Treasurers to consider GST changes PDF Print E-mail
Sunday, 16 December 2012 18:52

Treasurer Wayne Swan and his state and territory counterparts will discuss "refinements" to the distribution of GST proceeds and a revamp of mining taxes when they gather tomorrow.


On the agenda for the Standing Council on Federal Financial Relations, meeting on Monday in Canberra, is the recent report of the GST review led by former premiers Nick Greiner and John Brumby.

It proposes a number of refinements to the GST distribution arrangements, but the federal government has baulked at changing the 10 per cent GST rate or suggestions the tax base be broadened.

Mr Greiner has said the states would face a "fundamental public finance problem" over the next decade if the GST was not re-examined.

But the contentious debate will only progress when all the states and territories and the federal government agree on the need to change the GST.

The GST rate has been 10 per cent since it was introduced in mid-2000, and fresh food, education and health products are exempt from the tax.

Queensland, NSW, Victoria and WA put in a joint proposal to the Greiner review arguing for a population-based distribution of GST funds, which would slash money going to smaller states.

It's not just the state treasurers who think changes to the GST would be a good idea.

The Organisation for Economic Cooperation and Development (OECD) on Friday said Australia should broaden the GST base and raise its low rate, while scrapping a number of state taxes.

It also said the Federal Government's minerals resource rent tax (MRRT) should be broadened and state royalties replaced by a mining rent tax modelled on the federal approach, "allowing states to set their tax rates".

"Tax reforms, including a lower corporate tax rate, a broader resource rent tax and more efficient state taxes would facilitate ongoing structural adjustments," the OECD said.

The MRRT is also on the treasurers' agenda. The 30 per cent MRRT only taxes the super profits of coal and iron ore companies, and allows credit for state royalties paid by miners.

While the Greiner review found state royalty increases would be neither desirable nor sustainable, it made a number of recommendations to remove incentives for the states to raise those imposts.

The treasurers are also expected to discussing ways to cut business red tape and harmonise state regulations.

Victorian Premier Ted Baillieu said on Friday that falling revenues were placing great pressure on the states, especially those about to fall into line with a federal push to boost disability services and schools funding.

"You can't have all of these noble initiatives without having revenue streams to be able to pay for them," he said.

"There are time bombs being planted into the forward estimates of the commonwealth budget and state budgets, and they are being planted by the commonwealth."

Prime Minister Julia Gillard said the government would set out "every cent" to be spent on the Gonski schools funding package and the National Disability Insurance Scheme over the budget forward estimates.

"They'll see us detail a long-term funding strategy," she told ABC radio.

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