How the GST carve up works and why we have every right to be miffed

How the GST carve up works and why we have every right to be miffed

Western Australian's have every right to be mighty miffed at not getting a decent slice of the GST pie.

In fact, WA has been left licking the plate after the state only got a pitiful 34 cents in the dollar.

And the man who is responsible for baking the pie and giving every state a piece - Federal Treasurer Scott Morrison - reckons WA doesn't deserve a larger chunk because we are just doing fine in the west because of that pesky mining boom.

The only problem is someone forgot to tell ScoMo the mining boom is well and truly over.

So what is the GST, apart from sounding like something you might get in Chinese food?

The GST is a general consumption tax, first introduced by the Howard government in 2000.

The 10 per cent of GST we pay on about half of our goods and services raises around $57 billion a year.

The federal government pockets the tax and then splits the money among the states using a formula called the horizontal fiscal equalisation, which only a handful of people actually understand.

Basically the formula recognises states and territories have a different capacity to raise revenue from their taxes and how much it costs each of them to deliver services and infrastructure.

So in WA's case, the state is penalised because we are reportedly endowed with royalties from mining.

Next year WA will just get $2.35 billion in GST revenue.

That equates to around $3.7 per cent of the GST pie or $878 per person.

So why should the average person give a stuff about our share of the GST?

Due to the meagre rise in our slice of the GST, WA will lose more than $730 million in revenue in the next four years.

This is a state already staring down a $40 billion state debt by 2020.

Any talk of a Budget surplus in the near future is laughable.

At some point down the track Labor is going to have to balance the "worst books in history" so something is going to give.

Will programs be cut? Will infrastructure programs like Metronet be put on hold or shelved? Will WA be faced with an even worse deficit and be forced to raise taxes?

Getting a better piece of the GST isn't the magic economic bullet, but we are pretty stuffed getting only 34 cents in the dollar.

But if you believe the Commonwealth Grants Commission report, the reason behind it all is that WA remains the "state with the strongest fiscal capacity".

But as WA Treasurer Ben Wyatt loudly proclaimed on Friday, the economic reality in WA is a lot bleaker.

"This again highlights the complete disconnect in particular between the Commonwealth Grants Commission and economic reality of Western Australia," he said.

"What we have now in WA is in effect our fourth year of domestic recession and yet the Commonwealth Grants Commission still assesses WA as having the strongest fiscal capacity of all the states in the nation and so gives us this abysmal return.

"There seems to be an obstinate refusal from the Grants Commission to do two things: one, actually understand what's happening in the WA economy and secondly explain its decision-making process."

While WA gets $2.35 billion, our nearest neighbours South Australia get almost three times the share of GST pocketing a handy $6.36 billion, despite having almost a million less people.

I mean SA has lower unemployment and wages, but do the Crow-eaters deserve more than us because people use their money to pay for Port Power memberships?

Even Tasmania, which has one-fifth of the population of WA, gets more GST than us, with $2.4 billion going into the Apple Isle's kitty.

NSW are the big winners getting a whopping $17.6 billion, followed by Queensland with $14.9 billion, and Victoria a close third with $14.8 billion.

So basically NSW and Victoria get more that half of the GST because the two states don't dig anything from the ground.

And Victoria and NSW get to keep the millions it makes from gambling taxes because its not part of the carving up of revenue among states.

And Queensland gets a decent whack of the GST because like the Northern Territory, have sparser populations and higher costs of providing transport, health and education in combination with lower employment rates and wages.

We should also mention that WA loses GST because of mining royalties, with the CGC giving $5.5 billion to the other "cash-strapped" states.

Since the GST was introduced WA has effectively distributed more than $27 billion to other states.

And because the Vics can't find any decent minerals in their backyard due to the fact they have built too many sporting ovals on rich dirt, the Bushrangers are compensated $2.8 billion, while NSW gets $2.2 billion.

So what the hell is WA whingeing about, because we are an economic powerhouse living off the royalties of what we dig out of the dirt, right?

We all live in McMansions with two cars, a boat, a jet ski, a pool full of crayfish and sprinkle iron ore over our cereal every morning.

But the stark reality is WA's economy is a basket case.

According to CommSec's quarterly State of the States report released in January, WA is the nation's worst performing economy.

Even Tassie leapt from seventh to fourth, because of its boom in population.

Mr Wyatt said on Friday the Turnbull government didn't get the "white hot anger" over the GST in WA.

Maybe when the feds see a conga line of Sandgropers at the border of SA with begging bowls, will treasurer Scott Morrison and his cronies realise it's time to reform how the GST is carved up.

- With AAP

This story How the GST carve up works and why we have every right to be miffed first appeared on WA Today.