27/09/2016 - 13:54

Gaming the system might be the best bet

27/09/2016 - 13:54

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Disruption is affecting the GST allocation model, so when will that change?

Gaming the system might be the best bet
DUD BET: WA loses an element of GST allocation because it doesn’t don’t allow gambling to the extent other states do. Photo: Stockphoto

Disruption is affecting the GST allocation model, so when will that change?

As regular readers know, I have been a big fan of the arrival of disruptive forces bringing competitiveness into fields that have otherwise enjoyed protection, unregulated or not, and usually at a high cost to the end user in price or choice.

Uber is the most recent example known to most, but there are plenty of others – and they are not all due to technological change.

The fact that strawberries are now edible is testament to rule changes that allowed new varieties to bypass out-of-date horticultural protection. And, on the subject of fruit and veg, potato growing is now deregulated – albeit decades after it should have been.

Another more obvious area was motor vehicle and machinery manufacturing, coddled for so long it pre-dated the Commonwealth Grants Commission and is the reason Western Australia – which did not have a protected manufacturing sector – was subsidised by the rest of Australia from the mid-1930s onward.

That subsidy was never really enough to repay motor vehicle buyers for the ‘right’ to buy cars made in Adelaide or Melbourne, or farmers and miners for the high cost of importing equipment under high-tariff regimes.

Certainly, technology is a major element of disruption. Due to the internet, consumers have found that many goods can be bought online for a fraction of their WA price tags. While I agree with retailers’ angst over the fact GST is not paid on small offshore purchases, that’s where my sympathy ends.

But there are some areas where I don’t fully accept that disruption is good. The internet has brought all sorts of challenges to those who choose to regulate elements of our society that, while commercial in nature, also have a moral element – albeit very subjective but, nonetheless, important in a democracy.

The ability to control pornography went out the window the day the internet was invented, while most recently it has been gambling and gaming that now face the disruptive forces created by online commerce.

I have long felt the state’s lottery system, Lotterywest, was a well-balanced way of dealing with the desires of people to gamble and the need to keep that in check. Lotterywest acts not only as a responsible purveyor of a risky product, but it has a mandate to return surplus funds to the community.

I might not agree if I were a seasoned gambler or loved the pokies, but at the risk of sounding overly conservative, from what I’ve seen of gambling in the eastern states I think we have done well.

However, the influx of online sports betting and, more recently, commercial lotteries operating under interstate licences, create a sort of double jeopardy for this state – not only could we lose the ability to control gambling the community considers unsafe, we could lose the revenue earned as a form of sin tax that, at the very least, helps soften the cost of this vice.

In fact, it could be triple jeopardy if we consider the GST impact.

I have written before that WA loses an element of GST allocation because it doesn’t allow gambling to the extent other states do. Because we choose not to allow pokies when we could, the Commonwealth Grants Commission deems us to have earned the average per capita revenue of the states that do, and counts that as revenue earned in lieu of receiving that part of GST.

I could accept this if it was applied so liberally to other industries, but what states are penalised for laws that they consider their moral right, such as locking up vast areas of forest as wilderness, or refusing to allow fracking when they could earn millions or billions from the royalties? Why are there no fiscal consequences for that choice?

It would be even more galling if the gaming and gambling revenue earned from WA consumers using online outlets based in other states not only was taken away from Lotterywest to outside commercial interests, but was then added into the GST calculations.

That could increase the per capita average revenue in the states that choose to license these operators and, as a result, further negatively impact on our share.

That the Northern Territory, the nation’s single biggest recipient of GST per capita, is embarking on a campaign to attract more of this business to be based in Darwin when, quite obviously, the true market is everywhere else further highlights the problem.

Perhaps WA should get better at gaming the system, too?


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