Senate debates

Thursday, 30 March 2006

Questions without Notice

Goods and Services Tax

2:22 pm

Photo of Marise PayneMarise Payne (NSW, Liberal Party) Share this | | Hansard source

My question is to the Minister for Finance and Administration, representing the Treasurer. Will the minister inform the Senate of the benefits to state governments, like my state of New South Wales, from the GST? Will the minister further update the Senate on progress being made by state and territory governments in abolishing the layers of indirect taxes that the GST was in fact meant to replace?

Photo of Nick MinchinNick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | | Hansard source

I thank Senator Payne for that very timely question. One of the major benefits of tax reforms introduced by this government and bitterly opposed, may I say, by those opposite is that for the first time in this federation it provided our state governments with a growth tax. For decades we have had the states and territories under both Labor and Liberal administrations complaining that they were too reliant on a range of inefficient indirect taxes and stamp duties which did not grow in line with the economy or with the state’s expenditure needs.

The goods and services tax that we introduced changed all of that. All states and territories now receive more from the GST than they would have if we had persisted with Labor’s system of inefficient state taxes and Commonwealth grants paid for by income tax and company tax. New South Wales, for example, which is Senator Payne’s state, has received $44 billion in GST revenues since the year 2000. On current policy settings it will receive a GST windfall gain of $2½ billion over the next four financial years. That is $2½ billion more than they would have got under the old system.

When the GST was implemented, it was agreed with all of the states that a range of stamp duties and other minor taxes would be abolished, including, of course, the Carr Labor government’s notorious bed tax. It was also agreed in the intergovernmental agreements that a range of other duties, like mortgage duty and stamp duty on leases and hiring agreements, would be abolished when the state governments had sufficient revenue from the GST to do so. We know and it is perfectly clear that the Iemma Labor government in New South Wales clearly has sufficient GST revenue to abolish all of these state taxes, which the Carr Labor government agreed to do, but it is refusing to do so. Not only that; the New South Wales Labor government is the only state Labor government that is refusing to take action to abolish these taxes. I commend the other state Labor governments for doing so and I condemn the New South Wales government for not doing so.

At the same time, the New South Wales government has become the highest taxing state government in this country. The average resident in New South Wales is paying $500 a year more in state taxes than the average resident of Queensland and around $850 more than the average resident of Tasmania. Of course, New South Wales is taxing its citizens twice—once through the GST, and they get all of the GST; and a second time through their refusal to abolish these taxes which the Carr Labor government said it would get rid of back in 1999.

Now Premier Iemma is arguing that he cannot abolish these taxes because of the way the GST revenue is distributed. The system for distributing GST revenue is a system agreed to by the states and among the states. It has applied to Commonwealth grants from the Commonwealth government for decades before the GST was introduced. It is not a new system. It has been in place for decades.

Federal Labor, I think quite appropriately and properly, has been silent on this issue because they know that it is an inherent part of the Australian federation that we retain our well-tested, tried-and-true system of horizontal fiscal equalisation among the states. Contrary to the absurd claims made by Premier Iemma and his Treasurer, the way this system works is that the distribution of GST revenue between states simply reflects the ability of each state to deliver appropriate levels of services influenced by their circumstances. Obviously, states with more dispersed populations receive greater per capita amounts to reflect the difficulties of delivering equivalent levels of health, education and welfare.

As a senator for one of the smaller states with a big geographic spread, I strongly defend this system of fiscal equalisation. I know that all of my colleagues do and I am sure federal Labor does as well. It is, like this chamber, very much part of the federal compact in this country. So the New South Wales Labor government has really put forward an utterly spurious defence of its determination to tax— (Time expired)