Truth about the GST

Our Party seeks the truth about the GST.

The truth is no politician can explain the GST welfare system, and none of them want to change it!

The states must agree to change the GST.  FALSE!

Changing the GST welfare system simply requires a simple majority vote of both houses of Federal Parliament to do this.  It DOES NOT require states and territories to agree to it. Ref ABC Fact Check, 15 June 2016.  Holding the balance of power will ensure WA receives back the GST it raises.

The Treasurer does not have the power to change the GST. FALSE!

The Federal Treasurer Scott Morrison also said that the GST carve up “is decision of the Commonwealth Grants Commission, in the same way it is being done every year, ever since the GST was introduced. All the money from the GST goes to the states, none of it comes to the Commonwealth. It’s distributed on a basis of a formula which is set by the Commonwealth Grants Commission“.  However Gareth Parker challenged him saying that he is responsible for determining each states share.  The fact is the Treasurer is responsible for determining each state’s share of the GST.  Scott Morrison should be held to account.

Changing the GST will disadvantage other states. FALSE!

The Horizontal Fiscal Equalisation (HFE) disadvantages WA by excluding gambling taxes collected by the other states and rewarding them with GST welfare.  The loss of GST has forced Western Australia to dig up minerals and farm every inch of arable land just to make ends meet.

In terms of land mass and infrastructure, WA represents 33% of Australia and receives just one allocation of GST while the Eastern States, except Northern Territory (Qld, NSW, ACT, Vic, SA),  receive five allocations of GST for their collective land mass of 49%.

Eastern States receive $55.1 Billion of GST for its land mass yet Western Australia receives just $2.4 billion which is a massive disadvantage.  WA has 11% of the population but receives just 3.8% of the $62.8 billion GST pool.

WA has been a net beneficiary of Grant Funding.  FALSE!

From 1910 to 1942 Western Australia received a total of $21,940,000. In 1943 NSW received their first lump sum grant of $30,052,000 exceeding the total payments received by WA in previous years. NSW, Vic and Qld have exceeded WA in dollars received ever since.  Read this post for more details.

WA can insist the GST collected in WA stays in WA. TRUE!

In 1942, in order to run the war effort, the federal government made laws to become the sole collector of income tax.  Four states—Western Australia, Victoria, South Australia and Queensland—challenged the legislation on collecting income tax (not land tax or GST). The High Court ruled it was valid on the grounds that section 51 (ii) of the Constitution gives the Federal Parliament power to make laws relating to taxation, even though in practice the legislation removed a state power. It also ruled that under section 96 of the Constitution, the federal government could attach conditions to funding grants, and therefore it was legal to only give compensation to states that stopped collecting income tax.

Western Australia imposes Land Tax and the Metropolitan Regional Improvements Tax (MRIT) and receives funding grants from Canberra.  Therefore on this basis the WA State Government could collect the Goods and Services Tax (GST) raised in WA instead of Canberra collecting it!  GST is not income tax, its a Goods and Services Tax!  Canberra may stop paying grants to WA, but we won’t need grants if WA receives 100% of the GST it raises (11% or $6.9 billion per year).  Funding grants could be redirected to other states.

If you have any questions or truths about the GST, please contact the Party Secretary, Mr Stephan Phelan here:

Truth about Commonwealth financial support for WA

GST welfare statesOther States have claimed that Western Australia has historically benefitted from the distribution of Commonwealth grants – principally GST grants and its predecessors (financial assistance grants, tax reimbursement grants and special grants paid in recognition of State disadvantages).

However, for most of the 20th century Western Australia’s export orientated economy was heavily disadvantaged by Commonwealth tariffs which were set up to protect the manufacturing industries of the Eastern States.

The extra funding received by Western Australia in this period was effectively compensation for Commonwealth tariff policies, and indeed the Commonwealth Grants Commission (which recommends the distribution of GST grants among States) was set up in the 1930s partly in response to concerns about Western Australia’s disadvantages from federation, including tariffs.

Since sustained tariff reform began in 1988-89, Western Australia has been a net contributor to other States through the distribution of GST grants and their predecessors. The following table shows the subsidies received by Western Australia (i.e. funding additional to Western Australia’s population share of GST grants and its predecessors), both in nominal terms and present value terms (adjusted to 2017-18 dollars for the time value of money).
Nominal + Present Value
$b     $b
1988-89 +0.2 +1.4
1989-90 +0.2 +1.2
1990-91 +0.3 +1.2
1991-92 +0.3 +1.1
1992-93 +0.3 +0.9
1993-94 +0.2 +0.6
1994-95 +0.1 +0.4
1995-96 +0.1 +0.2
1996-97 -0.0 -0.0
1997-98 -0.0 -0.1
1998-99 -0.0 -0.1
1999-00 -0.1 -0.3
2000-01 -0.1 -0.2
2001-02 -0.2 -0.3
2002-03 -0.2 -0.3
2003-04 -0.1 -0.3
2004-05 +0.1 +0.2
2005-06 +0.1 +0.1
2006-07 -0.0 -0.0
2007-08 -0.3 -0.5
2008-09 -0.7 -0.9
2009-10 -1.0 -1.3
2010-11 -1.5 -1.9
2011-12 -1.4 -1.7
2012-13 -2.2 -2.6
2013-14 -3.0 -3.3
2014-15 -3.6 -3.9
2015-16 -4.3 -4.5
2016-17 -4.3 -4.4
2017-18 -4.4 -4.4
Total -25.7 -24.0

Furthermore, the subsidy that Western Australia now provides through HFE is just one part of Western Australia’s contribution to the Federation. More broadly, Commonwealth revenues derived from Western Australia (such as GST and company tax) exceed the Commonwealth spending on Western Australia (such as GST grants and welfare payments). Based on analysis by the Western Australian Department of Treasury, using latest available data, Western Australia’s net contribution was around $21.7 billion in 2015-16 (details are reported in Appendix 11 of Western Australia’s 2017 18 Budget Paper No. 3). Western Australia is estimated to have provided a net contribution to the Commonwealth since 1986-87.

The above issues were discussed in Western Australia’s first submission to the current Productivity Commission HFE Inquiry, which can be found here (see pages 12 15):

Join the Party, spread the word and correct the misinformation!

GST for WA