What if GST and payroll tax are unconstitutional?

Let me therefore offer an alternative solution that gets rid of payroll tax and reduces or eliminates vertical fiscal imbalance. One advantage of a retail tax is that the absence of input credits makes it easy to have different rates (on a uniform base) in different States. (In this context the "States" will be taken to include the Territories.) So let the retail tax rate in each State be set annually by the Federal Parliament at the "request and consent" of the State Parliament, and let the revenue so raised in each State be refunded to the State on the condition that the State refrains from imposing certain other taxes (e.g. income tax).

Does this arrangement amount to a State excise tax in violation of s.90 of the Constitution? No, because it's imposed under Federal legislation. Does the variation in the rate amount to discrimination between the States in violation of s.51(ii) and s.99? No. The Commonwealth invites each State to pass a "request and consent" act. The States respond as they see fit and the Commonwealth meekly accepts their responses. Where's the discrimination?

In the unlikely event that "discrimination" is an issue, there's another way to legitimise the same arrangement. According to the "minority" definition of an excise, the States can impose their own retail taxes, in which case they can refer the collection power to the Commonwealth under s.51(xxxvii), and the Federal Parliament can authorise the collection by the ATO on the condition that the referring States accept a uniform base and refrain from imposing certain other taxes.

The enabling Federal and State legislation could cover both constitutional options, so that different High Court judges could approve the arrangement for different reasons. As long as a majority of judges agree that the arrangement is constitutional, it doesn't matter if they disagree on the reasons!

In proposing a retail tax as a constitutional fix, I have not been wearing my Prosper Australia hat. But now let me put it on to answer just one question: if we must have a retail tax, and if the need to replace payroll tax provides some wriggle-room concerning the rate and the base, how should the retail tax treat real estate? My answer has four parts.

1. To loosen up the supply chain, all property sales (some of which are presently subject to GST) should be exempt.
2. To encourage construction, buildings should be exempt, leaving only sites subject to tax.
3. To maximise the incentive to build commercial accommodation and seek tenants, commercial landlords (who presently collect GST on rents received for sites and buildings) should pay retail tax on the imputed rental values of their sites alone, regardless of whether the sites are developed or let to tenants; and any contractual provisions requiring tenants to pay the tax (or increments in the tax) should be void.
4. To maximise the incentive to build rental housing and seek tenants, residential landlords (who are presently input-taxed) should be treated as in (3).

A retail tax implemented in this way would improve housing affordability and provide a stimulus for construction and related industries. And regardless of how it treated real estate, it would reduce vertical fiscal imbalance, eliminate payroll tax, improve international competitiveness, create jobs, and reduce compliance costs that feed into the cost of living. Anyone who can bring this about through a constitutional attack on the existing system will do the country a great service.