GST overhaul 2-10 6th March 2008

The formula for GST funding has been long debated by the states, but change may be coming sooner than we think.

“The Commonwealth Government has committed to maintaining a comprehensive system of horizontal fiscal equalisation based upon the state revenue sharing relativities recommended by the Commonwealth Grants Commission,” wrote Federal Treasurer Wayne Swan, in a letter to the NSW Business Chamber.

“The Commission is currently undertaking a review of the methodology for calculating state revenue sharing relativities, under which it is required to undertake work on simplification and continuous improvement of its methods for implementing equalisation.

“The Government will await the outcomes of this review, which is due to be completed in 2010, before implementing any changes to the system of horizontal fiscal equalisation.”

The chamber has welcomed the move. “The GST formula is complex and cumbersome and NSW Business Chamber has for a long time been calling for a review of the formula,” says Kevin MacDonald, CEO of NSW Business Chamber. “We subscribe to the concept of horizontal fiscal equalisation, however the current formula has for too long resulted in the slowest growing states of Australia subsidising the fastest growing states.”

“NSW has not received its fair share of GST revenue and this has impacted on the quality of government services provided to the people of NSW,” adds MacDonald. “Business is looking to the Federal Treasurer to deliver on the overhaul of the GST formula. The formula does not work and it is beholden on the Federal Government to fix the formula and modernise the GST arrangements.”