Services face cuts under GST rejig

ALL states and territories except Western Australia would lose money under GST changes being looked at by the Productivity Commission, forcing them to either cut services, raise tax or increase debt.

Commonwealth Grants Commission secretary Michael Willcock, who is charged with carving up the revenue pie, was yesterday quizzed on the Productivity Commission’s draft report on its GST review.

Using the example of Queensland and based on the 2017/18 financial year, Mr Willcock said the state would receive $729 million less in GST.

“That would then mean Queensland would need to consider raising additional revenue of its own,” Mr Willcock told a Senate hearing.

That could be done through raising state taxes, reducing the quality or scope of certain services or adding to state debt levels.

The Productivity Commission’s interim report released in October flagged changes that could also cost Tasmania hundreds of million of dollars a year.

State Treasurer Peter Gutwein told the commission’s Hobart hearing late last year that Tasmania faced losing funding equivalent to the en- tire police force or almost half the state’s nurses.

Tasmania receives about 40 per cent ($2.3 billion) of its annual revenue from the GST.

“Tasmania is strongly of the view that the current objective of HFE best meets community expectations that, as a nation, Australians believe that promoting equality between jurisdictions in terms of the level of services state and territory governments are able to provide is the primary consideration and is what Horizontal Fiscal Equalisation should achieve,” Tasmania’s submission said.

While a number of possible carve-up scenarios were outlined in the report, one in particular showed Tasmania losing as much as $168 million a year in GST revenue.

A bigger national GST pie could offset any future cut in Tasmania’s relative proportion. It could even allow Tasmania to reduce or eliminate ‘bad’ taxes such as stamp duty and payroll tax.

Senator James McGrath, representing the federal treasurer at the hearing, said the Productivity Commission’s final report would not be not released until May and urged states to wait until then before making any assumptions. -AAP