WA has had nearly $170 billion redistributed to other states by the federal government during the past 10 years, with the GST only one tax with a problem.
WA has had nearly $170 billion redistributed to other states by the federal government during the past 10 years, with the GST only one tax with a problem.
Western Australians contributed nearly $9,000 per person to other states through the federal budget in 2014-15, more than 30 times the figure of the next most generous state, NSW.
Buried in the recent state budget documents is Department of Treasury modelling for the 2014-15 financial year, which estimates that despite Western Australians paying upwards of $54 billion in tax to the Commonwealth, the state received only $31.4 billion in spending.
That includes a per capita share of items such as defence.
A gap of $22.8 billion is down from a record $26.1 billion in 2013-14, but means that about one 10th of the state’s economy was effectively transferred to Canberra, even as the mining boom was beginning to come to an end.
Treasurer Mike Nahan said the fall in the contribution-receipt gap was only small.
“After the collapse of commodity prices, which saw WA’s projected revenue fall by 12 per cent or some $14.7 billion in the years 2014-15 to 2017-18, you could have expected our subsidy to the rest of the country to have fallen just as sharply as the iron ore price,” Dr Nahan said.
Across the past three years alone, the transfer totalled $73.2 billion, he said.
It brings the state’s contribution over 10 years to nearly $170 billion.
Going east
The biggest beneficiaries of the transfer were South Australia and Queensland, gaining $8.5 billion and $7.7 billion respectively.
“In dollar terms, no-one does better than South Australia out of our contribution,” Dr Nahan said.
In per capita terms, however, Tasmania, at $10,650 per person, and the Northern Territory at $17,846, were the major beneficiaries of funds from the other states.
In terms of contributors, only NSW and Victoria joined WA propping up the system.
The per capita contribution from NSW was about $264, while Victorians put in $200.
“States with higher incomes and business profits contribute more to total Commonwealth taxes,” Dr Nahan said.
“States with younger, healthier populations, or strong economic conditions draw less on health and social security payments.”
WA companies and their employees pay an oversized share of the national company and income tax take, with wages generally higher here than other states (aside from the ACT).
Excess company tax take that was distributed to other states amounted to $4.9 billion, Treasury estimated, down from $7.8 billion for the previous period.
That particular number suggests WA will be the biggest beneficiary by far of the federal government’s plan to reduce company tax rates to 25 per cent over the next decade.
Additionally, WA was a large contributor in terms of mineral extraction revenue, at $967 million, although that figure was nearly half the level it had been two years earlier.
A second cause was WA’s smaller claim on Commonwealth spending, including lower social security claims and health payments.
The GST distribution is factored into the numbers, directly affecting the state government by $3.7 billion that year, according to Treasury.
The 1985-86 financial year was the last time WA was better off from Commonwealth spending than the amount the state paid into the system through revenue.
In 1986-87, WA’s net subsidy was $228 million annually, unadjusted for inflation.
It has grown since, breaking through the $1 billion mark in 1991-92. To put that figure in context, federal government receipts were 22.7 per cent of GDP in 1991-92, just less than $96 billion.
