Fights about the distribution of GST revenue aren’t just about the money – they also reflect the political death of major tax reform. It’s a policy fiasco.
Already a subscriber?Ferocious arguments between the states over their shares of the GST aren’t just typical squabbles over money. They are another signpost to theThe outrage from any other state government – and certainly most economists – about the inequity of Western Australia’s special deal on the GST won’t change that paralysis.to WA of a minimum 70 per cent of GST per head of population – rising to 75 per cent in July – would be electoral poison in a key state.
Ironically, greater Commonwealth assistance to weaker states was in part due to the need to assuage Western Australia after it voted to secede. WA benefited from this formula for decades. The difference now is that WA’s mining royalties, worth more than $11 billion last financial year, have transformed it into a remarkably wealthy state.
Treasurer Jim Chalmers is naturally keen to shelter behind the independence of the commission’s latest recommendations on how to divide up near $90 billion of GST next financial year.Cue fury from NSW and Queensland whose GST dollars have been slightly reduced due to higher royalty payments from coal while Victoria will get $3.8 billion more.
Due to its attempt at political insurance for WA, the Albanese government extended the “no worse off” pledge to other states to 2030 precisely to try to avoid this sort of stand-off. But this political fix is clearly unstable, as well as eye-wateringly expensive.
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