‘Shall Become Exclusive:’ An Economic Analysis of Section 90*

Section 90 of the Australian Constitution gave the power to impose excise duties exclusively to the commonwealth. Sometimes it is argued that the founders were motivated by a concern to ensure free interstate trade. The authors show that Section 90 may have reduced interstate trade distortions but equally it may have increased them and created a large excise revenue surplus for the commonwealth. There is, therefore, a case for giving excise tax powers back to the states and allowing them to cooperate through an interstate compact. There may be a role for the commonwealth in monitoring and enforcing such a compact. Copyright 1994 by The Economic Society of Australia.