The Jones Report - 9 July 2018

The Government has released the long-awaited response to the Productivity Commission Report on GST Distribution.  Described like that – its hard for anyone but State Premiers to get excited about, but it is critical to the financing of state services that we all rely on.  The Government rejected most of the PC recommendations replacing it with a guaranteed floor on funding and a top up to States who would otherwise miss out.  Here's the key parts:

The GST - a 10 per cent tax on goods and services is collected by the Commonwealth and redistributed to the States.  It accounts for nearly 13 per cent of all tax collected but its distribution back to the states is not done on a 1 for 1 basis – which means States don’t keep 100 per cent of every cent that is collected in their jurisdiction.  The more populous States (generally speaking) cross subsidise the service delivery of the smaller States.

Western Australia has complained that they are getting the rough end of the pineapple as their share of GST in recent years has dropped below 40 cents in the dollar (understandably, they weren’t complaining at times when they were getting more than they contributed).

States and Territory Governments will now keep no less than 70 per cent.  The only way this can be achieved without a State or Territory getting less than they do today is by creating a new fund to top up the losing States.  This doesn’t come from GST revenue – and this is the rub.

The Turnbull Government plan will see the top up fund hit $9 billion over 10 years.  This money has to be got from somewhere.  As the Government is desperately trying to ram its big business tax cuts through the senate before the election, there isn't a lot of places to look.

It’s not a magic pudding – the money must come from higher taxes (maybe another GST hike down the track) or a cut in some other Commonwealth funded services.


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