Vertical Balance in the Australian Federation
This thesis analyses the distribution of revenue and expenditure powers between levels of government in the Australian federation with a view to examining the validity of the contention that an improvement in intergovernmental fiscal relations., between the Commonwealth and the six State governments in the Australian federation, would be achieved if policies were implemented which were intended to reduce and/or compensate for, any degree of vertical imbalance which exists in the Australian federal system.
The structure of the thesis is in two sections. The first section outlines a theoretical model of a vertically balanced Constitution. It considers vertical balance to be a state of optimally efficient distribution of revenue and expenditure functions between two tiers of government. The model concludes that the only basis on which a distribution of expenditure functions can be based is that of inter-regional differences in tastes. In real life this rarely if ever occurs. Therefore, the emphasis for setting criteria for a situation of vertical balance is on the distribution of revenue powers.
The conclusion of the theoretical model is that vertical balance can only be achieved if there is at least one major tax source shared between the two levels of government. The major tax sources are defined as being personal and company income taxes, customs duties, and excise taxes.
The second section of the thesis looks at the distribution of the revenue powers between the levels of government in the Australian federation over the period 1901 to 1970. On the basis of an historical analysis it looks at the major changes which have taken place in the distribl1tion of revenue powers and how these changes have resulted in a situation favourable to the occurrence of vertical imbalance. In this context it is necessary to look at Constitution changes, at decisions of the High Court of Australia, and at legislation of the Commonwealth Parliament - at times two or more of these factors may be involved, e.g. the Uniform Taxation Agreement and the court cases which followed.
These two sections of the thesis are dealt with in Chapters 2, 3 and 4 of the text. The remaining chapter considers some of -the policy alternatives which might be followed to alter the distribution of revenue powers in the Australian situation The aim is to create a situation where, provided the levels of government acted in a suitable manner, there would be a high degree of probability that a situation of vertical balance could be achieved. In this context consideration is given to the desirability of maintaining a federal system rather than making a change to a unitary system of government.