Productivity Commission backs CCI’s GST reform

11 October, 2017

CCI WA has notched up its biggest win yet in the fight for fairer GST after the Productivity Commission’s draft report into the tax called for reform in lockstep with our initial submission.

The Commission now joins a growing list of economic authorities who agree with CCI’s ‘partial equalisation’ mode, which would restore incentives for states to develop underutilised industries and boost national economic growth.

In the draft report, the Commission says Horizontal Fiscal Equalisation, the method used to calculate the GST distribution, is under “significant strain” as WA’s share falls to an extreme low.

It says it is volatile at times of significant cyclical change, is hard to understand by the general public and it could discourage mineral and energy policies and tax reform that benefit the development of a state’s economy.

CCI Chief Economist Rick Newnham says the Productivity Commission is in fierce agreement with CCI on reforming the GST, demonstrating the WA business community’s case for change.

“Not only has the Commission found that the GST system is broken, they have backed our reform proposal for partial equalisation to promote economic growth,” he says.

“This means that rather than bringing every state up to the level of the nation’s highest performer, which is currently WA, each state would be brought up to the national average of service delivery capacity, with the excess GST then distributed evenly among states and territories.

“This would ensure every Australian citizen continues to have access to the national average of public services, while also incentivising individual states and territories to develop their own industries and grow the national economy.

“If implemented, this proposal would have returned an additional $3.55 billion to WA in additional GST in the last year alone.”

CCI’s call follows the GST distribution unduly creating perverse incentives for state governments across the country to block industry development, which hinders national economic growth.

“The current system effectively rewards economic laziness while punishing states like WA which drive development, grow their industries, and create jobs,” Newnham says.

“It is now up to the Federal Treasurer to back the independent draft recommendations and usher in the reforms.

“CCI continues to lead WA’s case for GST reform and we look forward to working with the Federal and WA State Governments ahead of the release of the Productivity Commission’s final report in January to ensure these much-needed reforms are implemented, for the benefit of every Australian.”

CCI’s submission was backed by the Business Council of Australia and Minerals Council of Australia, as well as several state industry associations, representing more than 18,000 businesses.

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 also backed our proposal.

► Join Team WA to fight for GST reform at CCI’s breakfast forum on 31 October 2017. Get your tickets here.