Private Members' Business - Goods and Services Tax
Posted on Tuesday, 13 September 2011
Mr CROOK (O'Connor) (20:12): I move:
That this House:
(1) notes that:
(a) Goods and Services Tax (GST) revenues are distributed to the States and Territories in accordance with a formula driven by Horizontal Fiscal Equalisation (HFE) principles and are legislated or in the Federal Financial Relations Act 2009;
(b) for 2010-11, Western Australia received just 68 per cent of what it would have received if GST revenue was distributed across Australia on a per capita basis—the lowest relativity applied to any State since the formula was introduced; and
(c) every other State and Territory, by contrast, received not less than 91 per cent of what it would have received if GST revenue was distributed evenly across Australia; and
(2) calls on the Government to amend the Act to stipulate a minimum GST revenue-sharing relativity of 75 per cent, which would allow continuing respect for the principles of HFE, but with proper recognition for population, and without Western Australia being unfairly penalised for its disproportionate contribution to our national economic prosperity.
I am pleased to speak on this motion before the House.
This motion is very important to my home state of Western Australia and is indeed important in underlying the financial security of all states and territories in Australia.
This motion does two things.
First of all, it calls on the House to formally acknowledge the inequity being experienced by Western Australia through GST distribution.
It asks members to acknowledge, on the record, that WA receives less GST relative to its population than any state or territory has ever received since the GST was introduced.
Secondly, this motion calls on the government to amend the Federal Financial Relations Act to introduce a floor on GST relativities for all states and territories.
This proposal maintains respect for the equalisation principles that currently guide the distribution of GST revenue, but proposes a fair and reasonable 75 per cent floor—a floor which strong states will be guaranteed to never fall below.
This evening I would like to discuss four matters in relation to this motion.
Firstly, I will give a brief overview on GST relativities and outline the extent of the inequity being suffered by Western Australia.
Secondly, I will address the proposal for the 75 per cent floor and outline why it is a fair, reasonable and necessary change to the Federal Financial Relations Act.
Thirdly, I will highlight the support that this proposal has received from Liberal, Labor and National colleagues in state and federal parliament.
Finally, I will explain why it is imperative that this issue be considered immediately—as I have no doubt that the eastern states members of this parliament will argue that this proposal should be put on the backburner until the unnecessarily long and drawn out GST revenue review is concluded and we see the outcomes of that review.
The Commonwealth Grants Commission is an independent statutory authority that advises the Commonwealth government on GST distribution.
Each year, the commission makes recommendations to the government on how much GST revenue each state and territory should receive.
The recommendations are guided by the principles of horizontal fiscal equalisation.
These principles seek to ensure that each state has the capacity to provide comparable standards of services if it makes the same effort to raise revenue as the other states on average and operates at an average level of efficiency.
The Grants Commission's recommendations are made with reference to GST relativities.
A state or territory's GST relativity refers to its GST share relative to its population share.
Over the 12 years since the GST was introduced, there have been some fundamental changes in states' revenue-raising capacity.
These changes have resulted in fundamental inequalities in the way the GST is distributed, most notably for Western Australia.
The results for WA's GST share have been extreme; the GST inequity being experienced by WA is widely acknowledged.
The Commonwealth Grants Commission itself admits that Western Australia continues to receive less GST relative to its population than any state ever has since the GST was introduced 12 years ago.
Even our Prime Minister and the Leader of the Opposition have conceded that the current GST share arrangements are unfair for WA.
In the current financial year, WA will receive 72 per cent of what it would receive if GST were distributed on an equal per capita basis.
This is lower than any other state; in fact, no other state will receive less than 91 per cent.
The conclusion is unavoidable: Western Australia is being unfairly penalised for its disproportionate contribution to our national economy.
The WA state budget predicts that WA's GST relativity will fall to just 33 per cent by 2014-15.
This represents just one-third of what WA would receive if GST were distributed on an equal per capita basis across the country.
This is hugely unfair and cannot have been the intention of the Grants Commission or the Commonwealth government when the GST was introduced.
The Secretary of the Commonwealth Grants Commission confirms that under the current model there will be no limit to how far WA's share of GST could fall.
This brings me on to my second discussion point: the proposal for a GST floor.
The floor will limit the amount that any state's GST share can fall to.
This motion proposes that no state's GST relativity should fall below 75 per cent. In other words, a floor will ensure that no state receives less than 75 per cent of its equal per capita share of GST revenue.
A floor in GST relativities will maintain respect for the equalisation principles that currently guide GST revenue distribution by the Grants Commission.
The commission will continue to recommend GST relativities using the same guidelines and principles of horizontal fiscal equalisation, except where those principles require a state to receive less than 75 per cent of its per capita share.
A 75 per cent floor will allow strong states to continue to contribute more than their fair share to the national economy but will provide a reasonable guarantee and certainty to the minimum GST share that a state or territory will receive.
The 75 per cent floor strikes a reasonable balance between maintaining the equalisation principles that encourage 'fair-go federalism' and ensuring strong states are not unfairly punished for their economic success.
This proposal is a simple measure that will return some certainty and some equity to the way GST shares are determined for more strongly performing states.
I would now like to turn to the support for this proposal and the public acknowledgement of WA's GST rip-off.
The proposal for a GST floor has been in the public arena for some time now.
Senior WA Liberal Party, Labor Party and WA Nationals colleagues have been demanding a floor for quite some time.
The Premier of Western Australia, the Hon. Colin Barnett, has been pushing for a 75 per cent floor since last year.
The Western Australian Treasurer, the Hon. Christian Porter, has also supported this proposal.
The Nationals WA formally adopted this motion earlier this year, with the support of their leader, the Hon. Brendon Grylls.
Even the Leader of the Opposition in WA, the Hon. Eric Ripper, has provided in-principle support for a floor in the GST.
In the federal arena, senior Liberal and Labor party members, including Liberal Treasury spokesman
Senator Cormann and the member for Durack, are on the public record admitting that GST share arrangements are currently grossly unfair for Western Australia.
In his recent visit to WA, the Leader of the Opposition acknowledged the flaws in the GST formula for Western Australia and has previously indicated that we should have a debate about a GST floor.
In fact, the federal Treasurer has referred to the question of a 75 per cent floor as a 'very valid question'.
Notwithstanding this general support, members on both sides of this House have declined to introduce this motion themselves or introduce a bill to this effect.
In fact, despite the Liberal Premier in Western Australia publicly pushing for this floor, the federal Liberals have refused to even consider this issue in their own party room.
I call on all WA members of this parliament—who have been elected by the WA voters to represent their electorate—to put eastern-states-centric politics aside and stand up for the interests of their state by supporting my motion.
Mr Katter: I think the member for North Sydney is a closet supporter.
The DEPUTY SPEAKER (Hon. BC Scott): Order! The member for Kennedy! The member for O'Connor has the call.
Mr CROOK: In this regard, I would like to take this opportunity to extend my warmest thanks to the member for Moore and the member for Kennedy for their public support of this motion.
Finally, I think it is important to address why this issue needs to come to the fore now.
Western Australians are willing to assist the other states and to contribute more than their fair share to the federal economy.
However, Western Australians are not prepared to be ripped off under this system by receiving less than 75 per cent of their per capita share when all the other states and territories receive more than 91 per cent.
Western Australians certainly are not prepared to face a scenario such as where we are forecast to receive just 33 per cent of our per capita share of GST revenue in 2014-15
While I welcomed the GST revenue review announced by the Prime Minister in March this year and welcomed her admission that the current GST carve-up is unfair, the review is on an unnecessarily long time frame and is unlikely to result in any reform before WA is set to receive a record punishment for its success in 2014-15.
As such, this pressing issue needs to come to the fore now.
A 75 per cent floor will give WA—and, indeed, all states and territories in Australia—much-needed certainty over GST revenue into the future.
Western Australia, like any state or territory in Australia, deserves a fair deal from the Commonwealth.
Currently, the situation is far from fair for WA.
Western Australia's economy is under siege through the mining tax, the carbon tax and GST revenue distributions.
Western Australians are prepared to contribute more than their fair share to the federal economy, but there must be some limit to the rip-off; there must be some limit to the punishment WA receives for its economic success; there must be some formal acknowledgement of Western Australia's disproportionate contribution to our national economic prosperity; and there must be some members in this House who are prepared to stand up for their state.
For these reasons, I commend the motion to the House.