GST distribution report delayed

Treasurer Scott Morrison has announced a delay of more than three months in the release of the Productivity Commission’s inquiry into how the Goods and Services Tax (GST) is distributed to the states.

The distribution system, known as horizontal fiscal equalisation (HFE) has been widely criticised for giving too much to some states and too little to others.

The Productivity Commission, which was to have delivered the report on 31 January, will now not have to do so until 15 May,

Mr Morrison says that he has granted the extension in response to a request from the Commission, but he has been criticised for the delay, which conveniently places the release until after the Tasmanian and South Australian state elections. It is also after the May Federal Budget.

“The PC recently wrote to me to request an extension to the timeframe for this inquiry. It is important that the Commission has sufficient time to work through all this information and to undertake further analysis and consultation on key issues, as necessary, in order to finalise its recommendations to Government.

“Of course, this means ensuring there is sufficient opportunity to address appropriate transition arrangements to any possible revised HFE system. These will need to be fully considered, in close consultation with the states and territories and other stakeholders.”

Ex-Senator Nick Xenophon, who is poised to become kingmaker and perhaps even Premier at the South Australian election with his new SA Best party, is not impressed with the delay. He said the current system was fair and that any change would “wallop” South Australia.

As might be expected, ALP Shadow Treasurer Chris Bowen is also critical of the delay. “Today’s announcement by Scott Morrison of a delay in the final Productivity Commission report, snuck out during the holiday period, is designed to do one thing – to try and hoodwink the people of South Australia and Tasmania that there won’t be cuts to the GST revenue that help fund their hospitals and schools.

“The uncertainty that will result from this delay will jeopardise the funding of services across the country.”

But Mr Morrison said the delay was necessary, “to get a clearer view of expected distributions into the future based on the current model, so the impact of any possible changes can be assessed.

“Comparisons with previous years’ distributions are misleading and an unreliable guide to future impacts as distributions are only determined a year in advance, not over the forward estimates.

“It is important to get this right. The PC inquiry has already demonstrated in its interim report that the system is broken and needs a real fix. This also needs to be achieved in a way that takes account of the impact during any transition period.”

 

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