A Model for a State Income Tax in Australia: Historical Considerations, Key Design Issues and Recommendations

Peter Warren Mellor
2017
This thesis addresses the question, would the reintroduction of income taxation at the State level in Australia be feasible at the present time? The States levied income taxes from the late nineteenth century until 1942, when the Commonwealth unilaterally enacted legislation for its 'uniform tax' scheme for centralised income taxation which made it effectively impossible for State income taxation to continue. As the States also face a significant constitutional restrictions on their ability to
more » ... n their ability to levy major forms of indirect taxation, the Australian federation is characterised by a very high degree of vertical fiscal imbalance and the payment by the Commonwealth of very significant amounts of grants to the States to enable them to meet their major spending responsibilities, with associated efficiency and governmental accountability costs. As a matter of law, however, the States retain the constitutional power to impose income taxation, and the possibility of resumption of income taxation by the States has been a focus of political and tax policy discussion on many occasions. In this context, Australia's historical experience with State income taxation from its first introduction in Tasmania in 1880 to 1942 is examined in depth to determine whether there may have been administrative problems in the Australian experience of State income taxation, or ongoing practical or political factors in the country's economy or system of government, which may make reintroduction of State income taxation impracticable. The contrast on this issue with the Canadian experience is also relevant, where provincial income taxation was centralised during the War but resumed in the years thereafter. As part of this historical study, the thesis also looks to the developments outside the specific sphere of taxation which have occurred since Federation to limit the direct constitutional powers of the Commonwealth government to exercise macroeconomic management and control over the Australian economy. The thesis concludes th [...]
doi:10.4225/03/58ad25bde496c fatcat:vrmrzkybdrhg3fvuopkw7nmkry