Reforms to Federal-State financial relations may be necessary and the surrounding politics is certainly fascinating. But what will we be in for if States start charging their own income tax?
Any new compliance requirement imposes a burden on businesses, so what will be the impact of a new income tax? And given the number of states and territories, does that mean up to eight new income taxes, potentially imposed at different rates on varying tax bases?
The largest burden will be carried by businesses operating in a number of jurisdictions, which will affect mid-size businesses in particular. They do not have unlimited budgets to administer their tax affairs so the Federal and State Governments must keep in mind the impact on mid-size business before adopting this reform.
The plan is understood to mean letting the states and territories charge some income tax — and then use it to fund services like health and education rather than relying on Commonwealth grants.It would be a major change to the way the federation works, potentially creating a patchwork of different tax rates across the nation.