TAXATION

Mr GRIFFITHS (Goyder) (14:59): Does the Treasurer agree with Prime Minister Rudd's comments that it is time for a comprehensive review of the tax system? On 21 April, the Prime Minister told ABC television, 'It is actually time we looked at the root and branch reform of the Australian taxation system.' In response to the state Liberal's tax discussion paper, released two weeks ago, the Treasurer said that tax reform was not on the state government's agenda.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (15:00): Yes, I do agree with the Prime Minister. The—

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: It is actually, yes. The opposition are more than entitled, as an opposition should be, to consider their own taxation policy going into the next election. I hope they do a better job than the Hon. Rob Lucas, who I referred to often as a very lazy shadow treasurer, that is probably why he was dumped by the leader, whose tax policy at the last election was to say, 'We'll have a land tax cut. It will be tens of millions, but we can't tell you who's going to get it, what tax is going to be cut and what rates are going to be changed until we win office, because only then can we have a crack at it.' I can understand why the Leader of the Opposition sacked Rob Lucas, because that was about as lazy a job as I have ever seen by a member of parliament.

I am more than happy for the leader to have his tax summit and to try to work out how he can rejig state taxes. We have been doing that ourselves for six years and we may or may not do it into the future, because we have substantially cut state taxes from payroll tax, bringing our rate in the dollar down to that of Victoria from 1 July this year. From 1 July this year we have cut land tax, we have cut a whole range of taxes in accordance with the intergovernmental agreement, and we have improved the first home owner's grant. But as the leader I hope would recall (and if he should ever see government would be presented with the reality), that the demand for service delivery in this state far exceeds our capacity to deliver it. That is a fact.

An honourable member interjecting:

The Hon. K.O. FOLEY: He says, 'Oh God.'

Members interjecting:

The Hon. K.O. FOLEY: Coming from a bloke who put his business into involuntary administration. He wants to talk about ability; a bloke who had his company put into involuntary administration. You want to talk about ability? You want to talk about ability? All right. We'll talk about your ability. You stick your head above the trenches any time.

Members interjecting:

The SPEAKER: Order!

An honourable member interjecting:

The Hon. K.O. FOLEY: I was actually reminded by a Liberal the other day to raise it. A Liberal in the corridor said, 'Why don't you get stuck into Pisoni and remind everyone that he put his business into involuntary administration?' But you'll remain nameless, who it was.

Members interjecting:

The SPEAKER: Order, the member for Schubert! I ask the Deputy Premier to return to the substance of the question.

The Hon. K.O. FOLEY: The critical issue is what is commonly referred to as vertical fiscal imbalance. Do you know what that is, member for MacKillop?

Members interjecting:

The Hon. K.O. FOLEY: I know Greg Kelton understands it. He was around when it was invented.

The Hon. P.F. Conlon: Kevin, does it make you faint?

The Hon. K.O. FOLEY: No, it doesn't make you faint. This issue has been put on the table by state treasurers for as long I have been attending state treasurers' conferences. I am the second longest serving state treasurer, I might add, in Australia right now, and how time passes very quickly.

Vertical fiscal imbalance is this: the state governments of Australia are the service deliverers of all tiers of government. We are the tier of government that has responsibility for family and community services, for disability, for education, for policing, for hospitals, for environmental practices and regulation, and the list goes on. The commonwealth, in various degrees of capacity, provides us with funding. The truth is that it is not sufficient for us to maintain services and improve, with the demand that we have. Take, for example, health. We have health inflation raging, I think, between 8 to 10 per cent, year-on-year compounding inflation—

Ms Chapman interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: We have 8 to 10 per cent health inflation, when—

Mr Williams interjecting:

The SPEAKER: I have already warned the member for MacKillop once.

The Hon. K.O. FOLEY: We have been saying to the commonwealth that, at some point, there has to be the issue of vertical fiscal imbalance; that is, that the commonwealth collects the majority of taxation revenue in this nation and the states have the major responsibility for the service delivery. If one wants to see that vertical fiscal imbalance better illustrated, one should have a look at the size of the national surplus when the budget is handed down in May.

Some reports are that the surplus could be as high as $20 billion. That is $20 billion worth of revenue, largely from income tax and company profits that are captured by the commonwealth, whereas state governments are investing and borrowing for infrastructure at an equivalent amount, and we have unmet demand in disabilities, families and communities and health right across the spectrum, right around the nation.

The Hon. P.F. Conlon: Transport.

The Hon. K.O. FOLEY: And transport. We have been saying to the commonwealth and state treasurers (and we were talking about this with Peter Costello) that, at some point, notwithstanding the GST revenue that has been made available for the state, there is an imbalance in who collects the majority of taxation revenue and who has the majority responsibility for delivering the service.

I support a wholesale root and branch look at how we do that because, with all due respect to the Leader of the Opposition (and I am not belittling his summit; good luck to him, that is not necessarily a bad thing to do), I say to him that he will be tinkering at the edges—he will be mixing the pie—unless, of course, he is going to introduce a new tax or cut services or run deficits. If you want to cut the quantum of state-based own source revenue, you have to identify which service you will cut, which debt you will increase or, indeed, which new tax or charge you will apply. There is no other answer.

At the end of the day, that is tinkering at the edges. The real issue is: how do we, as a society, receive enough money at a state level to continue to improve our services? The only way in which we will do that is to get a national government to share more of the national wealth with the states for us to deliver better services.