy back flips especially on climate change and the emissions reduction scheme as well as the blunders in some of its stimulus programs such as the pink batts and the BER wastes.
Another fact was that Rudd’s popularity was very high up to Copenhagen late last year.
In summary, Sheridan seems to only choose what suits his points and ignore important facts that contradict his views.
That is typical of his analysis and opinions. That is not good and balanced analysis!
2010-11-26
Mining tax rights and the Australian federation
Comments on Dennis Shanahan “Facing a new mining war”, http://www.theaustralian.com.au/news/opinion/facing-a-new-mining-war/comments-e6frg6zo-1225961149433
There are bigger issues involved in the MRRT. The first one is in the current federation who do resources belong to constitutionally, the states or the federal?
The second issue is should the states have the right to tax the rent of those resources, what can/should the federal do in terms of resources rent taxes? Should that simply grab the tax revenue, or should it respect the states' rights and work with the states to make the royalties or resources rent tax more efficient.
Third, how should the royalties/tax of resources be distributed between the states and the Commonwealth if any should be given to the latter, and how should that tax be used or be kept for future generations?
Fourthly, are the constant threats by the federal government to the states productive and conducive to cooperative federation and to the wellbeing of all Australians? There should be a clearer definition what the Commonwealth can and cannot do in terms of federal relations.
It is a myth to believe that Canberra can do better than the state governments in terms of servicing the people, no matter how poor state governments have shown in some areas.
Just ask the question: if all state governments from all the major political parties cannot do a service well, how can a government of any political persuasion from Canberra can do it better?
The fundamental issues of poor state government services may lie in the poor resources and unclear responsibilities of revenue and services between the two levels of government in Australia. Unless those issues are resolved, any faith on federal government for better services is likely to be badly misplaced.
There are bigger issues involved in the MRRT. The first one is in the current federation who do resources belong to constitutionally, the states or the federal?
The second issue is should the states have the right to tax the rent of those resources, what can/should the federal do in terms of resources rent taxes? Should that simply grab the tax revenue, or should it respect the states' rights and work with the states to make the royalties or resources rent tax more efficient.
Third, how should the royalties/tax of resources be distributed between the states and the Commonwealth if any should be given to the latter, and how should that tax be used or be kept for future generations?
Fourthly, are the constant threats by the federal government to the states productive and conducive to cooperative federation and to the wellbeing of all Australians? There should be a clearer definition what the Commonwealth can and cannot do in terms of federal relations.
It is a myth to believe that Canberra can do better than the state governments in terms of servicing the people, no matter how poor state governments have shown in some areas.
Just ask the question: if all state governments from all the major political parties cannot do a service well, how can a government of any political persuasion from Canberra can do it better?
The fundamental issues of poor state government services may lie in the poor resources and unclear responsibilities of revenue and services between the two levels of government in Australia. Unless those issues are resolved, any faith on federal government for better services is likely to be badly misplaced.
2010-11-18
Health reforms and the 30% GST hand over by the states and territories
Comments on Sue Dunlevy “GST row threatens health reforms”, 18/11/2010, http://www.theaustralian.com.au/national-affairs/gst-row-threatens-health-reforms/story-fn59niix-1225955231264
The strangest thing was why those states and territories that will hand over more than 30% of their GST had agreed to the deal in the first place.
According to the revelation of this report, the ACT will hand over back between 48 and 50 per cent of its GST, that is very different from 30%.
I remember that the ACT chief minister Stanhope said it was a good deal for the ACT.
One has to wonder what can be a worse deal for the ACT!
PS: the information on how much a state or territory has to hand over its GST is contained in the federal budget paper no. 3, 2010-11, that has been available since the budget night early this year.
The strangest thing was why those states and territories that will hand over more than 30% of their GST had agreed to the deal in the first place.
According to the revelation of this report, the ACT will hand over back between 48 and 50 per cent of its GST, that is very different from 30%.
I remember that the ACT chief minister Stanhope said it was a good deal for the ACT.
One has to wonder what can be a worse deal for the ACT!
PS: the information on how much a state or territory has to hand over its GST is contained in the federal budget paper no. 3, 2010-11, that has been available since the budget night early this year.
Gillard should lead as opposed to follow
Comments on Arthur Sinodinos “Gillard must develop ideas worth fighting for”, 18/11/2010, http://www.theaustralian.com.au/news/opinion/gillard-must-develop-ideas-worth-fighting-for/story-e6frg6zo-1225955200804
Relatively speaking, education is one of the least problematic areas among the nation's priorities.
Federal taking over of education, including TAFE, is likely to be a bad idea. State government must retain some lever over the skills of their labour force and TAFE is an important means to achieve it.
The federal government should focus on macro policy areas that affect the whole nation.
It should find ways to enhance federal-state cooperation in achieving better outcomes, as opposed to short term politics to compete with the state governments.
While climate change is in danger of being hijacked by the Greens, it is a key area that Gillard should fight for, because the public are likely to use it to measure Gillard’s success or otherwise.
Given that Gillard has already been seen having changed her stance on carbon tax, she should pursue a carbon tax that is revenue and trade neutral to be her initiative and policy.
Tax reforms are another key area where Gillard could leave a mark. The government could design a staged approach to the flat tax in the Henry review report: first to raise the tax free threshold to $15000 and then in another X years to $25000, for example. Accordingly, the associated expenditure side reforms or simplification would also be phased in by two stages. This staged approach has another advantage: it gives the government a chance to improve in the second stage based on the first stage results.
But in the longer term, the division of national tax revenue between federal and states should be a key area of reform based on the optimal division of services and policy management between the two levels of government.
These reforms to tax and federal relations should be aimed at bipartisan.
Relatively speaking, education is one of the least problematic areas among the nation's priorities.
Federal taking over of education, including TAFE, is likely to be a bad idea. State government must retain some lever over the skills of their labour force and TAFE is an important means to achieve it.
The federal government should focus on macro policy areas that affect the whole nation.
It should find ways to enhance federal-state cooperation in achieving better outcomes, as opposed to short term politics to compete with the state governments.
While climate change is in danger of being hijacked by the Greens, it is a key area that Gillard should fight for, because the public are likely to use it to measure Gillard’s success or otherwise.
Given that Gillard has already been seen having changed her stance on carbon tax, she should pursue a carbon tax that is revenue and trade neutral to be her initiative and policy.
Tax reforms are another key area where Gillard could leave a mark. The government could design a staged approach to the flat tax in the Henry review report: first to raise the tax free threshold to $15000 and then in another X years to $25000, for example. Accordingly, the associated expenditure side reforms or simplification would also be phased in by two stages. This staged approach has another advantage: it gives the government a chance to improve in the second stage based on the first stage results.
But in the longer term, the division of national tax revenue between federal and states should be a key area of reform based on the optimal division of services and policy management between the two levels of government.
These reforms to tax and federal relations should be aimed at bipartisan.
2010-09-16
Unique opportunties for parliamentary reforms in Australia
Comments on Graham Bradley “Parliament must focus on reform”, 16/09/2010, http://www.theaustralian.com.au/news/opinion/parliament-must-focus-on-reform/story-e6frg6zo-1225924277533
The list represents a good wish list from business of the current parliament, although only the last point falls mostly into parliamentary reforms and it is an excellent point.
The current parliament should undertake parliamentary and political reforms that are mostly impossible under the normal partisan approach with one of the main parties being in a dominant position in the lower house.
Those reforms may include election terms to a fixed term, removing preference requirement and whoever has the most votes should be the elected one, government to be formed with most MPs and only 2/3 of MPs' vote of no confidence can change a government to the next most MPs, parliamentary office of budget and policy assessments (Bradley's last point), limiting the federal government's power over the States and ensuring the rights of States not to be eroded by federal government, that is, needs a much higher threshold than a simple majority to take any state rights away from them, and so on.
These sort of reforms will be far reaching and in the long term interests of the nation and businesses.
The taxation summit is likely to be disappointing given the current political environment with the Greens in an important position to move the ALP to the Left even further and reduce efficiency.
Politicians should take the unique opportunities to reform the parliament and national governing mechanisms that will be long lasting but otherwise would be impossible to do.
Bradley’s other reforms can be undertaken under normal governance.
The list represents a good wish list from business of the current parliament, although only the last point falls mostly into parliamentary reforms and it is an excellent point.
The current parliament should undertake parliamentary and political reforms that are mostly impossible under the normal partisan approach with one of the main parties being in a dominant position in the lower house.
Those reforms may include election terms to a fixed term, removing preference requirement and whoever has the most votes should be the elected one, government to be formed with most MPs and only 2/3 of MPs' vote of no confidence can change a government to the next most MPs, parliamentary office of budget and policy assessments (Bradley's last point), limiting the federal government's power over the States and ensuring the rights of States not to be eroded by federal government, that is, needs a much higher threshold than a simple majority to take any state rights away from them, and so on.
These sort of reforms will be far reaching and in the long term interests of the nation and businesses.
The taxation summit is likely to be disappointing given the current political environment with the Greens in an important position to move the ALP to the Left even further and reduce efficiency.
Politicians should take the unique opportunities to reform the parliament and national governing mechanisms that will be long lasting but otherwise would be impossible to do.
Bradley’s other reforms can be undertaken under normal governance.
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