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State Treasurers discuss NSW plan to deal with the GST dispute.

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Tuesday 5 July 2005

State Treasurers discuss NSW plan to deal with the GST dispute


PETER CAVE: In an attempt to break the deadlock between the States and the Commonwealth over GST revenue, New South Wales has come up with a plan which would see it gain at the expense of Queensland and Western Australia. 


The New South Wales Government claims that in fairness, it should receive an extra $1 billion in GST revenue by removing the subsidies that it gives to the resource rich States. In return it would accede to the Federal Government's demand that the States cut their taxes. 


Not surprisingly, Queensland and Western Australia have rejected the plan.  


New South Wales has also called for the abolition of the Commonwealth Grants Commission, the body which advises how GST revenue should be distributed.  


This report from Andrew Geoghegan. 


ANDREW GEOGHEGAN: Five years on from its introduction and the States are still complaining that they're being ripped off by the GST. 


As the biggest State, New South Wales collects the most GST revenue - $13.2 billion. In return it receives $10.4 billion in GST grants. The $2.8 billion difference is used to subsidise other States. 


New South Wales Treasurer Andrew Refshauge. 


ANDREW REFSHAUGE: Well at the moment we're subsidising particularly Queensland and Western Australia, as well as Northern Territory, the ACT, South Australia and Tasmania. That really is just unfair.  


ANDREW GEOGHEGAN: A New South Wales Treasury report released today outlines a plan which would see New South Wales and Victoria gain up to $1 billion extra in GST revenue. 


But this would come at the expense of Queensland and Western Australia. 


Andrew Refshauge. 


ANDREW REFSHAUGE: Well at the moment they're getting our money. We're saying they've had enough of it for long enough. It's time we got our own back. They can survive quite well. They don't have to make any changes to any of their services. They don't have to cut any service at all. They have budget surpluses now on New South Wales and Victoria's efforts. 


ERIC RIPPER: I can't support their plan because it ignores the overall picture, which is the total West Australian subsidy to the rest of the country, $1,500 per person. 


ANDREW GEOGHEGAN: West Australian Treasurer Eric Ripper. 


ERIC RIPPER: The GST is not the total game. There's more taxation and more spending that has to be taken into account and on that basis, we're not a beneficiary State, we're a donor State, and our donation is about twice per capita what New South Wales's is. 


ANDREW GEOGHEGAN: Well how are you going to overcome that stalemate between yourselves and the Commonwealth? 


ERIC RIPPER: Western Australia has established a State tax review, which will develop a West Australian tax relief and tax reform agenda according to our needs here and the views of the West Australian population. 


That's what we think we should do because we've honoured the GST agreement. There's no basis for the Commonwealth to be threatening Western Australia. 


ANDREW GEOGHEGAN: So will you be considering cutting payroll tax, for instance? 


ERIC RIPPER: All State taxes will be the subject of this review. The priorities for relief and reform will emerge from the review and I'm not going to prejudge the outcome. 


ANDREW GEOGHEGAN: The Federal Government has warned that it'll be cracking down on the New South Wales and WA Governments if they continue to refuse to cut State taxes in return for GST revenue. 


Assistant Federal Treasurer, Mal Brough. 


MAL BROUGH: Every State is better off as a result of the GST. They have an agreement to honour, that is to cut these State taxes, stop being double taxing, and for New South Wales they should look closely at why they are in fact the highest taxing State in the Commonwealth. 


ANDREW GEOGHEGAN: However, New South Wales Treasurer Andrew Refshauge has promised to abolish vendor duty and reduce payroll tax if the Commonwealth accepts his plan. That plan includes the scrapping of the Commonwealth Grants Commission, which advises how the GST revenue should be distributed. 


ANDREW REFSHAUGE: Well the Grants Commission has been set up to have the most complicated formula that nobody can understand, in fact the Grants Commission themselves says that there's been pushed really to the limits. Its credibility is very much on the line. I don't think that people are benefiting from the Grants Commission.  


To make sure that the smaller States, the Northern Territory, South Australia and Tasmania, aren't in any way disadvantaged, it could be easily handed over to the Productivity Commission to make sure that that's happening, and then straight on a per capita basis. 


ANDREW GEOGHEGAN: The New South Wales recommendations have been sent to the Federal Treasurer's office but Mal Brough isn't buying it. 


MAL BROUGH: Look, what I'd say about this is it's just a stunt, it's a diversion, and what Bob Carr should do is remove the State taxes that he agreed to remove when we said we'd introduce the tax in 2000. 


PETER CAVE: Assistant Federal Treasurer, Mal Brough, ending that report from Andrew Geoghegan.