“The existing taxation system is out of date, unfair, internationally uncompetitive, ineffective and unnecessarily complex. It is a system that is preventing the development of a more efficient, relevant and accountable framework.” Despite 20 years passing since Peter Costello’s words as treasurer, they still hold true today.
The commencement of the GST in 2000 was the last significant example of comprehensive tax reform in the country and while it succeeded in abolishing several inefficient state taxes, it failed to remove stamp duty. Even though GST revenues are now sufficient so that the states and territories would not be worse off in comparison to the previous financial arrangement, they have so far refused to fulfil their commitments by abolishing this tax.
The Queensland Farmers’ Federation and industry members have been advocating for the removal of stamp duty on agricultural insurance for some time to help progress the nascent insurance market for farmers in the state. While the Victorian, NSW and South Australian governments have removed this inefficient tax, Queensland continues to collect nine per cent on the insurance premium and the GST.
KPMG is expected to hand down its review into the removal of stamp duty to the Queensland Government early in the new year. QFF anticipates that the review will show the cost to government (in revenue forgone) will be low – consistent with our own modelling that was provided to government 18 months ago. While removing stamp duty would lead to more equitable and efficient outcomes, if the reluctance to remove this tax is due to concern about loss in revenue, the shortfall should be met though increased reliance on more efficient state taxes.
Consistent with Treasurer Costello’s sentiments from 20 years ago, the 2009 ‘Henry Tax Review’ suggested there was no role for stamp duty in the modern Australian tax system and its removal could be achieved through a switch to more efficient taxes. While abolishing stamp duty on agricultural insurance is by no means the ‘root and branch’ approach needed, it is a step towards dealing with the demographic, social, economic and environmental challenges that lie ahead.