Flat White

Pauline Hanson isn’t ripping off Queensland. Canberra’s ripping off the West

8 March 2017

5:30 PM

8 March 2017

5:30 PM

The accusation by Premier Annastacia Palaszczuk that Pauline Hanson is trying to rip $1.6 billion from her home state to send to Western Australia is untrue. The gross injustice to Western Australia was caused by Canberra and should be corrected by Canberra, not Queensland.

The GST was introduced because the High Court, almost a century after federation, found all state taxes on goods at any point in the production and distribution chain to be unconstitutional. Throwing federal and state governments into disarray, the Court ruled that this was because section 90 of the Constitution gave the federal parliament the exclusive power to impose duties of customs and excise.

There were two possible solutions. Either ask the people to amend the Constitution or for Canberra to step in and raise the taxes for the states.

Quite courageously, John Howard put his government on the line by going to the 1998 election promising to impose a GST with the proceeds going to the states. He won but he lost the popular vote.

There were two serious faults in the new tax.

First, it uses an obscure formula to apply what is called ‘Horizontal Fiscal Equalization’ so that inefficient state governments are subsidised by the most efficient. The theory is that all state and territory governments should be able to provide the same standard of infrastructure and services. But there is no way of ensuring this is will be achieved. In fact, it could encourage even worse governments. They could ban the building of dams and adopt foolish energy policies making the state poorer.

Common sense would tell you that a bad government should be answerable to its electorate, not subsidised by Western Australians. After all, if a state government has serious financial problems, the constitution provides that the Commonwealth (and not Western Australia) can help with a section 96 federal grant. The Commonwealth can put conditions on the grant to require the state government to cure the underlying problem.

Making the people of Western Australia use their hard-earned money to fix up the mess created by other governments, state or territorial, offends the primary rule about taxation in a federation. Best explained by the US Founding Father Alexander Hamilton, this is that ‘individual States should possess an independent and uncontrollable authority to raise their own revenues for the supply of their own wants.’

There was a second fundamental fault in the new tax, another sleight of hand. Constitutionally, the territories are completely Canberra’s responsibility, with the power to overrule territorial laws and change territory constitutions. With the GST, the Commonwealth sneakily transferred its responsibilities for its territories to the states. All this explains the ludicrous situation where Western Australians receive about 30 cents in every dollar of GST collected while the very affluent ACT gets a generous bonus, Tasmania almost double and the Northern Territory over five dollars for every dollar of the GST collected there.  Who pays? Western Australians.

The solution is not to take money from Queensland or any other state or territory. The problem was created by Canberra’s judges and politicians. It’s Canberra’s to solve, not Queensland’s. In the meantime, as Pauline Hanson says, the Western Australians are entitled to the money they collect. Canberra should not tax them at about 70 cents in each dollar of GST collected.

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