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Legislative Assembly for the ACT: 2000 Week 1 Hansard (17 February) . . Page.. 297 ..

MR HUMPHRIES (continuing):

Mr Speaker, the Opposition has gone so far as to accuse this Government of not detailing the impact of the GST and to suggest that it has deliberately remained silent on the subject by not detailing estimates in the draft budget papers. Those claims are untrue. The draft budget papers do outline in some detail the principles of the GST and the very important agreements covering the transition period from the time the GST is introduced until the ACT begins to reap the benefits of having access to a growth tax base. The impact on forward estimates of the expected change in grant funding levels, while not built into the budget, is identified in Budget Paper No. 3.

Let me say again for the record that the major change in Commonwealth funding arrangements arising from the proposed tax reform will be that all the GST revenue will be passed to the States and Territories, replacing financial assistance grants as the major component of Commonwealth grants. In addition, States will abolish a number of own source taxes and fund an expanded first home owners scheme, but States and Territories will be, according to the Commonwealth, no worse off.

Mr Speaker, as one would expect, there are a number of important principles underpinning the reforms which are fundamental to the successful changeover to the new system. Firstly, the Commonwealth has indicated that the financial position of each State and Territory will be no worse than it would be under the current arrangements. The Commonwealth will fund any shortfall to ensure this occurs, and in any case it will only be a short-term issue. With these fundamental principles in place, the ACT, the Northern Territory and States will all benefit from the tax reform package. However, the benefits will not be instantaneous as the full tax package and consequential effects will require time to flow through the economy.

Not since World War II have the States and Territories had access to a tax base which grows in line with growth in the economy. This is a result of the nature of the GST being a growth tax. However, in the early years of the GST, the total pool of GST revenue to be distributed to the States and Territories will not be enough to compensate for the abolished taxes plus the additional costs imposed on the States and Territories. The Commonwealth will need to make additional payments to abide by the principle that States and Territories will be no worse off. Secondly, the GST will be distributed among States and Territories in accordance with the Commonwealth Grants Commission's recommendations of per capita relativities, due for release at the end of this month.

Of all the principles, the one causing the most concern relates to the guarantee from the Commonwealth to top up the States and Territories for a number of years. This will continue until the GST is fully operational and the pool of GST collections reflects a growth economy which is sufficient to put States and Territories in an improved position compared with the current system. To give effect to this guarantee, the Commonwealth has agreed to provide additional financial assistance to any State or Territory that is worse off under the new taxation arrangements during the changeover period, for as long as required.

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