Buswell calls for State income tax powers

WA Treasurer Troy Buswell has called for a radical rethink of Australia's taxation arrangements, including returning income tax power to the States for the first time since World War II.

Mr Buswell told an Australian Property Institute event in Busselton that WA's taxation base - payroll tax, land tax and stamp duty on property sales and motor vehicle sales - was "incredibly narrow and inefficient".

"If you were an economist you'd say, 'Don't have them'," Mr Buswell said of these taxes.

But under existing financial arrangements between the States and Canberra, the so-called "three ugly sisters" of payroll tax, land tax and stamp duty were necessary for the States to meet spending obligations.

"What really cheeses me off is you can't have a mature debate about tax reform in this country," he said. "We put up a proposal to the Henry tax review that said let's finish the job around GST and get rid of all State taxes.

"Get rid of State taxes and maybe let States pick up the back end of income tax as it happens in some other countries. Because I think that would be much better."

WA will raise about $9.2 billion in tax revenue this financial year, compared with $5.1 billion from direct Commonwealth grants and $2.5 billion from GST out of total revenue of $28 billion.

"At the moment, direct tax revenue is a relatively small share of what we spend so as a State if you haven't got enough money, you go to Canberra to get some more," Mr Buswell said. "But if you are going to have to be directly responsible for having to put a tax up to pay for something, you can't hide behind the transfer costs. If you ran your finances poorly and had to put up taxes to cover the shortfall, you would very quickly learn that people get unhappy."

Opposition Leader Mark McGowan said no Federal Government would return income tax powers to the States and Mr Buswell's energy would be better directed to delivering on the financial commitments the Government made at the election.