• Service: Tax
  • Type: Regulatory update
  • Date: 13/01/2014

Tax Insights

KPMG's analysis of tax issues and developments.

Grant Wardell-Johnson

Grant Wardell-Johnson
Leader, Australian Tax Centre

+61 2 9335 7128

Welcome back to Tax Insights 

by Grant Wardell-Johnson, Australian Tax Centre

Welcome to the first edition of Tax Insights in 2014. While it is the 13th day of the 14th year of the third millennium under the Gregorian calendar, it is the first day of the same year under the Julian calendar. Given the importance of Julius Caesar in the history of taxation, I will take the liberty of seeing this as the first day of 2014 for tax purposes. Julius introduced a sales tax of 1 percent (increased to 4 percent by Augustus for slaves), although it was later abolished by Caligula. Not the last time good taxation policy was overcome by heady popularism.

Indeed it is interesting to reflect on what happened 50 years ago in 1964 on Federal-State relations, income tax and vertical fiscal imbalance. The Bolte Liberal Victorian Government proposed introducing a marginal income tax to be payable by individuals living in Victoria but to be collected by the Commonwealth. The Menzies Liberal-Country Federal Government refused to collect it, although they put the proposition to the other states at the 1965 Premiers Conference. None of the other states supported it. Queensland, Western Australia and South Australia had conservative governments. NSW and Tasmania were controlled by Labor.


Addressing vertical fiscal imbalance wasn’t easy in 1964 and it won’t be easy in 2014. The Commission of Audit is due to release the first phase of its report dealing with Federal-State relations by the end of this month. This will inform a more detailed White Paper on the topic.


There is significant opportunity for reform, be it in harmonisation, undoing Federal-State duplication or adopting more efficient models of funding allocation and state tax collection. While one can but hope that the political stars line up for Federal-State reform, maybe as Shakespeare would have Cassius say “'the fault, dear Brutus, is not in our stars, but in ourselves.”


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