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IGA 2005 Review of State Taxation
Coincident with these improvements at the individual state level, AELA was encouraged that under the initial GST proposals State taxes on most financial transactions were to be abolished shortly after the 1 July 2000 GST commencement date. However with the revised GST framework announced by the Prime Minister on 28 May 1999, the abolition of financial institutions duty was deferred by six months to 1 July 2001, the removal of debits tax put off to 1 July 2005 and the abolition of the range of other State taxes on financial transactions was indefinitely deferred but within the context of the 2005 Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations (IGA).
In the event, NSW abolished debits tax from 1 January 2002, Tasmania abolished duty on equipment leases and hire purchase as from 1 July 2002 and Victoria abolished mortgage duty as from 1 July 2004, the latter reintroducing major distortion into that market, favouring the non-taxed chattel mortgage product over leasing and hire purchase.
In March 2005 AELA made submissions to Commonwealth and State Treasurers in the context of the IGA Review, stressing that the Review presented the opportunity to achieve the significant micro-economic reform that abolition of these duties would represent. Our submissions noted that the case for abolition had in fact been well made by both the Commonwealth and the States. The original GST blueprint listed their drawbacks as being: narrowly based; selectively levied; having inconsistent tax bases and rates; with compliance costs significant, particularly for businesses that operated in more than one jurisdiction; and creating opportunities to avoid taxes and encourage taxpayers to conduct activities in States with lower stamp duties.
AELA urged Governments to recognise that there was a compelling economic case for the abolition of stamp duties on equipment finance, and that the IGA Review was the opportunity to achieve this outcome. Accordingly it is most pleasing to be able to report that all jurisdictions have now announced a timetable for the abolition of stamp duties on equipment finance, commencing as from 1 January 2007 and finalizing in 2011. Abolition of these duties represents a major micro-economic reform, and the States and Commonwealth are to be congratulated on this outcome. AELA will continue to assist members in the transitional stages of these reforms and to assist members’ compliance and systems development processes, will maintain its Stamp Duty Summary for Financiers. Abolition of these duties completes a major undertaking commenced by AELA more than a decade ago, and the results are most gratifying.
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