Australian Rustbelt State Leader Proposes Big Overhaul of Tax

  • Weatherill recommends increase in GST to 15% from 10%
  • Proposes states receive 17.5% of federal income tax raised

South Australian Labor Premier Jay Weatherill, who has already broken ranks with his federal opposition colleagues by backing a higher goods and services tax, proposed on Thursday an overhaul of revenue distribution to push forward the country’s debate on tax changes.

Under a plan outlined in the text of a speech in Adelaide, Weatherill said the federal government would retain all the money raised from an increase in the GST to 15 percent in return for the states receiving a guaranteed share of federal income tax raised.

Details of his proposal include:

  • GST would rise to 15% from 10% and the extra funds raised would go to the federal government
  • Federal government would use the extra GST revenue at its discretion after compensating low-income earners for the increase
  • States would continue to receive revenue generated from the current 10% GST
  • States would be given a fixed 17.5% share of all income tax the federal government collects, enabling the states to keep funding health services
  • Most existing fixed payments from federal government to the states via tied grants would be abolished
  • Federal government would retain control of setting the income tax rate
  • Weatherill also backed extending GST to financial services

Weatherill has been at the forefront of reform proposals -- including offering South Australia as the site of a potential nuclear waste dump -- as his state prepares for the 2017 closing of General Motors Co.’s Holden factory, ending more than 50 years of automaking in Adelaide.

The state premier has sought to forge an alliance with New South Wales counterpart Mike Baird on tax reform to try to strengthen the fiscal position of the states and allow the federal government to rebalance revenue raising in order to spur growth in the economy.

South Australia gained little benefit from a mining boom that enriched the mineral-rich states around it. Instead it suffered from the side effects of a soaring currency and rising wages. Weatherill estimates 13,000 jobs are at stake in the automotive industry.

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