And Governments don't let other Governments tax for them. The money always comes with strings attached. Peter Costello is now telling the States how they should use the GST money that the Federal Government is collecting for them. One of the states should be saying; "I am not accepting the GST, and you cannot charge the GST in the state". We probably need a Lang vs Lyons showdown to return Australia to some semblance of a Federalist system again.

Federalism

The basis for Federalism is that there are multiple political units. These consist of a centre unit and sub-units. Each of these units, including the centre is politically independent. The purpose of a Constitution is to define the roles of the centre unit and sub-units so that they do not conflict.

Australia is falling into entropy - collapsing all power into the centre . Our system is not protecting the sub-units from encroachment of the Federal Government. Over a century of a Constitutional Westminster system, the Federal Government has successfully coveted more and more State responsibilities to themselves. They have worked it so that they are the principle taxing authority for not only themselves, but the States as well. The GST is the most recent form of this.

The question needs to be asked whether a Constitutional Westminster system is capable of combating a collapse to the central political unit. Is a largely informal Constitution capable of protecting the States from the Federal Government's plundering their responsibilities and taxation authority? From one hundred and four years of Australian Federal Government, the answer is no.

When Australia becomes a Republic, it will not be enough to constitutionally shuffle in a few words here and there, and delete a couple of other words along the way. The system itself is bereft. Explicit language must be added to protect minority rights. Explicit language added to ensure there is a clear demarcation between Federal Government and State Government. Language so clear that an activist Judicial is not necessary. Finally, the responsibilities of the Prime Minister must be recognized and laid out. The Prime Minister is a constitutional submarine at the moment.

When You Tax Me You Tax You

The GST is bringing in large amounts of money. Seemingly more each year, enough that in the last budget the Federal Government was bragging how much money they were raising from it for the states. So what does Costello want the States to do?

Mr Costello said he would insist at the meeting that the states implement a second wave of GST-related tax cuts by abolishing or reducing six stamp duties, many of which are hidden in the prices paid by consumers.

They include stamp duties on:

• Non-residential conveyancing;
• Leases;
• Mortgages, bonds, debentures and other loan securities;
• Credit, instalment purchase and rental arrangements;
• Cheques, bills of exchange and promissory notes;
• Unquoted marketable securities.

The whole thing about being the Treasurer of the Federal Government is that you can lower taxes at the Federal level. You don't need to press the States to lower taxes for you. It is likely this is just factional politics, with the Federal Government seeking to divert attention from the interest rate rise - ironically a central election promise.

But it does not change the fact that no government should accept tax monies from another government. No government should allow another government to tax for it. Once they do, they are no longer a politically independent unit. When this occurs in a Federal system, it is no longer a Federal system, but rather a centralised sovereign system with some outposts of political obstinence waiting to be cleaned up by the central authority.

Entropy to the central political unit must be defeated at all levels.

cam