The GST will take $520 million more next financial year than what was estimated a year ago.
And the increases continue in future years. The Budget papers show that the GST is the growth tax, rising faster than the sum of other taxes and estimated growth through to 2004-05.
The Budget papers, though, religiously leave out the GST from formal Commonwealth financial statements, because the Commonwealth argues that it is not a Commonwealth tax, but one that goes automatically to the states.
If it were considered a Commonwealth tax it would represent 14.5 per cent of Commonwealth revenue.
GST payments to the states in 2001-02 were higher than all other grants to the states put together. The trends show that the Commonwealth is slowly reducing non-GST payments and is making the states rely on the GST more. GST payments were 50.65 per cent of states’ revenue from the Commonwealth in 2001-02 rising to 54.9 per cent in 2002-03. Non-GST transfers from the Commonwealth to the states will fall in 2002-03 from $26.1b to $24.1b.
The GST beast is giving the states a guaranteed increasing revenue base. This is money they can do what they like with. Nearly all the balance that goes from the Commonwealth to the states is tied money for purposes determined by the Commonwealth.
The long-term implication for the federation is more power and monetary independence to the states. And as the states tend to take a more parochial, pork-barrelling view than the Commonwealth, the trend might result in poorer policy outcomes.
On the other hand, GST revenues go to the states on what is called the vertical fiscal equalisation formula. Under this the high-population rich states (NSW, Victoria and Western Australia) get a lower amount than their populations would warrant and the Northern Territory, Tasmania, South Australia, Queensland and the ACT get more.
On a population base Tasmania, for example, would get $703m from GST revenue, in fact it gets $1201. The ACT gets $587m not $473m but NSW gets just $8718m not $9880m that its population would warrant.
The growing GST revenue base will act as a locked-in state equalisation catalyst.