Thursday, July 07, 2011

Carbon tax. You want GST on top of that?

We'll know Sunday. Three more sleeps.

My colleague Shane Wright in the West Australian:

The States and Territories stand to share a near-$500 million windfall as the Federal Government's carbon tax pushes up prices and GST revenue.

In a blow to taxpayers, they face having to foot the bill of the carbon tax and the GST from the middle of next year.

But it will mean up to an extra $45 million for the WA Government.

The office of Treasurer Wayne Swan would not comment on the issue or whether the Government would release new forecasts for the economy under a carbon tax.

A carbon price of about $20 a tonne would drive up overall prices about one per cent, led by an increase of 15 per cent for electricity.

That one per cent would be magnified by the 10 per cent GST.

Tax experts questioned by The West Australian yesterday all agreed that because the carbon tax would push up prices, there would be some impact on the amount of GST collected.

This financial year more than $48 billion is forecast to be raised by the tax, with that rationed out to the States and Territories.

WA is fighting to get a fairer share of the tax while a review headed by former NSW premier Nick Greiner is looking at the complex system used to allocate GST revenue across the Commonwealth.

Treasury officials have previously confirmed that because of the way a carbon price interacts with prices, GST revenue would have to rise.

WA Government officials also expect the carbon tax to flow through to the amount of money that will ultimately end up with the State.

Apart from lifting overall prices, a carbon tax should have a small impact on overall economic growth, which could flow through to employment.

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