The Federal Government had passed the “national interest test” with its planned GST reforms, the State’s business community believes.
The WA Chamber of Commerce and Industry said the plan, which will give WA an extra $4.7 billion over the next eight years was not perfect but would prevent a repeat of the problems that had afflicted WA over recent years.
“Although the Federal Government has not adopted the ambitious model of equalising to the average, as recommended by the Productivity Commission and proposed by CCI, the Federal Government’s approach meets the national interest test for change,” chamber chief economist Rick Newnham said.
“These reforms ensure that no State is left behind but every State can do more to get ahead. The GST floor will ensure that States which forge ahead to develop their own economy are not punished with less GST as a result of their success.”
Australian tax leader at PricewaterhouseCoopers, Pete Calleja, said the plan, which includes a 70¢ GST floor from 2021-22 and a 75¢ floor from 2024-25, would provide financial security to smaller States.
He said it removed ad hoc deals such as those granted to WA in recent years, which had a perception of bias.
Mr Calleja said the Government should use its changes to look at a further overhaul of the GST. “Another critical reform that should not be ignored is the overarching rate of the GST, given the evidence suggesting consumption tax is one of the most efficient tax-raising mechanisms for a developed economy,” he said.
“It is timely that we have a holistic review and debate that assesses the merits of broadening the base, raising the rate and/or seeking increases on luxury items with a decrease on essential items, for instance.”
Under the Government’s plan, more than $9 billion will flow to all States and Territories through a direct Federal contribution to the GST pool.
John Manning, vice-president of ratings agency Moody’s Investors Services, said it would protect all States from budget pressure. “The Government’s decision to broadly accept the Product-ivity Commission’s findings to improve the GST system and move to anchor fiscal equalisation to the economies to the strongest of our two largest States marks a positive step for State and Territory finances,” he said.
“Removing the limitations of pool size beyond GST collections will further increase the fiscal capacity of State and Territory treasurers to manage debt to sustainable levels while spending on long-term infrastructure.”
The Business Council of Australia said the proposals could end years of interstate bickering. “The combined effect of the GST distribution changes and personal income tax reform, a more competitive company tax rate and the related integrity measures adds up to major national reform which will grow the economy, create jobs and help ensure all Australians can access high quality government services,” council chief executive Jennifer Westacott said.