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Business welcomes government commitment to reform of GST

18 March, 2008

NSW’S largest business group NSW Business Chamber has welcomed an increase in GST funding for NSW in 2008/09.

The NSW Business Chamber, a long standing critic of the current GST formula, has said it is encouraged by comments made by Federal Treasurer Wayne Swan in a letter to the Chamber about the GST agreement. In a letter to the NSW Business Chamber Mr Swan said:

“…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. 

"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 GST formula is complex and cumbersome and NSW Business Chamber has for a long time been calling for a review of the formula”, said 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.

“Since 2000-01 NSW taxpayers have sent close to $2 billion in GST revenues to Queensland – a State which has lower unemployment, consistently faster growth and lower taxes than NSW. Despite the subsidy from NSW, Queensland continues to cry poor and wants more.

“NSW has not had received its fair share of GST revenue and this has impacted on the quality of government services provided to the people of NSW.

“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."

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