States cave on tax abolition?

The States look like caving in to Federal Treasurer Peter Costello’s demands that they abolish seven taxes that they agreed to “review” in 2005 as part of the GST agreement with the Commonwealth.

This development is certainly part of the crisis in federalism about which I’ve been blogging for some time now (also here). However, arguably it’s less important than Howard government threats to move in on health (about which John Howard has now seemingly backed off), education, industrial relations and defamation law.

After all, although the States only agreed to “review” the 7 listed taxes (after basic foodstuffs were removed from the GST as part of the deal with the Australian Democrats to get it through the Senate), the fairly clear intent was that they would remove them to the extent that actual GST revenue made this fiscally possible. And the sheer extent of “windfall” (higher than expected) GST revenue means that it is possible for the States to remove them without difficulty. It’s certainly true, as some have argued, that there might be other taxes whose abolition would be preferable, or that it might be better to retain at least part of the windfall revenue and use it to repair crumbling pulic infrastructure. But the fact is that either expedient would contradict the spirit if not the letter of the original GST deal between Commonwealth and States.

As I mentioned above, I’m much more concerned by the ongoing threat of a federal takeover in education, industrial relations and defamation law, both from a federalist viewpoint and because of the likely content of Commonwealth initaitives in these areas.

The performance of the Commonwealth Department of Education, Science and Training (DEST) in micro-managing Australia’s higher education institutions in an extraordinarily rigid and inept manner hardly inspires confidence about what this bureaucracy would be likely to do if it ever got its hands on the VET, secondary and primary education sectors as well. A-G Phillip Ruddock’s proposed defamation law reforms appear ill-considered, unimaginative and unbalanced at best. And the proposed Commonwealth industrial relations reforms need a post all their own to analyse their deficiencies.

From a federalist viewpoint, such wide-ranging assaults on traditional areas of State power are extremely disturbing irrespective of the content of federal legislative intervention, and Howard’s backing off from intervention in state health responsibilities only reduces my concerns marginally. Mark Bahnisch has added to the traditional federalist arguments (division of power to reduce abuse and excessive exercise of power, democratic checks and balances, diversity, choice, facilitating experimentation) the European notion of “subsidiarity” as an additional conceptual underpinning for federalism. The key aspect of subsidiarity for present purposes is:

* Decisions should be taken as closely as possible to the citizen (the close to the citizen criterion).

It’s certainly a useful point to make in a situation where the central government is attempting to move into areas traditionally administered by the States. However, there’s an obvious problem with the principle in an Australian context. The governments of the larger States aren’t obviously any closer in any meaningful way to the citizens of their outlying regions than is Canberra. Is Bob Carr more in touch than John Howard with the concerns of people in Bourke or Broken Hill? Peter Beattie with those of citizens of Mount Isa or Cooktown? Geoff Gallop with people in Broome or Kunnunurra?

If anything, the subsidiarity principle might point to the desirability of the Whitlamite notion of smaller regional governments that really would be closer to citizens’ real concerns than either the Commonwealth or the existing States. Certainly the experience of Territorians since self-government in 1978 indicates that a small-ish, accessible regional government (which is what the NT government really is) is vastly more responsive to local needs and concerns than Canberra ever was. However, John Quiggin recently argued pretty persuasively that the regional government model really wasn’t a practical option in modern Australia.

On the other hand, the subsidiarity principle should at least remind politicians and bureaucrats that devolving power to the local and individual institutional level as much as possible, keeping central oversight flexible and light-handed, and avoiding rigid prescriptive, micro-management of any policy area, are essential attributes of effective modern governance. I can’t think of an obvious way in which such principles could usefully be constitutionally entrenched or otherwise effectively enforced (although Senate committees in the absence of government control could certainly make a contribution), but they remain critically important principles nonetheless.

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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Homer  Paxton
Homer Paxton
2022 years ago

Actually Ken you are wrong.
I did some work some time ago for the Real Estate Institute of NSW.
After finally getting the agreement I saw the word review and started to worry.
This was exacerbated when having rung Federal Treasury I was told there was no plan to get rid of the various taxes and that political action was elsewhere.
I was told to start lobbying. do it early do it often.
As it was the REINSW didn’t do anything.

This reminds me of the GST legislation. I was told by the government at the time no worries Harradine will vote for it.
I wasn’t convinced and asked how much work cozzy had put into Harradine.
not much was the answer.

Jacques Chester
Jacques Chester
2022 years ago

Speaking quickly about the NT scenario, it seems to me that what makes a difference here is that MLAs are dealing with really very small electorates – 2,000-3,000 voters. I think this greatly amplifies the role of parliamentarians as inteceders in the Executive wing; a role which is not traditional but I think obviously growing in importance.

John Morhall
John Morhall
2022 years ago

Re “avoiding rigid prescriptive, micro-management of any policy area, are essential attributes of effective modern governance”.

I think it interesting in this context that the Bomber has decided to back away from espousing policies, (Press Club last Monday) and to focus as an opposition on the governance issues: keeping the bastards honest, or more honest than they might have been without the scrutiny of an opposition.

Re the fundaments, Isaacs and Higgins have a lot to answer for!

Nicholas Gruen
2022 years ago

Ken, maybe I’m naive or something, but to me an agreement to ‘review’ something is an agreement to review it. Not an agreement to abolish it, or for that matter an agreement to abolish it if the revenue is there. If it really meant that, how come it doesn’t say it. When I say ‘maybe I’m wrong’ I’m not being rhetorical. Perhaps the words really do mean that. And maybe that was understood. But I can’t see any evidence of it.

And there’s lots of evidence to the contrary. The Feds dreamt all this up pretty recently didn’t they? If they had said that they were now going to pressure the States to abolish the taxes they had said they’d review that would be one thing. But what they’re doing seems to me to simply be going the big lie. Just incanting that the States agreed to do something when they didn’t.

Can you imagine how seriously the Howard Govt would take a commitment to ‘review’ something. How many things has it signed off on – in the international arena for instance – to review things (let alone made in principle pledges about doing its best to achieve one thing or another – like reducing global poverty or greenhouse gases).

So I don’t think you should be gesturing towards the centre, and towards being reasonable, when it looks to me like you’re being confronted by a big lie. I’d rather call it for what it looks to me like it is. Am I missing something?