Page 1223 - Week 05 - Wednesday, 30 May 2007
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the federal government—
since 2000-01 has calculated its Budget aggregates in a way that effectively excludes about 60% of the revenue it collects on behalf of the States—
and territories—
without applying a similar downsizing to the 5-7% of GDP worth of revenue collected and transferred to the States in earlier decades …
Despite much silly talk about GST “windfalls” and “free kicks”—
the federal government—
over the past decade has kept a very tight rein on transfers to the States—
and territories—
In any case, the net effect of … GST-based tax reform on State budgets since 2000-01 is not widely understood. The introduction of the 10% GST (collecting 4% of GDP worth of revenue) has financed the abolition of … Wholesale Sales Tax—
as well as a variety of what were inefficient state and territory taxes, worth about 1.4 per cent of GDP. We have seen the ongoing reform of state and territory taxes. From the states’ perspective, four per cent of GDP worth of GST revenue is provided to the states and territories, but all that does is offset the gap that was left by the abolition of the financial assistance grants and the managed drop in our own revenues through all of the state and territory taxes that have been abolished during this period. All that net GST revenue officially earmarked to replace state and territory revenue is simply money coming in in a different form. I again quote Mr Robertson:
When unscrambled, the evidence is that—
the federal government’s—
tax-take is at all time highs, while its effective funding of State and local functions remains at a three-decade low ….
The extent to which—
the federal government—
understates its own record tax/GDP ratio while exaggerating its effective revenue-sharing with the States is important.
Armed with a more reliable sense of the underlying budget facts, the Australian people would be better placed to decide whether they support these current arrangements, but in the end the question boils down to: would the public prefer the next dollar of income tax collected by the federal government to be allocated to its
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