Joe Hockey has failed to persuade the other states and territories to give Western Australia a larger share of the goods and services tax.
A meeting of federal and state treasurers on Thursday did not reach any consensus on GST distributions, forcing Hockey to refer the dispute to a meeting between the prime minister and state premiers which is scheduled for next week.
After the meeting in Canberra, state treasurers warned Hockey to stick to the recommendations of the Commonwealth Grants Commission – which has reviewed the operation of the GST – or risk “massive damage” to the federation.
Hockey told reporters the grants commission had recommended in its review that WA’s share of the distributed GST should fall from 37 cents in the dollar to “less than 30 cents in the dollar”. The federal treasurer argued that recommendation was unreasonable.
“It’s a perfect storm that [WA] are being hit with: both a massive drop in their allocation on the GST as they are being hit by a massive drop in iron ore prices and royalties,” Hockey said.
But the states were not persuaded by the pitch.
South Australia’s treasurer, Tom Koutsantonis, declared if Hockey moved unilaterally to boost WA’s GST share it would be “unfair on the federation, unfair on the states”.
“If he attempts to redistribute the GST using his powers as treasurer, that would be an unprecedented use of his powers,” Koutsantonis said.
Hockey told reporters he had a legal obligation to consult before moving to resolve the standoff. The treasurer declined to say what he would do in the event consensus was not reached.
Hockey said he was “concerned for the federation about this”. The treasurer appealed to the states to rise above their parochial interests. “It’s not about robbing Peter to pay Paul. It’s about what is fair for the future of our federation. After all, we are all Australians. We have got to make sure that there is a fairness in the distribution of money around Australia.”
The federal treasurer is facing significant pressure not just from the WA government, which has threatened to stop cooperating with Canberra unless the GST distribution is adjusted. Hockey is also under pressure from his WA colleagues in Canberra.
Ahead of Thursday’s meeting, the foreign affairs minister, Julie Bishop, told reporters the other states needed to consider WA’s position.
“This year, WA’s share [of the GST] was something like 37. No state would say that that is sustainable and fair,” Bishop said. “So in the interests of our federation I believe that the states need to come up with a much fairer outcome.”
Thursday’s meeting also canvassed new GST integrity measures that Hockey said could generate billions in additional revenue.
These measures included applying GST to overseas purchases below the current threshold of $1,000 – or taxing “intangible” purchases from large multinational companies at the source.
Hockey rejected suggestions from the Victorian treasurer that the integrity measures floated at the meeting amounted to a broadening of the base of the GST. “I see those things as integrity measures for the tax base, not a broadening of the GST or an increase in the GST,” the treasurer said.
The shadow treasurer, Chris Bowen, said Hockey had fumbled Thursday’s meeting. “Everything he touches, he gets wrong,” Bowen said.
Bowen said Hockey had telegraphed a favourable result for WA before the meeting, but had been unable to deliver. “[Hockey] had talked big talk in Western Australia, but had been unable to deliver on his undertakings,” Bowen said.
