WA sure does have more than its fair share of GST. The new system is designed to ensure that.
OK I'll play
How is < 100% a fair share?
Ha ha. Probably shouldn’t hijack Bruce’s log for a contentious topic.
The simple version is that in a federation we should all benefit from our mineral resources. The GST system says that WA needs less GST revenue than other States because it gets lots of revenue from iron ore royalties.
During the mining boom, WA got lots and lots of iron ore royalties, then as the data came through got less GST. The downturn in GST revenue coincided with the downturn in royalties The WA Government, having spent all the boomtime revenue, then raised public indignation that it doesn’t get its fair share of GST.
With some key marginal seats in WA, Tony Abbott obliged with a top-up payment, and this was followed more recently by an amendment to the system that ensures WA’s GST revenue never falls below a certain level. This has the effect of giving WA a permanent advantage over all the other States. They get to keep the upside of any boomtime, without needing to save for the downtime. They can offer the same services as other States with lower taxes, or better services with the same taxes.
Before the changes, the basic GST system was fair, if you think we are one country and that citizens everywhere are entitled to an average level of State services if they pay an average level of taxes.
NSW has always received less than its per capita share of Commonwealth grants, and since Federation WA has received more than its per capita share.
No hassles about using log to inform fellow citizens of the federation. I feel even less guilty now in asking Richard to help fund ACT bike paths.
Hi Richard, given Michael's comments above do you have any spare for NSW as apparently we've always been hard done by? :)
I thought ALDI bags were NSW primary funding source
Trust there are plenty of Aldis in WA then
Love ALDI has great British cheese
It was commented at the time that one of the benefits of large reusable plastic shopping bags is that you can fit far more cash of questionable provenance in one than you can in the brown paper bags traditionally used for such purposes.
In my early days as OV treasurer, before online banking was a thing, if I wanted to move money from term deposits to the cheque account (in a different bank) or vice versa, the only practical way was to carry the cash from bank A to bank B. Always got a bit nervous about this, not least because the route involved Russell Street, which at the time was a drug-dealing hotspot (although not usually during banking hours).
Basic GST system has never been fair, because it doesn't take revenue from gambling into account, and WA (the only state sensible enough to keep the pokies out) is at a disadvantage.
The CGC takes account of how much revenue is raised by the States from gambling and then assesses each State on an equal per capita basis. No State is advantaged or disadvantaged in terms of the GST outcome by the gambling assessments.
The fact that Western Australia opts to limit gambling revenue (restricting pokies to the casino) is a policy choice to have lower than average taxes/revenue, and correspondingly lower social costs from gambling.
Richard, just about to arrange for a truckload of reusable ALDI bags to be sent over to WA, if you could arrange them to be stuffed full of used $50 notes then returned to @MW, c/o NSW Treasury that should redress some of the imbalance:)
Loving this thread: where else would you go to learn about GST imbalances, federal and state politics, drug dealing, money laundering, ACT bike paths, ALDI shopping bags and British cheese? :-)
Continuing on the thread about taxation I had a Facebook discussion with my WA colleagues recently about their State Lottery and the misconception some had that Canberra benefitted from the tax take. MW is it correct the only Federal take will be GST on the sale of the lottery tickets? which will be returned to WA (or at least 75% of it) and the rest to other States and territories via the GST formula - so Lost Richard will have only very partially helped improve ACT bike paths after he bought lottery tickets to unsuccessfully try and win the recent $150 million jackpot?
After dealing with this issue can we move onto the pros and cons of privatising State Lottery agencies? - more fertile ground to sort fact from fiction.
WA TAB is being privatised if you want to invest in gambling in WA.https://www.afr.com/companies/financial-services/w...
Not sure if Lotterywest will go under the hammer any time soon, or if we will let the evil pokies in!
Lotterywest is a State owned enterprise (SOE). The Commonwealth does not get company tax from SOEs. For reasons of competitive neutrality, SOEs make a tax equivalent payment, equal to the rate of corporate income tax, to the ATO. The resulting revenue is returned to the State that owns the SOE.
Yes, GST is charged on lottery tickets, and this is then distributed among the States as part of the GST pool. To distribute the pool, the starting point for each State is their per capita share, and then this is modified by a 'relativity', greater or less than one, which adjusts for each State's relative revenue raising capacity and expenditure 'disabilities'.
Western Australia's share of the Australian population is around 10.6%, and its relativity for 2019-20 is 0.51842 (influenced by recent years of high iron ore revenues). So in 2019-20, Western Australia will receive about 10.6 x 0.51842 = 5.5% of the GST pool (ie somewhat less than the 75% that you seemed to have in mind).
YAY BB is now No1 on noisy logs - congratulations MW for your efforts
Thanks MW - looks like my broad understanding is correct (altho the finer aspects of company taxation of SOEs was news to me) and that I need to encourage Richard to keep buying lottery tickets to indirectly help fund the repair of the rough surfaces we occasionally have in ACT bike paths. BTW he also benefits from his GST contribution when he visits ACT and goes for a bike ride so he should not feel too bad about helping us in need.
One of the problems with the system as it affects WA is that the GST allocation formula runs some years in arrears (three, I think), so their GST share bottomed out (thanks to mining boom revenues) at a time when the boom was no longer happening.
No matter what other revenue may be available, to receive only half (or less - at one point it was 35%) of our share is a travesty. The 75% we 'seemed to have in mind' has now actually been promised by both major parties as a guaranteed minimum.
If NSW feels hard done by, go ask SA and TAS why they should get double or triple their relativity.
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