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The 'Mexican stand-off' preventing serious state tax reform looks set to continue, according to Pitcher Partners’ 2014/2015 state tax review.
Pitcher Partners' partner Paul Glover said a continued lack of action on major GST reform is preventing the states from moving on any meaningful tax reforms of their own.
Mr Glover said that while there is currently considerable debate around adjusting the GST, this talk is doing nothing to drive the states towards making any substantial changes to their own tax systems.
The current debate is simply overshadowing the need for state-based reforms, he said.
“GST is still by far the highest revenue generator for the States, making up 35 per cent of total revenue as compared to 15 per cent from payroll tax, 9 per cent from stamp duty and 5 per cent from land tax," Mr Glover said.
“The current national debate regarding the potential broadening of the GST base and lifting of the GST rate is overshadowing the interconnected issue of the need to overhaul the State tax regimes, and remove a raft of inefficient taxes."
However, while the current GST debate has proven ineffective in driving state-based taxation changes, Mr Glover said it does give hope for change in the future.
“Whilst the States continue to compete through incremental changes to thresholds and rates of the various taxes impacting on small and medium-sized businesses, the recently revived debate in Canberra about potential GST reform has provided hope that meaningful State tax reform may one day come to pass,” Mr Glover said.
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