Growth hits grants

THE WA Business News round table panel was united in its view that State taxation levels were too high and too great a burden on the business community, with the exception of State Treasurer Eric Ripper, who put a different spin on things.

Mr Ripper said Western Austra-lia’s strong economic growth was hampering its ability to secure Federal grants.

In discussing this endemic national problem, panelists agreed that, in order to reduce the tax bur-den on business, initiatives were needed to tackle the Federal grants system.

Eric Ripper, Treasurer: “Let me first of all come to that overall level of taxation, we are not getting a single additional cent from the GST beyond what we got under previous arrangements. 

“It won’t be until 2007 and 2008 we will see the GST give us some additional revenue. 

“We suffer partly along with all the other States in that the Federal share of all the revenue collected, and all expenditure, continues to increase as a proportion.

“We also have a particular problem because we are penalised for our economic growth, we are penalised for our royalty revenues and our Commonwealth grants reduced and the Commonwealth grants for Tasmania, South Australia, Queensland and the ACT are increased.  I think that is a real problem, not only for WA but for the entire nation.

“Basically the system of distributing Commonwealth grants actually penalises for growth and growth-promoting policies. 

“It is equivalent of the poverty trap scenario that is common in the welfare system; if people find out a way to boost their economic growth they will find their Commonwealth grants are redistributed to others.

“That translated then into this financial year to Commonwealth grants, which make up 45 per cent of our budget, actually only increasing by 0.9 per cent. In real terms if they kept pace with inflation and population growth it would have increased by $145 million.”

Peter Fitzpatrick, Motor Trades Association executive director: “The other thing that really annoys business is party politics, the constant squabble between Canberra and the States about who gets what slice of the tax cake. 

“If party politics are going to get in the way, I think there is the need for a tax summit because GST hasn’t delivered the benefits we thought it would. State taxes are far too high and make us non competitive in a number of ways. 

“We need to shift the balance away from State tax; we shouldn’t have the high levels of payroll tax, we shouldn’t have the high levels of stamp duty we have. We’ve got to start seeing some benefits com-ing back from the Federal Govern-ment.

“I also think that we need to get some really mature relationships going between the Commonwealth and the States to take away the reliance of the States on their own tax systems. In a State as big as ours and with a small number of people, we are always going to be uncompetitive when it comes to competing with the other States.

“State taxes are a real dead hand on business, there is no doubt about that.

“The constant to-ing and fro-ing between the Federal and State governments, there is an old saying ‘when the elephants fight the ants get crushed’ and small business is getting crushed while this fight is going on.

“There is just not that sort of understanding or reciprocity between the States and Federal governments in terms of who is going to get what slice of the cake. I think we all acknowledge that Queensland gets more than its fair share of the GST take and this causes this uncompetitiveness to occur.

“I think we should be getting rid of State taxes, as many as we possibly can, provided we can come up with a formula that is going to work in terms of distribution of Federal taxes.

“Where is the GST going?  Why is it going? Are the States that are economically performing better going to get some sort of bonus or are the States that simply have a better formula going to continue to benefit?

Let’s start getting rid of some State taxes by getting a better treatment of the States or a fairer treatment of the States by the Commonwealth.”

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