Today the second interim report of the independent GST Distribution Review being conducted by the Hon John Brumby, Mr Bruce Carter and the Hon Nick Greiner AC has been released. This follows the first interim report released in April this year.
The Commonwealth distributes GST revenue, through a process called Horizontal Fiscal Equalisation, to ensure that all States and Territories can provide broadly equivalent services in areas such as education, health and public transport.
This process - which was expressly re-affirmed by the first interim report - is a long-standing principle of the Australian Federation and has underpinned broadly equal living standards across all parts of Australia.
In the second interim report the Panel has examined the interaction between horizontal fiscal equalisation and a number of tax policy issues, including State tax reform, mining royalties and the Minerals Resource Rent Tax (MRRT).
One of the central themes to emerge at the Tax Forum was the widespread agreement that existing state taxes are amongst the most inefficient in our tax system. Accordingly, the Panel has examined a wide range of options relating to the interaction between horizontal fiscal equalisation and state tax reform.
This second interim report outlines options relating to the MRRT and its interaction with state mining royalties and the GST distribution.
While the report is an interim report only, and as such does not make final recommendations, it points out that royalties are an inefficient way of raising revenue, as set out in the Australia's Future Tax System review.
As this is an interim report, the Panel will continue its consultations with a view to providing its final report later this year.
The report can be accessed on the Review website at www.gstdistributionreview.gov.au.
The GST Distribution Review is another step in the Government's wide-ranging tax reform agenda – including nearly 40 reforms which progress ideas from the Henry Tax Review –to strengthen and broaden our economy, lift productivity and help Australia make the most of the opportunities ahead.