‘A costly mistake’: new review finds giving WA billions in extra GST was unfair to other states

BJP7 Images/Getty Images The Productivity Commission has recommended undoing the controversial 2018 changes to the distribution of goods and services tax (GST) revenue between the states that has cost taxpayers A$23 billion.

It has proposed reinstating the system that existed before the Morrison government’s deal that gave billions of dollars in extra funds to Western Australia, at the expense of the other states.

The commission’s 124-page interim report finds the reforms were “a costly mistake” and “have not achieved their intent”.

It says: The 2018 changes tried to achieve too much and moved too far away from the system’s core objective.

The result is a system that is now more complex, less consistent and more costly.

Credit to the Productivity Commission for producing a clear and rigorous report.

The 2018 “reforms” were bad policy.

The sooner they are unwound the better.

The federal government should adopt its recommendations in full.

How WA benefits The report confirms what critics have long argued: the deal benefits only WA , and taxpayers in every other state and territory foot the bill.

It also documents potential perverse outcomes.

For instance, WA’s GST distribution would rise if another state is hit by a natural disaster and receives extra GST funding.

Estimates compiled from Treasury data by economist Saul Eslake suggest WA would by 2028–29 have received about $43 billion more than under the pre-2018 rules.

Why is the GST redistributed? Every country with a federal system faces the same issues: which level of government should tax, which should spend, and how to divide revenue between them.