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Thursday, 19 February 2004
Page: 25284


Mr ROSS CAMERON (Parliamentary Secretary to the Treasurer) (1:18 PM) —I have listened with interest to the treatise of the member for New England, and I am pleased to now return to the subject of the A New Tax System (Commonwealth-State Financial Arrangements) Amendment Bill 2003. Much as I sympathise with his constituents, I know that my own constituents in urban Parramatta would love to get some access to the virtually $2 billion that the government is spending subsidising the fuel of primary producers in his electorate. But, since they are in an urban area, they are excluded from eligibility for the diesel fuel rebate. Primary production farming is probably the most tax-preferred economic activity taking place in the Commonwealth of Australia but, if the member for New England thinks it should be more tax-preferred, he is certainly entitled to his opinion.

I would like to thank all members who have contributed to the debate on the A New Tax System (Commonwealth-State Financial Arrangements) Amendment Bill 2003. In 1999 the Commonwealth, state and territory governments signed the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations. This agreement, which is given effect under the A New Tax System (Commonwealth-State Financial Arrangements) Act 1999, substantially reformed Commonwealth-state financial relations. Under the new arrangements all GST revenue collected is provided to the states and territories, giving them a secure and robust tax base which they can use to fund essential community services and abolish inefficient state taxes. The Australian government also provided a guarantee that no state or territory would be worse off under the new system of Commonwealth-state financial relations.

This commitment is met through the payment of budget balancing assistance to a state or territory whose share of GST revenue is yet to exceed its guaranteed minimum amount, which is a calculation of the position a state would have been in had tax reform not been implemented. After just three years, most states are better off than they would have been had the Australian government not implemented tax reform. In 2003-04 it is estimated that the states will receive $32.5 billion in GST revenue, and only two states are estimated to require budget balancing assistance. In fact, the six states and territories which no longer require budget balancing assistance are collectively estimated to be better off by some $575 million in 2003-04.

The member for Rankin put the proposition in debate that the states were only now becoming revenue neutral compared to the previous system of Commonwealth-state financial relations. This is demonstrably factually wrong. The states have been revenue neutral since day one. It has purely been a question of how quickly they move from revenue neutral to revenue positive. I think to most people's surprise, because of the extraordinary growth of the Australian economy under the stewardship of the Prime Minister and Treasurer Costello in particular, we have seen them hit their targets much faster than expected. We now have four states and two territories that are already revenue positive under the new system to the extent of some $575 million. Victoria and New South Wales will hit that target in the near future.

This bill makes technical amendments to the A New Tax System (Commonwealth-State Financial Arrangements) Act 1999 to facilitate its operation. The bill will implement three measures which have been agreed to by all of the states and territories. The bill will ensure that the commissioner is able to account for all GST refunds when determining GST revenues to be collected and provided to the states and territories. This reflects the principle that GST revenue equals gross GST collections less all GST refunds. In particular, the commissioner will be able to deduct GST refunds under the tourist refund scheme and GST refunds to international organisations, diplomatic missions and visiting defence forces.

At present, as a state comes off budget balancing assistance, there is no mechanism to ensure that the required adjustments from the previous financial year are fully given effect to. The bill will fix this problem. It will allow payments to a state or territory to be adjusted to fully account for any overestimate or underestimate of payments in a previous financial year, thereby ensuring that states and territories receive their appropriate payments. The bill also makes minor changes to the statutory deadlines for a number of determinations required under the act. This will improve the timing of these determinations, which are used to calculate final state and territory entitlements to payments under the act.

I have referred to the contribution to the debate by the member for Rankin, which was factually incorrect—and demonstrably so. I put to any fair-minded listener to the debate that the prospect of the states running at the GST as a bunch of forwards to a maul would simply never have taken place if they were not 100 per cent confident that they would be, at worst, revenue neutral and quickly significantly better off. We can well recall that sort of ALP duplicity taking place here in Canberra, where there were successive Labor leaders decrying the great inhumanity and injustice of the GST while every single one of their state Labor counterparts was racing towards the GST with all speed and haste available. Here we can see why. For so long the states had criticised the Commonwealth—on some occasions rightly—for the insecurity and uncertainty of their revenue stream. What the government has now done, through an act of considerable political courage, is to fundamentally reform Commonwealth-state financial relations to give the states and territories certain access to a big lick of their annual revenue without having to come like Oliver Twist with their cap out asking for more.

We can well recall those somewhat undignified and unproductive premiers conferences—the annual ritual of the premiers gathering together to gang up on the Commonwealth; each side blaming the other for a couple of days headlines; one side storming out in disgust; and a litany of failed negotiations. The losers were the Australian people and good public policy. But it was this government, under John Howard, which had the courage to tackle this much-needed piece of reform. The hardheads were all saying: `You must never tell the Australian people that you intend after an election to introduce a new tax. This is a form of political suicide. If you're going to introduce a new tax, like the Australian Labor Party you should promise before the election that there will be no new taxes, then quickly move to introduce them when the new term begins.' But the Prime Minister said that he would not be governing in that fashion, that he had confidence that, if he fully declared his hand before going to the election and if he argued the policy merits, the Australian people would have the good judgment and good sense to support good policy. That is exactly what happened. The $575 million of extra revenue that those four states and two territories will receive in the 2003-04 year is a dividend for that courageous act.

I note the curious character of this reform, this great public policy leap forward: the fact that the Commonwealth has worn all of the political risk but the states will receive all of the fiscal benefit. That is why we will be opposing the amendment moved by the member for Kingston. His amendment suggests that the Commonwealth should account for the GST as a Commonwealth tax. This of course is the basis for the mantra repeated with such frequency by members of the opposition: that the Commonwealth is allegedly the highest taxing government in Australian history. This is the smoke-and-mirrors trick of simply adding all of the GST revenues of the states to the Commonwealth's taxes.

We simply observe that every cent, all of the GST revenue, goes to the states. The states can spend GST revenue entirely according to their own budget priorities, without direction or limitation from the Commonwealth. As I said, in this year the states will receive a GST windfall of $575 million. Given that the states receive and spend all the GST revenue, it is logical that the GST be identified in the budget as a state tax, because we are in effect acting as a revenue collection agency for the states. I regard this as a significant step forward. It is a dividend for taking a political risk for a good cause. It is a benefit which will flow to Australians in perpetuity as a consequence of the political courage of John Howard before an election. I commend the bill to the House.

Question put:

That the words proposed to be omitted (Mr Cox's amendment) stand part of the question.