Treasurers make little tax reform headway

A meeting of state and federal treasurers in Canberra has ended with little progress on tax reform.

In a move that will put online shoppers offside, the treasurers have agreed to a 12-month timetable for a review of the GST threshold for online purchases.

The states have welcomed the agreement, saying they are seeing millions of dollars in potential revenue head overseas, but the Commonwealth is concerned it could cost more to collect the tax than it would raise.

Federal Treasurer Wayne Swan was talking tough heading into the meeting, saying the states had some heavy lifting to do on tax reform.

"The states can reform their own taxation systems if they wish.

And one of the taxes they should get rid of is stamp duty, because that really hits a lot of Australians really hard," he said.

But he did not offer them any compensation in return, and state treasurers did not take well to the pre-meeting attack.

"What we're not going to do is take Wayne Swan's advice in regards to abolishing stamp duty and then slugging the family home with land tax here in Victoria," Victorian Treasurer Kim Wells said.

"To make the sums add up, we would have to triple land tax in this state as well as hit the family home with land tax." NSW Treasurer Mike Baird says states will look at stamp duty if the Commonwealth shares some of its income tax revenue.

"One of the proposals that state treasurers put forward to the Commonwealth today was that when their Commonwealth budget and their broader economy returns to a more normalised cycle, there is an opportunity in one of their most efficient taxes, which grows faster than the economy and income tax," he said.

"If you quarantined a portion of that and returned it back to the states, for every dollar the states receive it would be happy to remove 50 cents of stamp duty.

"Now that is a measure that remains on the table and will remain on the table." Mr Wells doubts that will ever happen.

"If there were a sharing of income tax, then there is a possibility to reduce the reliance on inefficient taxes," he said.

"But I can't see longer-term how the Federal Government would warm to that idea.

What we're very keen on is to make sure that we work within and live within in our means to deal with the taxes we have before us." GST question One of those taxes is the GST.

The states want agreement on cutting the $1,000 threshold for online purchases from overseas.

The independent GST review by former premiers Nick Greiner and John Brumby and tax expert Bruce Carter recommended the threshold should be at least halved.

South Australian Treasurer Jack Snelling supports that, but Mr Wells says more analysis needs to be done.

"We support a cut to the threshold but we're mindful of the costs around that," Mr Wells said.

"So there's no point cutting it to $500, for example, if the costs of compliance administration and collection is going to be significantly more than the GST collected.

"We support the push, there's no question about that, but we're mindful of the collection costs around it." Analysis ordered Today the Commonwealth agreed to look at those issues.

Mr Baird says Mr Swan has agreed to do a full analysis of what it would cost to lower the threshold by the end of next year.

"It's a good start.

We have a timeframe, we have a process, and I think we have some genuine reform in relation to what is a clear leakage from the current GST system," Mr Baird said.

"As part of the business case process, we need to work on what is the most efficient level, that is, where do we raise the most revenue for the least amount of cost? "If you look around the world you see places like the UK where it sits at $30 and in Canada at $20.

The question is, what is the exact level and the right level for this country? Well, we'll wait for the analysis to be done." But Mr Swan remains pessimistic that cutting the online threshold is worth it.

He says the state treasurers are ignoring the weight of opinion that there is a lack of capacity to process millions of low-value parcels and the cost would outstrip the revenue collected.

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