Treasurer Christian Porter has called for a 75 per cent floor in goods and services tax grants and a 50 per cent discount to the redistribution of mining royalties in the state government’s submission to the federal GST review.
Mr Porter said the current form of “fiscal equalisation” employed by the federal government was “too extreme”.
“It fails equity tests, penalises hard work, encourages welfare dependency and is now a divisive rather than unifying influence,” Mr Porter said in a statement released today.
Mr Porter said reform was imperitive to restore confidence in state and Commonwealth government financial relationships and remove impediments for economic growth.
The Treasurer said the state’s GST revenue kickback was projected to fall from its current level of 72 per cent to 33 per cent within three years, giving the state a limited capacity to fund large-scale public investment.
“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.”
Mr Porter also said a 50 per cent discount to the redistribution of mining royalties would reduce the incentive for royalties to be spent on recurrent services rather than investment.
“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.”
