Risks and opportunities

that other states are vocalising their opposition to arrangements. NSW, which receives 88c in the dollar, is now supporting the cries that once only emanated from the West. The NSW Treasurer stated, “It is completely unfair on NSW that we are paying the wages bill of the Queensland public service … and are paying over $1 billion in 2021 for South Australians who can’t even keep their lights on”. In its submission to the Productivity Commission inquiry, the Tasmanian Government argued strongly for retaining HFE arrangements. It made the case they are fair and do not discourage governments from making economic reforms. Other states, notably Western Australia, argued the opposite. More broadly, GST reform has always been contentious and considered the ‘third rail’ of Australian politics — touch it and you get electrocuted. But economists consider the GST a good tax because it doesn’t hurt the economy nearly as much as other taxes when raising a dollar. Increasing the GST rate, applying it more widely, and using it to replace other taxes would be a big positive for the economy. The main argument against increasing the scope and level of the GST is that because lower-income households spend a higher proportion of their income, they will be worse off in relative terms. But these households can be compensated by increasing pensions or benefits, increasing support payments and cutting taxes for lowincome earners. For Tasmania, a bigger national GST pie could offset any future cut in our relative proportion. In a perfect world it could even allow Tasmania to reduce or eliminate ‘bad’ taxes such as stamp duty and payroll tax. This would give Tasmania a competitive advantage and help attract businesses and people. The CGC will publish its views by the end of this month. The Productivity Commission will release its draft findings in October. All governments, and particularly the Tasmanian Government, should not forget about broader GST reform in arguments about its distribution. Tasmania has much to gain from a better GST system. Carl Harris is managing partner, Tasmania, and Paul Liggins is partner, Deloitte Access Economics.