Tasmanian government speaks about new draft GST recommendations from the Productivity Commission

Tasmanians could be facing tax hikes or cuts to spending on state services if the federal government acts on new draft recommendations on the GST from the Productivity Commission.

But state Treasurer Peter Gutwein said there was not “a snowflake’s chance in hell” that the Tasmanian Liberal government would support the draft report.

The commission’s draft report on horizontal fiscal equalisation, the system under which GST revenues are distributed to the states and territories, appeared to lean toward equalising revenues against the second-richest state in Australia.

Under the current HFE system, revenues are equalised against the richest state in the country: Western Australia.

WA has complained that this particular distribution model has meant that it does not get its fair share of GST revenue.

If the Productivity Commission, when it releases its final report in January 2018, recommends the implementation of equalisation to the second-richest state in Australia, Tasmania would stand to lose $77 million – or roughly $150 per capita - in GST revenue a year.

Federal Treasurer Scott Morrison has said that “transition plans” would need to be considered for states like Tasmania and South Australia if changes to the GST distribution model came into effect.

Mr Gutwein said any of the changes recommended by the commission would force the state government to either increase taxes for Tasmanians or cut spending to services like health and education.

“We’ve always said that we would do what’s in the state’s best interest,” he said.

“The Productivity Commission’s recommendations are not in the state’s best interest.

“WA needs to manage its own budget rather than looking to take from states like Tasmania that have been able to manage theirs.”

Opposition Leader Rebecca White

Opposition Leader Rebecca White

Opposition Leader Rebecca White said the draft report was “very concerning”.

“If Tasmania loses its GST, it would have a dramatic impact on services that are so important to Tasmanians, like our health system and our education system,” she said.

“These services are fundamental services that Tasmanians rely on, funded primarily from GST.”

Economist Saul Eslake said the commission had “rejected” the idea of an equal per capita model, which would have seen Tasmania lose up to $1 billion over four years.

But he said equalisation to the second-richest state would also hurt Tasmania.

“There will no doubt be concerted efforts made between now and January from various parties to attempt to change the way the commission’s thinking,” Mr Eslake said.