The Queensland Premier, Wayne Goss, has shot himself in the foot. In his Budget last week he announced that Queensland would half its stamp duty on share transactions from 0.6 per cent to 0.3 per cent. He hoped he would attract more share transactions to Queensland which would result in stock-brokers opening offices in his state. When the other states screamed, he said piously that he did not want to hurt them. He did not want to take away transactions from those states. Rather, he said, he wanted to attract some of the many transactions with Australian shares that took place overseas. Well, that was either underhand or naive. He must have known that by lowering the Queensland rate he would attract interstate business to the detriment of other states’ revenue. Indeed, that was more likely than attracting overseas business. This is because transactions overseas already attract a low level of stamp duty so the incentive is lower to move.
The result of Mr Goss’s move was predictable. It perhaps happened faster than one would imagine. The other states have followed suit. It now means that, in total, instead of collecting about $600 million a year on share transactions; they will collect only half that. The states will lose about $300 million. In short, money that would have gone to hospitals, roads, schools will go instead to people who trade in shares. Well done, Mr Goss. It is true that the leakage of revenue caused by people moving transactions overseas was a problem. Twenty-per cent is a high figure _ about $150 million. However, Mr Goss’s maverick approach to that problem was bound to fail. Besides which, it was selfish. Why should Queensland attempt to attract to itself all the overseas leakage? The way Queensland went about it does not sit well with modern governmental practice.
It stitched up a secret deal with the Australian Stock Exchange and announced it in the Budget _ the Budget process being notoriously secretive. It would have been much better if he had consulted and with the others states and Commonwealth devised a way of stemming the overseas leakage in a way that was not so destructive of the states’ revenue base. The notion of competitive federalism is only beneficial up to a point. It becomes self-defeating when the states erode their already shrinking revenue bases and then go cap in hand to the Commonwealth to make up the difference. Tactics like Mr Goss’s make people wonder whether the states deserve the financial and policy autonomy they cherish.