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Payments to Commonwealth for GST collection
Total Impact on State and Territory Budgets Note: positive numbers represent budgetary gains, negative numbers represent budgetary losses.
Sources: Costello (2000); IGA Appendix C; Budget Paper No. 3, 2001-02, Tables 5 and 6; and author’s calculations. Table 9 includes payments to the Commonwealth for ATO costs incurred in collecting the tax. The States have agreed to
the inclusion of this provision in the Agreement presumably because they reap the benefits of not having to administer
the abolished taxes. No estimates are presented of these latter benefits. Nor are any estimates presented of the benefits
accruing to the Commonwealth in the form of ATO administrative cost savings resulting from the abolition of the
wholesale sales tax.
Costello (1998, p.25) states that the new arrangement will enhance the budgetary position of the States “by giving them
all the revenue from the GST”. This is, in fact, a less than adequate representation of the impact of the Agreement, as
can be seen from inspection of Table 10. This Table, which relates to the year 2002-3, the first year of virtually full
operation of the IGA package, examines its revenue and expenditure impacts upon both the Commonwealth
Government and sub-national governments. 123 Commission on Fiscal Imbalance TABLE 10
SUMMARY OF GAINS AND LOSSES AS A RESULT OF THE IGA, 2002-03
(billion of dollars)
Budgetary Gains Budgetary Losses Commonwealth Abolition of FAGs
Transfer of FHOS responsibility 19.23
0.80 Total 20.03 NET GAIN TO COMMONWEALTH 1.63 Commonwealth grants to balance State
Abolition of WST 18.75 Total 20.38 -0.35 States and Territories GST revenue Reduced gambling taxes 1.43 1.63
0.50 Abolition of FID
Abolition of business stamp duties 1.46
0.75 Growth dividend - States' share 0.21 Abolition of bed taxes 0.05 State rebates for off-road diesel 0.59 Abolition of franchise fee replacements Commonwealth grants to balance State
Reduced govt. tax costs 28.87 Abolition of FAGs
Transfer of FHOS responsibility Total 31.80 NET LOSS TO STATES AND TERRITORIES Payments to Commonwealth for GST
31.60 0.20 Sources: Costello (2000), IGA Appendix C and author’s calculations. Given the stress which the Treasurer has placed on his claim that the States receive all the GST revenue, it is important
to identify the crucial aspects of the IGA package.
♦ Introduction of a GST with all revenues hypothecated to the States as untied grants;
Simultaneous abolition of untied Financial Assistance Grants to the States;
Abolition or reduction of certain State taxes; and
Abolition of the Federal wholesale sales tax. In a complicated package the essential elements are that the GST revenue ($28.87b. in 2002-03) will fund:
♦ Abolition of the Federal wholesale sales tax ($18.75b. in 2002-03);
Abolition of State FID, bed taxes and stamp duties on quoted marketable securities ($3.26b.);
Abolition of Revenue Replacement Payments ($7.54b.); an...
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