The treasurer labelled Victoria and South Australia hostile states.

Report suggests GST carve-up should be replaced with a new system

Shane WrightPerthNow

THE annual GST carve-up should be abandoned and replaced with a system that would deliver WA billions of dollars and stop mendicant States from bludging off the rest of the nation, a report out today argues.

Compiled by the right-leaning Institute of Public Affairs, the report found WA had lost $16 billion to other parts of the Commonwealth since the current GST allocation system was introduced.

Over the same period South Australia had reaped $19 billion from other States including WA, NSW and Victoria.

The Productivity Commission is investigating the GST allocation system, with its draft report backing changes that it says would deliver more money to cash-strapped WA while taking money from poorer States such as SA and Tasmania. It has come under fire from smaller States as well as from Victoria.

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After years of complaints of our GST share, there might be some light at the end of the tunnel.

IPA research fellow and report author Morgan Begg said some proposals being examined by the commission would deliver more cash to WA but were “second-best” options.

He said the current system was deeply flawed and reduced incentives for States to build their economies and compete against other parts of the country in areas such as tax or bureaucratic oversight.

But in a radical shift, Mr Begg said the country would be better off giving each State the right to strike its own rate of GST and keep that cash to do as they wished.

“More reform is required, decentralising the GST by allowing the States to set the rate that applied in their respective jurisdictions and keeping the revenue raised would unlock the benefits of competitive federalism,” he said.