Hon Christian Porter BA(Hons) BEc LLB(UWA) MSc(Dist)(LSE) MLA

Hon Christian Porter BA(Hons) BEc LLB(UWA) MSc(Dist)(LSE) MLA

Former Treasurer; Attorney General

    GST distribution reform a national imperative

    14/10/2011 12:00 AM
     
    • WA calls for:
      - 75 per cent floor in GST grants
      - 50 per cent discount to the redistribution of mining royalties
    Treasurer Christian Porter today signed off on the Western Australian Government’s submission to the review of the distribution of the Goods and Services Tax (GST) commissioned earlier this year by the Prime Minister.

    “The reform of the GST distribution system is imperative to restore confidence in State/Commonwealth financial relationships and remove impediments to growth in the national economy,” Mr Porter said.

    “The current form of ‘fiscal equalisation’ is too extreme - it fails equity tests, penalises hard work, encourages welfare dependency and is now a divisive rather than unifying influence.”

    WA currently received back only 72 per cent of its contributions to the national GST pool.  This was projected to fall to an unsustainable 33 per cent within three years.

    With dwindling GST revenues, WA has limited capacity to fund the large-scale public investment needed to support the future growth of the resources sector, which continues to drive the nation through uncertain global economic times.

    “The Federal Government should move immediately to introduce a floor on GST shares equal to 75 per cent of a State’s population share,” Mr Porter said.

    “In 2011-12, a 75 per cent floor would have delivered additional GST revenue of $166million to WA, with the cost to other States being just 0.4 per cent of their total GST grants.

    “Under this proposal, WA would still continue to provide a substantial cross-subsidy to economically weaker States such as South Australia and Tasmania but the result would be fairer and not harmful to WA’s growth.”

    The WA Government has also called for a 50 per cent discount to the redistribution of mining royalties, partly to reduce the incentive for royalties to be spent on recurrent services rather than investment, at the expense of future generations.

    “A limit should also be placed on the extent to which any State’s GST share can fall in any one year and greater recognition of the costs of facilitating economic development in growth States should be addressed,” the Treasurer said.

    “With more incentives for States to promote growth, reduced barriers to growth, and fewer distortions to economic reform, all States will benefit from an increased GST pool.”
     
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