Published: 10 June 2020

The task ahead, the economic "fight of our lives", requires understanding of current challenges before designing a recovery plan for the post pandemic world.

All states will be facing similar problems. New ways of thinking and responding are necessary. The need for change has to be understood, as do the challenges. Hopefully our new pragmatic Premier will continue as to put his cards on the table for all to see.

Next year we will spend $1.7 billion more than we will receive. Our underlying fiscal predicament, confirmed in answers to questions I asked, shows the government will borrow up to $2.5 billion during 2020/21, effectively to cover the shortfall for one year. What about the years beyond?

Tasmanian state taxes (payroll tax, conveyancing duties, land tax) were budgeted to raise $1.25 billion next year. Latest estimates suggest tax receipts will be $300 million (30 per cent) less than budgeted.

Reform of our tax systems isn't about paying more, it's about creating an efficient, fairer system and better place to live. The state is a service deliverer. A tax system where revenues fall when demand rises is a poorly designed system. All taxes remove funds from taxpayers and some are fairer than others, some more efficient. If payroll taxes only apply to large employers at a high rate, they're unfair. Land tax has a similar narrow base. Conveyancing duties are inefficient because they discourage a better use of housing stock and a disincentive for those needing to relocate for employment.

As part of a Federation we need to work together. Unfortunately, Treasurer Josh Frydenberg's dismissal of states' request for transition assistance to help reform their unfit for purpose tax systems is short-sighted.

We also can't keep running cap in hand to the federal government if we don't get our own house in order. We can't keep borrowing money every year especially if we can't pay the interest no matter how low that may be. In that sense states are like households. The federal government has more scope with its own bank. It controls the currency. Borrowing is not the problem.

Tasmania needs a system of state taxes that is fair and meets our needs. A tax system that better captures value as the economy grows and doesn't collapse when the economy slows.

The Advocate 10 June, 2020

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