ID :
171899
Wed, 03/30/2011 - 13:31
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Shortlink :
http://m.oananews.org//node/171899
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PM launches review of GST distribution
(AAP) - Prime Minister Julia Gillard has launched a review of how the goods and services tax (GST) is distributed, acknowledging complaints from the states that the current system is flawed.
The government has appointed former NSW premier Nick Greiner, former Victorian premier John Brumby and South Australian businessman Bruce Carter to conduct the review.
The review has been particularly welcomed by the large resource states of Western Australia and Queensland, which feel hard done by under the current system.
Announcing the review in Perth on Wednesday, Ms Gillard said there was a need for greater simplicity, transparency and predictability in the system of distributing the GST to states and territories.
She said that under the current system there was also not enough incentive for economic reform, with states and territories sometimes being penalised for success.
"I want to get those things fixed, and this is the process to get them fixed," she told reporters.
The review team will provide an interim report in February 2012, ahead of a final report by September 2012.
Ms Gillard said premiers had been calling for reform for some time.
She said Queensland Premier Anna Bligh had complained her state was being penalised for its economic success while WA Premier Colin Barnett had asked what his state had done wrong "besides being successful".
Ms Gillard said states shouldn't be "unfairly punished for success".
She said the current system struggled to deal with changing economic conditions, with mining growth increasing discrepancies in the revenue raised by states and territories.
"We need a formula, a system that better copes with growth."
Ms Gillard said more certainty and predictability was needed to stop the states being hit with unexpected shocks to their finances when GST income could fluctuate widely from year to year.
And she said more incentive for economic reform and improved service delivery was needed.
"If we have a system that is punishing economic reform and punishing success, then it doesn't work for states and it doesn't work for Australia."
Mr Barnett, who has been a vocal critic of WA's decreasing share of the GST, welcomed the review, saying it was long overdue and would examine his proposal for a 75 cent "floor" for his state.
"Under the current system, Western Australia gets around 68 cents in the dollar. If the current system stays in place we could be down to 40 cents in the dollar within three years," the premier said.
"It is impossible to plan hospitals, schools, road projects and the like if you've got that degree of uncertainty about our future income."
Mr Barnett said WA was willing to contribute to the smaller states but said 75 cents in the dollar was a "generous" minimum expectation.
Queensland Treasurer Andrew Fraser said he hoped the review saw an end to an unfair system that punished the state.
"Over the past decade, states like Queensland and Western Australia have seen billions of dollars worth of GST revenue stripped away because of the superior performance of our economies," he said.
"Both states have been punished for our economic success, and any move to see that discontinued is welcome.
"The fact is that states that receive mining royalties are penalised far more harshly than the southern states that rely on transfers."
Mr Fraser said Victorians currently got more out of Queensland's resources sector than Queenslanders did.
NSW Premier Barry O'Farrell also welcomed the review, saying he would demand NSW got its fair share.
"NSW has been ripped off for years under the deal signed off by the former NSW Labor government," he said.
Victorian Treasurer Kim Wells said the prime minister should suspend a flagged cut to Victoria's GST funding in light of the review.
Mr Wells was furious when the Commonwealth Grants Commission recommended last month the government slash Victoria's GST funding by $500 million in the 2011/12 financial year.
"Today Prime Minister Julia Gillard has conceded the merits of the Victorian government's argument in relation to GST distribution," he said in a statement.
"Given this concession, the Commonwealth should immediately suspend the unjustified $2.5 billion cut ... until the outcome of the review is completed.
"It is clear that the Commonwealth has no confidence in the existing formula."
Tasmanian Premier Lara Giddings expressed concern the review could politicise the way the tax is distributed among states.
"Tasmania is at a relative disadvantage both in terms of population size and socioeconomic status," she said.
"It would be fundamentally unfair to disregard those factors simply to reward states that are resource rich and have a larger population base."
Tasmania is already reeling from an estimated $200 million fall in GST revenue, with the government preparing to shed the equivalent of 2300 public sector jobs.
The government has appointed former NSW premier Nick Greiner, former Victorian premier John Brumby and South Australian businessman Bruce Carter to conduct the review.
The review has been particularly welcomed by the large resource states of Western Australia and Queensland, which feel hard done by under the current system.
Announcing the review in Perth on Wednesday, Ms Gillard said there was a need for greater simplicity, transparency and predictability in the system of distributing the GST to states and territories.
She said that under the current system there was also not enough incentive for economic reform, with states and territories sometimes being penalised for success.
"I want to get those things fixed, and this is the process to get them fixed," she told reporters.
The review team will provide an interim report in February 2012, ahead of a final report by September 2012.
Ms Gillard said premiers had been calling for reform for some time.
She said Queensland Premier Anna Bligh had complained her state was being penalised for its economic success while WA Premier Colin Barnett had asked what his state had done wrong "besides being successful".
Ms Gillard said states shouldn't be "unfairly punished for success".
She said the current system struggled to deal with changing economic conditions, with mining growth increasing discrepancies in the revenue raised by states and territories.
"We need a formula, a system that better copes with growth."
Ms Gillard said more certainty and predictability was needed to stop the states being hit with unexpected shocks to their finances when GST income could fluctuate widely from year to year.
And she said more incentive for economic reform and improved service delivery was needed.
"If we have a system that is punishing economic reform and punishing success, then it doesn't work for states and it doesn't work for Australia."
Mr Barnett, who has been a vocal critic of WA's decreasing share of the GST, welcomed the review, saying it was long overdue and would examine his proposal for a 75 cent "floor" for his state.
"Under the current system, Western Australia gets around 68 cents in the dollar. If the current system stays in place we could be down to 40 cents in the dollar within three years," the premier said.
"It is impossible to plan hospitals, schools, road projects and the like if you've got that degree of uncertainty about our future income."
Mr Barnett said WA was willing to contribute to the smaller states but said 75 cents in the dollar was a "generous" minimum expectation.
Queensland Treasurer Andrew Fraser said he hoped the review saw an end to an unfair system that punished the state.
"Over the past decade, states like Queensland and Western Australia have seen billions of dollars worth of GST revenue stripped away because of the superior performance of our economies," he said.
"Both states have been punished for our economic success, and any move to see that discontinued is welcome.
"The fact is that states that receive mining royalties are penalised far more harshly than the southern states that rely on transfers."
Mr Fraser said Victorians currently got more out of Queensland's resources sector than Queenslanders did.
NSW Premier Barry O'Farrell also welcomed the review, saying he would demand NSW got its fair share.
"NSW has been ripped off for years under the deal signed off by the former NSW Labor government," he said.
Victorian Treasurer Kim Wells said the prime minister should suspend a flagged cut to Victoria's GST funding in light of the review.
Mr Wells was furious when the Commonwealth Grants Commission recommended last month the government slash Victoria's GST funding by $500 million in the 2011/12 financial year.
"Today Prime Minister Julia Gillard has conceded the merits of the Victorian government's argument in relation to GST distribution," he said in a statement.
"Given this concession, the Commonwealth should immediately suspend the unjustified $2.5 billion cut ... until the outcome of the review is completed.
"It is clear that the Commonwealth has no confidence in the existing formula."
Tasmanian Premier Lara Giddings expressed concern the review could politicise the way the tax is distributed among states.
"Tasmania is at a relative disadvantage both in terms of population size and socioeconomic status," she said.
"It would be fundamentally unfair to disregard those factors simply to reward states that are resource rich and have a larger population base."
Tasmania is already reeling from an estimated $200 million fall in GST revenue, with the government preparing to shed the equivalent of 2300 public sector jobs.
