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in Searle (1998) and Commonwealth Grants Commission (1999:1).
The results, in terms of the translation of these relativities into actual Federal untied grants distribution is presented in
Table 19. This Table also presents, for the purposes of comparison, data on what the distribution would have been had
it been undertaken purely on the basis of State populations. This table provides a broad indication of the redistributive
impact of fiscal equalisation in Australia.
EFFECT OF HORIZONTAL FISCAL EQUALISATION, 2001-02
(in million of dollars)
under HFE Total Difference
(million) Per capita
(3)/(4)($) (1) NSW
NT Equal per capita
(2) (3) (4) (5) 9,401.1
5,086.9 29,923.6 29,923.6 0.0 19.5 n.a. Source: Budget Paper No 3, 2001-02, Table 12. 7. RECENT DEVELOPMENTS As is to be expected after such a major reform, the year since the implementation of the IGA has seen stability in
Australian federal fiscal arrangements. My perception is that, as the States come to fully understand the implications of
the IGA there is increasing unease in some States and increasing satisfaction in others. With understanding of the
redistributive implications of the transitional arrangements has come a realisation that, if the States are to abolish or
reduce taxes prior to 2005 they would be wise to act on those taxes slated under the IGA for possible abolition in that
year (business stamp duties and the debits tax). Victoria has already moved in this direction and NSW has recently
announced that it will abolish the debits tax from January 2002. 137 Commission on Fiscal Imbalance What has been surprising has been the apparent lack of appreciation by federal politicians on both sides of the House of
the fundamental nature of the IGA – that, once the transitional period is over, all increases in GST revenue benefit the
States not the Commonwealth. The most recent example of this was a speech in July 2001 by the Federal Treasurer in
which he said.
Obviously if a country wants a competitive taxation regime and a decent level of social services then it needs a taxation
base to sustain it. To stay competitive the weight must be kept off direct tax – income tax and company tax- and the
indirect tax base must carry the burden of funding social services (Costello, 2001).
The difficulty with this statement is that, under the IGA, GST revenue is hypothecated to the States but the funding of
social services is largely a federal responsibility. How can State revenues fund federal expenditure responsibilities
unless other federal fiscal arrangements change?
In a similar vein, the Federal Opposition has as a main plank in its policy platform for the next federal election, due late
this year, som...
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