Tuesday, July 8, 2014

Motor Trade Association: Interview with The Hon Peter Costello

 image: Sydney Morning Herald

Taxing Times: Interview with The Hon Peter Costello 

The Federal Treasurer Peter Costello recently announced that he would crack down on the State Government for double-taxing the people of Western Australian.  MOTOR spoke to him about this and the industry’s own double-dipping woes…

In A Nutshell:  The Federal Treasurer believes that with GST revenue far surpassing all expectations, the States need to now make good on their pledge to abolish the nine State taxes GST has replaced in accordance with the inter-governmental GST agreement signed by all States in 1999.

However, many States feel they have already met their obligations to the Federal Government, with many holding the view they have been ‘ripped off’ by the Treasurer and Democrats Leader Meg Lees citing him as ‘mischievous’.  NSW recently offered the Federal Government $1 billion to pay its way out of the GST deal, which was rejected, after refusing to cut stamp duties. 

On 1 July, the Treasurer announced he would put measures in place to force NSW and WA into honouring the GST agreement. Eric Ripper conceded his government would fully comply with the GST agreement with the abolition of the Bank Accounts Debits Tax.  He also said WA had already axed the Financial Institutions Duty and Stamp Duty on Quotable Marketable Securities.

On 7 July, WA State Treasurer Eric Ripper announced that there would be a new review of State taxes.

According to you, many Australians are currently being double-taxed by the GST as well as the taxes it was designed to replace. As you are probably aware from your meeting with Peter Fitzpatrick, the vehicle dealers of WA are also the victims of double-dipping by the State Government following the introduction of the new stamp duty Ruling on loan and leave vehicles on 1 July 2005. Can you provide a national perspective on this issue for our readers?

 I am concerned about the tax burdens imposed on businesses and individuals by State and Territory Governments. The WA Government is projecting to collect $645 million in motor vehicle taxes in 2004-05 and $642 million in 2005-06, which is up 30 per cent since July 2001.  Across the Forward Estimates total tax revenue for WA is projected to increase from around $4 billion in 2005-06 to $4.6 billion in 2008-09, which is an increase of around 16 per cent.

Could you provide a brief synopsis on the issues surrounding the GST agreements with the States?

In 1999, Australian Government, State and Territory leaders signed an Intergovernmental Agreement on the Reform of Commonwealth State Financial Relations (the IGA) which provides that all GST revenue is paid to the States and Territories.

The GST revenue for WA is forecast to increase from $3.8 billion in 2005-06 to around $4.4 billion in 2008-09. In the absence of further tax reform, this will provide a cumulative windfall above WA’s Guaranteed Minimum Amount of around $1.4 billion.  The GST was intended to replace a range of inefficient indirect taxes, one Commonwealth and nine State taxes, which were listed in the IGA. These State taxes were identified by the States themselves as undesirable on efficiency and equity grounds.

Originally, all of these taxes were to be abolished on or before 1 July 2001, with the exception of stamp duty on non residential conveyances of real property which was to cease to apply from a date to be determined by the Ministerial Council on the basis that no State or Territory would be worse off.  In order to get the GST legislation through the Senate, as part of an agreement with the Australian Democrats, some items were removed from the GST base meaning it raised less revenue. As a result the States would not receive enough revenue to abolish all these taxes by 1 July 2001 without being worse off.

It was therefore agreed that wholesale sales tax and accommodation (bed) taxes would be abolished on 1 July 2000, Financial Institutions Duty and stamp duty on quoted marketable securities would be abolished by 1 July 2001, and bank account debits tax abolished by 1 July 2005. All the other taxes would then be reviewed so that if GST was sufficient they could then be abolished.

Over six years from 2004-05, anticipated GST revenue payments to the States will amount to around $243 billion, exceeding original projections. In the absence of further tax reform, it is estimated that this would result in the States receiving a windfall of around $17 billion compared to the amount they would have received under the former system of Commonwealth-State financial relations.  In light of this growing GST windfall, at the 23 March 2005 meeting of the Ministerial Council for Commonwealth State Financial Relations, the Australian Government proposed a timetable for the elimination of the majority of stamp duties listed under the IGA for the benefit of Australian businesses and families. 

On 20 April 2005, six States and Territories responded to the Australian Government with an alternative proposal on the timing and sequencing of the elimination of these taxes. Western Australia was not a party to this offer. It wants to keep the State taxes and the GST, which was introduced to replace them. The Australian Government is disappointed.

You announced on 1 July 2005 that over the next twelve months you would be putting measures in place to compel NSW and WA into honouring the GST agreement with the Federal Government. What sort of measures do you mean to use to force the WA Government into abolishing some of its taxes, and what are the legal ramifications of this move?

 People in other States will not have to pay GST and the State taxes it replaces. The WA Government wants to double tax West Australians, unlike those in the Eastern States. The Australian Government wants to encourage the WA Government to protect West Australians against double taxation and give them tax relief that other Australians will receive.  A range of measures are available to the Australian Government to encourage the WA Government to abolish these taxes. However, as noted before, the Australian Government wants to deliver this outcome by agreement. It is premature, at this stage, to outline the response if the WA Government tries to maintain double taxation.

What would your message to Mr Gallop & Mr Ripper be at this point in time?

 Everyone knows the GST was introduced to replace nominated State taxes. Six of the eight States and Territories have offered timetables for the abolition of IGA taxes. The WA Government is at present refusing to abolish the taxes that the GST is intended to replace and putting West Australians behind people in other States. No State can keep the GST revenue and the taxes it is designed to replace. Should the WA Government continue to double-tax its citizens, the Australian Government will introduce measures to encourage the WA Government to relieve the tax burden.

Wednesday, July 2, 2014

Scoop Magazine, WInter 2014

 image: supplied

Keeping the Faith

When Ezra Pound opened in Northbridge back in September 2009, it was among several front-runners to redefine our capital city’s hospitality topography. Small bar licenses had recently been given the green light, and the people of Perth were hell-bent on embracing the small bar scene. Cut to five years on, and the boys behind Ezra Pound - Talmage Andersen and Jan Kulski - are back with their next offering, Old Faithful.

“Old Faithful is an idea that sparked while I was travelling through the US in 2011”, says Melbourne-raised Talmage

“After sitting at an American barbecue restaurant eating a plate full of smoked meat and drinking one of the most delicious IPA craft brews, it seemed like a no-brainer to me. The trick was to translate the idea to the Australian market, which wasn't really that hard considering how much we love barbecue and beer here anyway.”

It’s no secret that the industry is spawning new eateries by the acreage, despite all the party-pooper bureaucratic red tape that goes with it.

“I’m really enjoying watching the growth of the hospitality scene here in Perth,” says Talmage.

“It’s even more humbling to be a part of that growth, while helping to add culture to this beautiful city. I love seeing some of our hospitality professionals getting into their own venues, and adding their unique style and design to our once-boring hospitality landscape. I certainly think one of the biggest challenges for small business operators is the lengthy process in obtaining your license to trade. It can take up to one year to process, and when you’re paying rent on an empty space for a year, this can turn into a costly exercise.”

Despite the challenges, stay tuned - the boys have whispered to us they may be planning a cheeky little pop-up bar very soon.