Editing Economy of Australia (section)

===Taxation===
[[File:ABS-5206.0-AustralianNationalAccounts-NationalIncomeExpenditureProduct-TaxesCurrentPrices-TotalTaxes-A2301963V.svg|thumb|right|Quarterly taxation revenue ($millions) since 1959.]]
{{Main|Taxation in Australia}} {{See also|Income tax in Australia|Goods and Services Tax (Australia)|Passenger Movement Charge|Fiscal imbalance in Australia}}
Taxation in Australia is levied at the federal, state, and local government levels. The federal government raises revenue from [[Income tax in Australia|personal income taxes]] and business taxes. Other taxes include the [[Goods and services tax (Australia)|goods and services tax (General Service Tax)]], excise and customs duties. The federal government is the main source of income for state governments. As a result of state dependence on federal taxation revenue to meet decentralised expenditure responsibilities, Australia is said to have a vertical [[fiscal imbalance]].

Besides receipts of funds from the federal government, states and territories have their own taxes, in many cases as slightly different rates. State taxes commonly include [[payroll tax]] levied on businesses, a poker-machine tax on businesses that offer gambling services, [[Land value tax|land tax]] on people and businesses that own land and most significantly, [[stamp duty]] on sales of land (in every state) and other items (chattels in some states, unlisted shares in others, and even sales of contracts in some states).

The states effectively lost the ability to raise income tax during the Second World War. In 1942, Canberra invoked its Constitutional taxation power (s. 51 (ii)) and enacted the ''Income Tax Act'' and three other statutes to levy a uniform income tax across the country. These acts sought to raise the funds necessary to meet burgeoning wartime expenses and reduce the unequal tax burden between the states by replacing state income taxes with a centralised tax system. The legislation could not expressly prohibit state income taxes (s. 51(ii) does not curtail the power of states to levy taxes) but the federal government's proposal made localised income tax extremely difficult politically. The federal government offered instead compensatory grants authorised by s. 96 of the Constitution for the loss of state income (''State Grants (Income Tax Reimbursement) Act 1942'').

The states rejected Canberra's regime and challenged the legislation's validity in the First Uniform Tax Case (''[[South Australia v Commonwealth]]'') of 1942. The High Court of Australia held that each of the statutes establishing Commonwealth income tax was a valid use of the s. 51(ii) power, in which Latham CJ noted that the system did not undermine essential state functions and imposed only economic and political pressure upon them.

The Second Uniform Tax Case (''Victoria v Commonwealth'' (1957)) reaffirmed the court's earlier decision and confirmed the power of the federal government's power to make s. 96 grants conditionally (in this case, a grant made on the condition that the recipient state does not levy income tax).

Since the [[Victoria v Commonwealth (1957)|Second Uniform Tax Case]], a number of other political and legal decisions have centralised fiscal power with the Commonwealth. In ''Ha vs. New South Wales'' (1997), the High Court found that the ''Business Franchise Licences (Tobacco) Act 1987'' (NSW) was invalid because it levied a customs duty, a power exercisable only by the Commonwealth (s.90). This decision effectively invalidated state taxes on cigarettes, alcohol and petrol. Similarly, the imposition of a Commonwealth goods and services tax (GST) in 2000 transferred another revenue base to the Commonwealth.

Consequently, Australia has one of the most pronounced vertical fiscal imbalances in the world: the states and territories collect just 18% of all governmental revenues but are responsible for almost 50% of the spending areas. Furthermore, the centralisation of revenue collection has allowed Canberra to force state policy in areas well beyond the scope of its constitutional powers, by using the grants power (s.96) to mandate the terms on which the states spend money in areas over which it has no power (such as spending on education, health and policing).

Local governments (called ''councils'' in Australia) have their own taxes (called rates) to enable them to provide services such as local road repairs, local planning and building management, garbage collection, street cleaning, park maintenance services, libraries, and museums. Councils also rely on state and federal funding to provide infrastructure and services such as roads, bridges, sporting facilities and buildings, aged care, maternal and child health, and childcare.

In 2000, a [[Goods and services tax (Australia)|goods and services tax]] (GST) was introduced, similar to the European-style [[Value-added tax|VAT]].<ref>{{Cite web|title=A brief history of Australia's tax system {{!}} Treasury.gov.au|url=https://treasury.gov.au/publication/economic-roundup-winter-2006/a-brief-history-of-australias-tax-system|access-date=2024-12-18|website=treasury.gov.au}}</ref>