18,000 WA businesses back GST reform

27 June, 2017

Western Australia’s business community has thrown its weight behind fixing the broken GST system, with state industry associations representing more than 18,000 businesses and more than 400,000 employees backing the Chamber of Commerce and Industry of Western Australia’s (CCI) submission to the Productivity Commission, made today.

Under the current GST model, WA will lose more than $11 billion over the next three years compared to 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, to create stability in GST revenue.

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 Nigel Satterley to develop the submission.

CCI Chief Economist Rick Newnham said the current GST model dictates that if one state strengthens its revenue base through developing underutilised industries, it will lose GST funding – a clear weakening of incentives to developing new sectors and contributing more to the national economy.

“As it stands now, states are encouraged to take the path of least resistance when it comes to lining their coffers – it’s far easier to sit back and let the GST redistribution do the work than it is to get out there and develop new, under-utilised sectors. This economic apathy robs the nation of higher economic growth and undermines job creation,” Mr Newnham said.

“CCI has told the Productivity Commission that in order to bring these incentives back to boost national economic growth and job creation, a partial equalisation GST model should be introduced that will create stronger incentives for all states to develop their own economies to grow state government revenue.

“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.

“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 – WA Treasury relativity forecasts show that no state would be worse off under this proposal in the next two years.

“If the fault in the GST formulae had been foreseen in the year 2000 when the GST was introduced and a 70 cent GST floor was in place from the beginning, WA would have a $900 million budget surplus next year and a third less debt than we currently have.

“CCI and the WA business community thank Treasurer Scott Morrison and the Turnbull Government for instigating the GST review and CCI looks forward to working with the State Government, WA industry groups, business leaders, Western Australians in Canberra and the entire community to highlight to the Productivity Commission that the GST system is broken and is holding our nation back.”

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.

To read CCI's submission in full, please click here.

Media contact: Kate Hodges – 0448 928 227