The controversial 2018 reforms designed to tackle Western Australia\u2019s then-declining GST share have made the distribution system less fair for other states, an interim Productivity Commission report has found.<\/p>\n
The GST carve-up allocates billions in dollars of funding derived from the revenue of the 10 per cent goods and services tax between Australian states and territories. <\/p>\n
WA currently keeps 75 cents for every dollar of GST revenue, thanks to a deal struck by the then Coalition government\u2019s treasurer Scott Morrison to address the state\u2019s collapsing revenue share. <\/p>\n
It\u2019s a deal that has since been upheld by the Albanese government.<\/p>\n
But the commission\u2019s report revealed on Friday the Morrison-era reforms had made the playing field \u201cless equitable\u201d and undermined the purpose of the GST distribution system.<\/p>\n
Productivity Commission deputy chair Alex Robson said the reforms had \u201clargely not achieved their goals\u201d.<\/p>\n
\u201cThe 2018 changes tried to achieve too much and moved too far away from the system\u2019s core objective,\u201d Dr Robson said. <\/p>\n
\u201cThe result is a system that is now more complex, less consistent and more costly. <\/p>\n
\u201cIf the government wants to support other objectives, they could do so outside the GST distribution system.\u201d<\/p>\n
The 2018 changes also stipulate no state can receive less GST per person than the fiscally stronger NSW or Victoria, a change the commission found had only benefited WA.<\/p>\n
This had created \u201ctwo sets of rules\u201d within the distribution system, Productivity Commissioner Angela Jackson said in a statement. <\/p>\n
\u201cOne for states in a better fiscal position than Victoria and NSW, such as Western Australia, and another for everyone else,\u201d Dr Jackson said. <\/p>\n
\u201cIf a state like South Australia improves its fiscal position, they get less GST because they are considered to need it less. <\/p>\n
\u201cIf Western Australia improves its fiscal position, they either don\u2019t lose any GST or potentially receive even more.\u201d<\/p>\n
WA had been affected by \u201cdominant-state effects\u201d \u2013 an issue that arises when one state dominates a revenue source, such as mining, and the high royalties from this in turn slash its GST share. <\/p>\n
These changes \u2013 which included the minimum relativity floor, the state-standard benchmark, federal top-ups and the No Worse Off Guarantee \u2013 had cost taxpayers about $23bn in the last financial year, blowing out the cost by four times the expected amount.<\/p>\n
The state-standard benchmark, which ties WA\u2019s GST share to that of NSW or Victoria, also unfairly advantaged the country\u2019s west. <\/p>\n
\u201cUnder the current system, if NSW is hit by a natural disaster and spends money on the recovery, it receives more GST to reflect its increased need,\u201d Dr Jackson said. <\/p>\n
\u201cBut under the standard state benchmark, Western Australia also receives more GST from the other states, for a natural disaster it didn\u2019t have.\u201d<\/p>\n
NSW Treasurer Daniel Mookhey said Commission\u2019s interim report was \u201chistoric\u201d.<\/p>\n
\u201cThe Commission has rightly concluded that the Morrison government\u2019s 2018 changes have been an expensive failure,\u201d he said in a statement. <\/p>\n
\u201c(It is) leading to some Australians having an automatic entitlement to either better services or lower taxes, or in some cases both, than nearly every other Australian.<\/p>\n
Mr Mookhey said the NSW government\u2019s \u201cposition is simple\u201d. <\/p>\n
\u201cAn Australian living in Cabramatta in Sydney, Carlton in Victoria, Coober Pedy in South Australia or Cairns in Queensland is worthy of the same supports from their governments as an Australian living in Cottesloe in Western Australia,\u201d he said.<\/p>\n
\u201cWe look forward to the Commission finalising its report.<\/p>\n
\u201cAnd I look forward to attending next month\u2019s public hearings to continue advocating for a system that makes for a stronger Australia and NSW.\u201d<\/p>\n
The interim report has recommended a return to the pre-2018 system, and offered a number of options to the federal government.<\/p>\n
That included either ensuring the Commonwealth Grants Commission was directed by the Treasurer to address dominant-state effects where they arise, or to commit to make \u201cdirect and transparent payments\u201d to states affected by the issue.<\/p>\n
It also suggested scrapping the state standard benchmark and making the No Worse Off Guarantee permanent. <\/p>\n
The commission will deliver its final report by December 31 following submissions. <\/p>\n