Not so long ago, premiers' conferences were shouting matches between state leaders who wanted more money and prime ministers who refused to give it to them. But with the introduction of the goods and services tax, the political dynamics of federalism was fundamentally changed.
Since 2000, GST revenue paid to the states has increased at an average annual rate of more than 9 per cent -- a huge and unexpected gain. Given such a windfall, for the premiers to protest at being refused further funds from Canberra would be like a child at Christmas lunch complaining about not being given another serve of pudding after having already eaten three helpings.
There's no reason to believe today's meeting of leaders in Canberra will be very different from those of the past few years. A spirit of bonhomie and goodwill will pervade Parliament House. In theory, without the need to fight about finances, the premiers and Prime Minister will be free to concentrate on co-operating to reduce duplication, cut red tape, and improve service delivery. This should be a good thing. However, in practice, the situation is more complicated, and despite the faults of the old system, it had its benefits.
When federal and state officials argued over every dollar of federal funding, a discipline was imposed on both levels of government. That discipline has now gone. While the fiscal relationship was never between equals, it was nevertheless one of balance.
With the automatic transfer of GST revenue to the states, the focus of federal/ state relations is moving away from disputes about financial relations. Attention is turning to the issue of how governments manage and regulate both themselves and the private sector. The problem is that in these debates about the appropriate level of government to undertake regulation, there is an almost complete lack of balance.
The media, academia and even sometimes the business sector present the Commonwealth as the answer to the regulatory ills of complexity and confusion. The solution to any problem is assumed to be the imposition of uniform rules across the federation. Few bother to ask what it is about politicians in Canberra that equip them to make regulations that are clearer, simpler, and more easily understood than those produced by politicians in Macquarie Street or Spring Street.
A quick survey of federal legislation reveals that federal public servants have a capacity as great as, if not greater than, their colleagues in the state capitals to confuse and obfuscate. Income-tax legislation, which is the exclusive preserve of the federal government, is the most famous example of this. The tax acts total an estimated 7500 pages.
In a speech last week, commissioner of taxation Michael D'Ascenzo admitted that an understanding of tax law is now beyond the comprehension of any normal person. He said only tax professionals could be expected to understand taxation legislation. Such a proposition raises many interesting issues.
Given that few MPs are tax experts, there is the question of whether they knew what they were doing when they passed those 7500 pages of legislation. (Although some relief may be at hand. The last election brought into parliament two MPs who actually do have an understanding of the tax system -- Malcolm Turnbull and, ironically, Barnaby Joyce).
If tax professionals were the only people who paid tax, it might be of no consequence that tax law was incomprehensible. But when legislation has as broad an application as do the tax acts, and when that legislation involves the confiscation of private property by government and imposes criminal penalties, the fact that such legislation can't be understood is a concern. When we reach such a stage, the issue is not just about bad regulation -- it becomes one about the operation of the rule of law.
More alarming was another comment by the commissioner that it didn't really matter how complicated tax regulation became. "In Australia, 73 per cent of people go through tax agents and the tax profession. Ninety-five per cent of companies go through the tax profession. So, in a sense, who cares?" It would be one thing for the commissioner to acknowledge the unavoidable complexity of tax law. But that is entirely different from our most senior tax official saying we shouldn't care how many volumes made up our tax legislation.
The experience of the regulation of income-tax collection in this country is a lesson for all those who in the name of simplicity will today be urging more power for the Commonwealth government.
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