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Australian Government - GST Distribution Review

GST Distribution Review Releases Issues Paper and Calls for Submissions

The Review Panel today released an Issues Paper and called for submissions from interested parties. It is the first instalment of the Review which was announced by the Prime Minister and Treasurer earlier this year. The Review Panel comprises the Hon Nick Greiner AC, the Hon John Brumby and Mr Bruce Carter.

The Review is considering whether the current approach to sharing the GST amongst the States will ensure that Australia is best placed to respond to structural and other challenges and to maintain public confidence in the financial relationships within the Australian Federation.

"The principle of equalisation is largely accepted and the approach to it has evolved over time. But issues of concern exist for some states, while others are comfortable with the current system" said the Panel.

Australia is now facing several challenges such as the rise of China and India, and the resulting growth in the mining sector is increasing the discrepancy in the amounts of revenue raised by States and Territories, as well as making it more difficult to anticipate GST distribution from one year to the next. Concerns have also arisen about the complexity, efficiency and equity of the current system.

"Now is an appropriate time to examine the current approach as well as consider alternates to see if there is a need for change" the Panel said.

The Issues Paper describes Australia's current equalisation system from a factual and analytical perspective and provides guidance for submissions. This paper is not intended to be exhaustive, nor is it intended to limit discussion to the issues canvassed in this paper. It also raises some questions that may open the way for equalisation stakeholders and the community to tell the Panel what they regard to be the key issues for the Review. For example:

Has the fiscal equalisation system evolved to effectively operate in an open economy subject to global volatility?

Is the fiscal equalisation system a passive and reactive mechanism? Should it, or can it, be a more active and dynamic policy tool?

Does the current fiscal equalisation process complement, encourage or discourage productivity enhancing reforms by the States?

Do the outcomes of the current process result in an appropriate level of predictability and stability in the determination of GST shares?

Is full fiscal equalisation required or is there a form of partial equalisation that can sufficiently recognise underlying differences amongst the States?

The Issues Paper and information about the Review is available at Submissions are due by 14 October 2011.

1 July 2011

Philip Gaetjens
Secretary, GST Distribution Review
(02) 6263 2797