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The Australian Master Tax Guide by CCH is likely to become a compulsory reading for one and all State MP before the State Election of March 2007 AD.

Revenue Sharing: The GST Experiment circa 2007 AD
Bohemians, Iron Curtain Breakers and other mischief makers have long recognised that the study of Australian tax law is an exciting discipline. We should not use this guide as a cruch, but instead always look at it as the working tool to unlock the intricacies and complexities of Australian income tax law and practice.

REVENUE SHARING

The commencement of GST on 1 July 2000 caused radical changes to Commonwealth/state revenue sharing. GST revenue collected by the Commonwealth is channelled to the states and territories, in return for their agreeing to abolish certain taxes and charges (1-115). The distribution of GST revenue is also conditional on the states applying horizontal fiscal equalisation principles. The Commission continues to determine the equalisation formula and also proposes an equitable allocation of GST revenue. The allocation reflects the capabilities and needs of each state, as well as the fact that not all states levy the whole range of taxes to be eliminated.

In Ha & Hammond 97 ATC 4674, a majority of the High Court (4:3) held that business franchise licence fees imposed by New South Wales on tobacco were in reality excise duties and were constitutionally invalid (under s 90 of the Constitution, only the Commonwealth has the power to levy "duties of excise''). By implication, this meant that similar business franchise licence fees imposed by the states and territories on alcohol and petrol were also constitutionally invalid. To minimise the potentially serious impact on state and territory revenues, the federal government increased the rate of duty imposed by the Commonwealth on tobacco, alcohol and petrol and returned the additional revenue raised to the states and territories (less the Commonwealth's administration costs).

These arrangements ceased when the GST commenced on 1 July 2000 and the states and territories were required to progressively eliminate certain state taxes (and the federal government eliminate wholesale sales tax). In return, GST revenue collected by the Commonwealth would be channelled to the states and territories. State taxes such as financial institutions duty, debits tax, "bed taxes'' and stamp duty on listed marketable securities have now been abolished, with the remaining business stamp duties (eg on credit and rental arrangements, leases and mortgages) to be phased out by 2010/11.

This is the case that got me hooked on the complexities of tax laws as at the time of this judgement I was the Clerk to the Public Accounts Committee who was on long service leave in Prague. On my return in September 1997 Michael Egan, the State Treasurer at the time, made sure I read it back to front and up side down inside out ;-)

HA & ANOR v STATE OF NEW SOUTH WALES & ORS; WALTER HAMMOND & ASSOCIATES PTY LIMITED v STATE OF NEW SOUTH WALES & ORS
Full High Court, 5 August 1997

Constitutional law - Duties of excise - Exclusive power of Commonwealth Parliament - New South Wales law imposing licence fees on retail and wholesale sale of tobacco - Fees calculated upon basis of tobacco sold in an earlier monthly period - Assessments issued in respect of unpaid licence fees - Whether fees or amounts payable duties of excise - Whether duties of excise are confined to taxes which fall selectively on locally produced and manufactured goods - Whether fees or amounts payable merely fees for licences to carry on business - Business Franchise Licences (Tobacco) Act 1987 (NSW), sec 41 - The Constitution (under cl 9 of the Commonwealth of Australia Constitution Act 1901) sec 90.

The two plaintiffs in the first action conducted a duty free store in suburban Sydney and sold, by retail, tobacco products to the public. Neither held a retailer's licence under the Business Franchise Licences (Tobacco) Act 1987 (NSW) ("the Act"). The plaintiff in the second action carried on the business of selling tobacco for resale in New South Wales and appeared to have held a wholesaler's licence at the relevant time.

Under the Act, each of the plaintiffs was prohibited under penalty from selling tobacco, whether by wholesale or retail, without a licence. Licences were issued on application, for periods of not more than a month. The fee payable for a retail or wholesale licence under sec 41 of the Act was a specified percentage of the value of the tobacco sold by the applicant for the licence in an earlier monthly period (from June 1995 onwards the specified percentage was 100%). The penalty imposed for selling tobacco without a licence was the licence fee which would otherwise have been payable by the holder of a licence plus a penalty of twice that amount.

The Chief Commissioner for Business Franchise Licences (Tobacco) in New South Wales issued notices of assessment to the plaintiffs in the first action claiming over $2m under the Act. A notice claiming over $20m was issued to the plaintiff in the second action.

The plaintiffs contended that the provisions of the Act which purported to impose a liability to pay the amounts claimed by the Commissioner and calculated in accordance with sec 41 were duties of excise which New South Wales was not empowered to impose. Under sec 90 of the Constitution, the Federal Parliament has the exclusive power to impose duties of customs and of excise. Ha & Hammond 97 ATC 4674 ...