Cinderella and her GST.

 Economist, Saul, Eslake wants more and more WA’s Goods and Services Tax .  WA already gives 25% of the GST money raised in WA to Tasmania, Northern Territory and other states. It used to give 70% until a deal was struck with the Federal goverrnment for a guaranteed 70% of GST for WA. This guarantee is now 75%. The WA Government says if the guarantee is scrapped and the old system reinstated, WA would now only be  receiving  about 8% of its GST. For every hundred dollars paid in to the GST by Western Australians, $92 would be spent outside of WA. Hardly a Fair Go! Yet, Eslake and various other state treasurers think it is a great idea.

The GST  was introduced by then Prime Minister, John Howard’s  LNP government in July 2000.           The GST was designed to replace a raft of state taxes like sales tax, which in some cases was charged at a rate of 32%. Many believed that as the GST money was raised in each state to replace existing state taxes, the GST taxes would also remain in that state. This was not the case.

Although the GST is raised in each state, it is distributed among the states by the Commonwealth Grants Commission, based on formula that eventually saw WA‘s share of its GST drop considerably. Because WA received a great deal of money from mining royalties The Grants Commission steadily reduced its share of the GST. In 2016, WA's share of its GST was 30%. It needs to be said that WA worked very hard and spent a lot of money, in conjunction with the Federal government and various foreign governments and international resource companies to develop its vast mineral resources. 

Naturally, Western Australians were not happy that, over the years, the Commonwealth Grants Commission allocated more and more of WA's GST to other states and territories based on each states financial position. 70% of the money raised in WA went to Tasmania, The Northern Territory and other eastern states. Western Australia strenuously protested. WA is a big state, about one third in area of the entire country. It incur enormous costs in providing education , health, roads, rail  and transport facilities to one third of Australia. Which is why the Morrison LNP government in 2019 established that WA would always receive 70% of its GST. That is WA would get to  keep 70% of the money raised in Western Australia. This % has now risen to 75%. The WA State Government estimates that if that guarantee was not in place WA would at present only be receiving about 3% to 8% of its GST. Definitely, not a Fair Go!

All of WA’s sister states are salivating at the thought of getting their hands on 92% of WA’s GST.            For many years Western Australia was referred to as The Cinderella State.
We all Know that Cinderella was famous for two things …. Her great beauty and the ugliness of her sisters.

Unlike the carping conservative media, economist, Saul Eslake, wrote recently that he sees much merit in Labor's tax reformist budget 0f 2026. He is not worried by the fact that Labor promised before the 2025 election that it would not change existing laws regarding negative gearing and capital gains tax. Eslake believes Labor has made the correct and necessary decisions in trying to bridge the widening gap between taxpayer subsidised real estate  investment speculators with several houses in their portfolio outbidding young people trying to purchase their first home.

He concludes his article by expressing the wish that Labor will break another promise, the promise that Western Australia will always receive at least 75% of the GST that it raises. Here, I part company with Mr Eslake, who has argued loudly ever since the LNP Morrison government signed the deal that made that GST guarantee, Morrison’s pledge to peg WA’s share of the GST at 75%.

Western Australians realise they live in a commonwealth and are prepared to share the GST but they also believe in a Fair Go.  For most of the 20^th Century, WA was a mendicant state. That is, the money WA raised  fromy state taxes or was given as its share of from federal income tax distribution, was not enough to pay for the state’s schools, hospitals, road, railways and other vital state responsibilities.        The Commonwealth Grants Commission provided the WA government with additional funding to carry out necessary public works.

WA now receives huge royalties’ payments for its mineral resources and no longer needs assistance from the Commonwealth Grants Commission. Some other states do not raise enough GST money to carry out all their necessary works and they are very happy to receive large chunks of WA’s GST. It was the former firebrand Labor Premier of NSW, Jack lang, who once observed, “Never stand between a state treasurer and a bucket of money.”

Western Australians are standing between their bucket of GST money and all other state and territories’ treasurers who want some of it. Having been a mendicant state, Western Australians would like to see a situation where all of the GST money raised by a state stayed in that state. If that money is not sufficient for the  needs of an individual state then they should be given more of Australian taxpayers’ money by the Commonwealth Grants Commission. That means all Australians share the load through their taxes.

 Western Australians also argue that there are anomalies in the formula used by the CGC to carve up the GST. The Grants Commission always counts WA's mineral royalties in its calculations but never includes the considerable gambling revenues that other states collect when determining the GST carve up. Western Australians decided many years ago, in the best interests of social cohesion, not to have widespread gambling in their state. There is a popular State Lottery, associated with Tats Lotto, which provides big cash prizes and also spends millions on Western Australian charitable institutions. There is a Casino in Perth that has poker machines and other forms of gambling, however,  poker machines and other gaming devices are not legal anywhere else in Western Australia. Not so in the eastern states where poker machines are a part of the furniture in every hotel and club.

The rest of Australia has embraced widespread poker machines and gambling activities. This brings in huge amounts of money to those governments now clamouring to get their hands on WA’s GST. The gambling windfall is not counted as part of the states income by the Grants Commission. Surely, those states must have to divulge to the Commonwealth Grants Commission how much money they acquire from gambling and have that income added to the mix before more money is taken out of WA’s GST.

So, Western Australians believe each state should keep all of its GST (as they did with their state taxes) and the Grants Commission should allocate funds  from taxpayers’ money to any  mendicant states that do not raise enough revenue for its Public Works.

If the GST  is going to be carved up among the states, then states who acquire huge sums of money from widespread gambling must be required to declare those funds.

Seems fair!