Barnett Supports GST On A Per Capita Basis

Barnett Supports GST On A Per Capita Basis

Western Australia Premier Colin Barnett

Federal GST Review A Missed Opportunity 

Victor P Taffa

  • GST system broken and Review Panel missed opportunity for fundamental reform
  • GST Review recommendations inconclusive and do not go far enough
  • Major problems that initiated the review have not been adequately addressed
  • State Govt strongly rejects suggestion iron ore royalties be reduced by one-third
  • Long term ‘vision’ for reform consistent with calls from WA

Western Australian Premier Colin Barnett has labelled the Federal Governments GST review report as inconclusive and a missed opportunity for reform.

“The review is largely tinkering at the edges.” Premier Barnett said.

“It has missed an opportunity for substantive reform in the national interest and failed to address the fundamental issues that initiated the review in the first place.”

The Premier said the report did not take into account WA’s circumstances.

“WA is penalised for having a successful mining industry, and the royalties earned from that, while the revenue other States earn from activities such as gambling is ignored.” Premier Barnett said.

“Given this fact, it’s extraordinary that the review has suggested WA should effectively reduce its royalty income by one-third.”

Premier Barnett said the State Government strongly opposed any interference with the States’ flexibility to collect mining royalties, which would undermine their sovereignty and capacity to achieve the best returns for their communities as owners of the minerals.

The Premier also said it was a pity that Federal Treasurer Wayne Swan had released the report of the GST Distribution Review before the States were provided with an opportunity to read the report and prepare a detailed response.

However, he said there was no doubt the review panel had avoided making recommendations on major deficiencies in the current system.

“Nevertheless, we are pleased the review panel’s final report like its first interim report appears to recognise that many aspects of the current GST distribution system are broken.” Premier Barnett said.

“The panel’s finding that it has become increasingly difficult for the States to manage their budgets because of variations in their GST receipts parallels the recent Standard and Poor’s report, which pointed to the challenges posed for the WA State Budget by GST relativity adjustments that are out-of-sync with our Budget conditions.”

The Premier did welcome the panel’s finding that the current process needs to more adequately recognise costs the States incur to support mining activity.

Premier Barnett was also pleased to see some reference by the panel to the need for a closer matching of Federal Government revenue-raising capacity with the States’ expenditure responsibilities and for Commonwealth transfers to the States to be on an equal per capita basis.

“However, this was only referred to as part of a long-term vision for reform of Federal finances and fails to address it as an immediate priority for reform.” Premier Barnett said.

“While WA supports reform of the GST treatment of on-line imports in principle, we do not consider this or other GST base issues should be allowed to distract attention from the primary purpose of the review – to reform the GST distribution in Australia’s national interests.”

“We do agree with a need for more transparency in the GST distributions system.  However, WA’s position, along with that of Queensland, New South Wales and Victoria, is that the GST should be allocated increasingly on a per capita basis.”

“That remains WA’s position and it is the only way to achieve substantive reform.”

Fact File

  • Under current arrangements, WA’s grant share has fallen to only 55% of its population share in 2012-13, and is expected to fall further over the forward estimates period possibly to less than 30%
  • In the period 2011-12 to 2015-16, WA will lose $15.3 Billion compared to if it received an equal per capita share of GST revenue
  • WA’s declining GST share increases the State’s overall annual net contribution to the Federation, which now stands at $14.9 Billion
  • WA Government has been seeking reforms to the GST distribution system to remove penalties for economic success, while appropriately assisting the weaker States