Feds and states clash at tax forum

When it comes to tax reform, the states and territories are in harmony on the need for greater harmony.

But other tax forum participants believe all their talk about harmonising state tax systems is a cop-out and just want to know: When will they do away with bad taxes like stamp duty?

Queensland Treasurer Andrew Fraser kicked off the national tax forum session on state taxes in Canberra on Tuesday by calling for increased harmonisation across state borders.

Rather than inching towards harmonisation, states should work towards uniform legislation - leaving them with just the power to set thresholds and rates of their taxes - within the next couple of years.

"We should start with payroll tax and then move to land tax," Mr Fraser told about 200 participants attending the federal government forum.

"It will be a step down the road but it seems to me we have to start somewhere."

Mr Fraser's proposal attracted broad support from other state and territory treasurers but other forum participants dismissed the idea as incremental reform.

Insurance Council of Australia General Manager Alex Sanchez called on the states to get serious.

"Harmonisation is the last refuge of scoundrels. Let's spend some time doing proper tax reform," he said.

The Tax Institute's Robert Jeremenko said harmonisation was a worthy goal but "to borrow a phrase, it's a lazy way out."

Mr Jeremenko echoed the calls of the majority of participants: inefficient state taxes - particularly real estate stamp duties - had to be abolished.

The states largely agree that some of their 25 taxes - particularly stamp duty - are inefficient and counterproductive.

But they say they cannot abolish any of them unless they can find other revenue sources.

Mr Fraser said every state could abolish stamp duty tomorrow: "We'd just have to abolish the police service, the ambulance service, the fire service and take a good sword to disability funding also."

Tasmanian Premier Lara Giddings said the states had little choice to persist with the taxes.

"If we could get rid of them we would get rid of them," she said.

"But the reality is we're at a point now at the state level where we've got no further room to move unless there is further reform."

West Australian Treasurer Christian Porter said the states could retire inefficient taxes if the federal government was prepared to share its income tax revenue.

But federal Treasurer Wayne Swan quickly slapped down the idea.

"I have no appetite for that at all," he told the forum.

"What seems to be being proposed here by a number of people around the room is that somehow we could give the states a lot more money for the taxes they abolish but not end up increasing our own tax take.

"The fact is the states do have tax bases. What they have to do is use them and use them more fully."

Mr Porter later said that was a "fairly sharp no".

"To knock things on the head so quickly is a little bit disappointing in a forum of this type," he told reporters.

Mr Swan said the government stood ready to work with the states on other reform ideas.

"But we're not a money tree and we can't just hand over cash willy-nilly and not be concerned about what it means for our bottom line, what it means for our macro economy."

He pointed out commonwealth revenues down $130 billion from where they were before the global financial crisis.