GST reform to stop ‘economic apathy’

28 June, 2017

CCIWA is continuing its fight for a fairer GST system, offering up three proposals to fix the broken equation in its submission to the Productivity Commission review.

The submission has been backed by several state industry associations representing more than 18,000 businesses.

Under the current GST model, WA will lose more than $11 billion over the next three years compared with its equal per capita share – the equivalent of nine new Perth Children’s Hospitals or seven new Perth Stadiums.

In its submission, CCI has called for the GST system to be reformed to a partial equalisation model that would restore incentives for states to develop under-utilised industries and boost national economic growth.

CCI has also called for the introduction of a relativity floor for all states, settling at 70 cents per dollar to create stability in GST revenue. Currently WA received 34 cents for every dollar it raises in GST.

CCI has worked closely with its Members and senior WA business leaders including Wesfarmers Chairman Michael Chaney, Fortescue Metals Group Chief Executive Officer Andrew Forrest, investment banker John Poynton and Satterley property group’s Chief Executive Officer Nigel Satterley to develop the submission.

CCI Chief Economist Rick Newnham says the current GST model dictates that if one state strengthens its revenue base through developing underutilised industries, it will lose GST funding.

“As it stands now, states are encouraged to take the path of least resistance when it comes to lining their coffers,” he says.

“This economic apathy robs the nation of higher economic growth and undermines job creation.

CCI has submitted three proposals to the Productivity Commission that would boost economic growth through GST reform.

“Growth incentives could be restored by partially equalising to pre-determined, acceptable level of state service delivery, or by withholding 20 per cent of each state’s revenue from the GST calculation – meaning less of WA’s GST props up other states – or, by adopting the Alberta Model, where 25 per cent of all mining royalties are excluded from the calculation, again meaning WA keeps more of its own resources spoils,” Newnham says.

“CCI and WA business have also called for the introduction of a ratcheting GST relativity floor to bring back stability for the country’s leading state by ensuring a minimum level of GST funding is always received. This ratcheting floor should be introduced immediately.”

One of the proposals was also backed by Australia’s biggest miner BHP.

At an event on Tuesday Minerals Australia president operations Mike Henry said part of the reason WA received so little is because increased state resources royalties translated to less GST.

“A distribution that saw states retain a portion of resource royalties outside the funding pool, would increase the incentive towards resource developments,” he said.

CCI’s submission has been supported by the Association of Mining and Exploration Companies, the Civil Contractors Federation, Master Builders Western Australia, National Disability Services WA, the Regional Chambers of Commerce and Industry WA, the Real Estate Institute of Western Australia, the Tourism Council and the Western Australian Road Transport Association.

►Want to learn more about CCI’s GST proposals? View the full submission here.