Tuesday, July 21, 2009

The GST carve up recarved

Premier John Brumby has promised to fight a proposed change in the carve up of GST revenue set to cost Victoria hundreds of millions each year.

The proposed change to the break up of the $40 billion GST pool would give extra money to the growth states of Western Australia, Queensland and the Northern Territory to compensate them for the cost of building the schools, roads, hospitals and police stations needed to service their growing populations.

Until now they have been eligible only for a subsidy for the cost of repaying loans taken out to build such infrastructure.

The Grant's Commission's draft report says states predominantly use GST money rather than borrowing fund infrastructure and that a change that recognised this would allow them to build infrastructure "when the need arises"...

Western Australia's Treasurer Troy Buswell has applauded the report saying his state has been "propping up states such as New South Wales and Victoria for too long".

"We have a very high level of population growth and pressures on us to provide the funding that drives that economic activity," he said.

Premier Brumby disputed that assessment yesterday saying Victorians already got back only 92.7 cents in each GST dollar they paid and "would not want to see that get any worse''.

"Queensland and Western Australia ought to be paying their way,'' he told
reporters in Melbourne.

"They have been the beneficiaries of a huge growth in the royalty income that came through the resources boom, and we wouldn't want to see their position further improved at the expense of Victoria.''

If Victorians lost an extra once cent out of each dollar in GST revenue they handed over the Victorian budget would be down $131 million.

Tax experts contacted by The Age say the exact loss to Victoria is hard to quantify, as the draft Grants Commission recommendation is only general in nature.

Another proposed change would have the GST formula reviewed every four years instead of every five and had the potential to benefit Victoria.

The Commission will issue a final report on the proposed formula in February, but indicates in its draft report that it unlikely to alter its its thinking about infrastructure funding, saying the change reflects "a more comprehensive approach to equalisation."

The change would come into force from mid next year.

Published in today's SMH

Graphic: How to Carve a Turkey