The GST: If it’s Broke Don’t Fix it
The distribution of GST revenue under the horizontal fiscal equalisation formula is a mess.
In 2017 equalisation meant that Western Australia got 34 cents of every dollar of GST collected in that state.
At the other end of the scale the Northern Territory received $4.66 for every dollar collected in the Territory.
The government recognised that Western Australia was being hardly done by and commissioned the Productivity Commission to review the horizontal fiscal equalisation formula.
On Thursday the Productivity Commission (PC) released its report which contained a radical proposal that would send billions of extra dollars flowing to New South Wales and Western Australia while leaving every other state worse off.
The PC has proposed overhauling the GST by transitioning to a model that uses an average figure as the basis of the GST carve-up, rather than using the fiscally strongest state as the benchmark.
This was clearly never going to fly politically and would have certainly cost the Coalition the next election as it would have been wiped out in Tasmania, South Australia, Queensland and Victoria which were the big losers under the Commission’s proposals.
Want to know more? Subscribe to Inside Canberra