National Commission of Audit must prioritise GST distribution reform

26 November 2013

Peter Katsambanis, Member for North Metropolitan Region in the WA Parliament, today lodged a submission to the National Commission of Audit calling for urgent reform to the way GST revenue is distributed amongst the states and territories of Australia.

The Commission has been established by the Australian Government as an independent body to review and report on the performance, functions and roles of the Commonwealth government. A key area of this audit is the current architecture of Commonwealth-State relations.

“The current model for distribution of GST revenue is broken and is threatening the very fabric of our Federation,” Mr Katsambanis said.

“Here in WA we are being punished for our success and by 2016/17 we will be receiving $6.1 billion less than we would be entitled to under a per capita distribution of GST.

“Getting a fair share of our state’s GST revenue is critical for WA as we face both mounting challenges to provide infrastructure for our growing population and the need to reduce state taxes to drive further investment and growth in the future.

“My submission to the National Commission of Audit calls for a per capita distribution of 80% of GST revenue to each state with the balance of funds being used as incentive payments to encourage and reward all states to undertake economic reforms which will drive productivity, new investment, growth and prosperity across Australia.

“For WA, an 80% per capita distribution would mean almost $5 billion in extra funds in 2016/17 which we can use to fund critical infrastructure projects, pay down state debt and cut job-destroying taxes like payroll tax,” Mr Katsambanis added.

“With the other 20%, some equalisation could be achieved amongst states through the revenue distribution process without unduly punishing successful states such as Western Australia.

“Importantly, by using the GST process to drive further reforms amongst the states, it would remove the current perverse disincentives and would help achieve national goals consistent with increased economic growth and prosperity for all Australians.

“Over time this increased economic growth and employment will result in additional state and Commonwealth taxation revenue without the need to increase taxation rates or the imposition of new taxes.

“I call on the National Commission of Audit and the new Federal Coalition Government to prioritise GST distribution reform to fix the current broken system and help drive future prosperity for all Australians,” Mr Katsambanis added.

The Commission will report to the Prime Minister, Treasurer, and the Minister for Finance with the first phase of the review due by the end of January 2014, and the second phase by the end of March 2014.