One reason for Australia's chronic current account deficit is payroll tax, which inflates prices of Australian products, including exports and import replacements. This suggests that payroll tax is an excise, in which case it violates s.90 of the Constitution.
In the last relevant High Court case, namely Ha v. NSW (1997), the minority accepted a narrow definition of excises, saying that s.90 was intended only to give the Commonwealth exclusive control of tariff policy. That reasoning would make payroll tax unconstitutional because it is a State tax acting as a reverse tariff.
The majority accepted a wide definition, saying that an excise is “an inland tax on a step in production, manufacture, sale or distribution of goods”. Payroll tax meets this definition in so far as it applies to labour embodied in goods. That it also applies to the labour component of services is irrelevant because, as Justice Menzies said in support of the “wide” prohibition in WA v. Chamberlain Industries (1970), a State cannot escape s.90 by “throwing its net widely”.*
So the contention that payroll tax is an excise could expect some support from both factions of the High Court. But I'm not a lawyer.
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* (Dec.9, 2011) The Menzies argument is equally applicable to services under the “narrow” definition of an excise: a constitutional ban on discriminating against locally produced goods is certainly not meant to be circumvented by discriminating against locally-produced services as well. Moreover, if the purpose of s.90 is to give the Commonwealth exclusive power with respect to the free trade question, that question is no less relevant to services than to goods, especially in an age when technology has lowered the barriers to international trade in services.
[First published at tribune.grputland.com, Sep.5, 2009. Relocated Sep.24, 2011. Last modified Jan.11, 2012. See also “What if GST and payroll tax are unconstitutional?” at On Line Opinion.]
