GST system stifling national economy, BHP says

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Posted

July 06, 2017 12:42:02

Australia’s biggest miner has joined calls for a substantial overhaul of the way GST revenue is distributed to the states, warning the current structure is stifling the national economy.

BHP’s submission to a Productivity Commission review called for a portion of mining royalties to be quarantined from the GST distribution formula, arguing it would broaden the economy and generate more investment in the minerals sector.

BHP’s position is in line with what other miners have suggested and WA has also argued for it to be implemented, in a bid to improve its low share of GST revenue.

In its submission to the commission’s inquiry, BHP warned the existing structure was serving as a disincentive to states from growing their mining industries and therefore harming the national economy.

“Over time, this is likely to result in less investment in the resources sector than would otherwise be the case,” the submission stated.

“This translates to lost opportunity for jobs [including flow-on opportunities for other businesses that support the resources sector], less activity in regional communities and in turn, a less productive, efficient and robust national economy.”

Its submission states that changing policy to encourage new resource projects could create hundreds of thousands of jobs over a 12-year period.

The submission, written by senior BHP executive Mike Henry, supported the Minerals Council of Australia’s suggestion a quarter of mining royalties be exempt from the GST formula while introducing a safety net to protect smaller states from losing revenue.

Such a change would be expected to see WA’s share improve, from a level that is much lower than any other state.

WA has led the calls for the GST distribution system to be reformed, after seeing its allocation drop to just 34 per cent of what would be its per capita share.

WA receives by far the lowest per capita share, but other states which fare better under the current system have strongly resisted calls for change.

Earlier this year, the Federal Government ordered the Productivity Commission to examine how the existing distribution system was impacting the national economy – sparked in part by WA’s complaints.

Prime Minister Malcolm Turnbull previously promised to introduce a “floor”, with no state’s share able to fall below that level, but has since said that will only happen once WA’s portion improves under the current formula.

The Productivity Commission is due to report back by January 2018.

Topics:

tax,

business-economics-and-finance,

federal—state-issues,

wa



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