Senator Barnaby Joyce, possibly suffering withdrawal symptoms after two days out of the headlines, popped up again yesterday
calling for lower tax rates for “the most needy and depressed regions”
of Australia – being coincidentally the ones that vote National Party.

This produced an odd response from his party leader, Mark Vaile, as reported by The Australian:
“Mr Vaile said such a plan was unconstitutional and would require a
referendum.” This was said to have “effectively killed off” the idea.

Perhaps
politicians should be required to do their own tax returns rather than
send them to accountants. If Mr Vaile did his tax, he would find, on
pages 44-50 of this year’s Tax Pack Supplement, the rules for a
complicated system of zonal rebates currently available to people in
remote and regional Australia. (Read more about it at the ATO website here.)

A
single taxpayer with no dependants in Zone A, for example (which
includes places like Broome, Port Hedland, Darwin, Mt Isa and Alice
Springs), gets $338 off their tax. For a taxpayer in a “special area” –
defined as being more than 250km from a population centre of 2,500 or
more people – this rises to $1,173. Taxpayers with dependants get
significantly more.

In principle, this is not a bad way of
compensating people for the disadvantage of living in remote areas. It
is certainly fairer than, for example, discounted utility bills, which
subsidise country people in proportion to how much electricity they use
(not a good measure of disadvantage). If we could replace the existing
plethora of rural subsidies with a simple distance-based formula
administered through the tax system it would be a real gain. Somehow I
doubt that is what Senator Joyce had in mind.

On the other hand,
the legal basis for the zone system looks a bit shaky. Section 51(ii)
of the Constitution (evidently what Mark Vaile was thinking of), gives
the Commonwealth power over “Taxation; but not so as to discriminate
between States or parts of States.” Perhaps a tax lawyer among Crikey’s
readers could tell us whether the constitutionality of present
arrangements has ever been seriously tested.