The GST pool

Budget Review 2012–13 Index

Daniel Weight

Downward revisions to forecast goods and services tax (GST) receipts are likely to have significant implications for the States’ and Territories’ fiscal positions. It remains unclear whether or not receipts will return to their ‘pre-GFC’ rate of growth.

Current GST issues

Even before the release of the 2012–13 Budget, State and Territory Premiers and Treasurers had begun warning about the implications of a reduced GST pool.[1] Media reports indicated that state Treasury officials had already been briefed by the Commonwealth on a likely $2 billion writedown in GST revenues since the November 2011 Mid-Year Economic and Fiscal Outlook.[2]

The distribution of GST funds was already an issue of contention before the Budget was released. How the GST is, or should be, distributed is a different issue to how much revenue there is in the pool to be distributed. Nonetheless, the resource-rich States (in particular Western Australia) continually criticise the methodology used to redistribute the GST and other revenues to the States and Territories. These increasingly vocal concerns prompted the Commonwealth Government to announce a GST Distribution Review on 30 March 2011.[3] An interim report was released by the Commonwealth Treasurer on 23 April 2012.[4]

Retailers are also concerned about the rise of GST free online sales. The Productivity Commission’s 2011 report on the Economic Structure and Performance of the Australian Retail Industry recommended that the low value threshold exemption for GST on imported goods and services be lowered from the current $1000, if it was cost effective to do so.[5] The Government noted the recommendation, and established of a Taskforce to investigate options to improve the efficiency of processing low value imported parcels.[6]

GST receipts

The 2012–13 Budget predicts that total GST receipts for 2012–13 will be $50.5 billion. This is projected to grow at around 5 per cent per annum in the outyears to $56 billion in 2014–15.[7] These projections may be somewhat optimistic, given that actual receipts have remained flat since the global financial crisis.

Table 1 shows actual GST receipts until 2010–11 and current estimates from 2011–12 onwards.

Table 1: Size of the GST revenue pool

2006–071

2007–081

2008–091

2009–101

2010–111

2011–122

2012–132

2013–142

2014–152

GST pool (billions)

41.0

44.4

42.6

46.6

48.1

47.8

50.5

53.2

56.1

Per cent change from prior year

na

8.2%

-4.0%

9.2%

3.3%

-0.6%

5.6%

5.4%

5.3%

(1)  Australian Government, Final Budget Outcome, Commonwealth of Australia, Canberra, various years, viewed 11 May 2012.
(2)  Australian Government, Australia’s federal relations: budget paper no. 3: 2012–13, Commonwealth of Australia, Canberra, 2012, p 122, viewed 11 May 2012.

It is difficult to know to what extent the Government’s stimulus package contributed to the sharp increase in GST receipts in 2009–10. It can be seen, however, that the estimated outcome for 2011–12 is $47.8 billion, which is less than the $48.1 billion actually received in 2010–11. Once the effects of inflation are considered, the GST revenue pool has declined in real terms over the last year.

Treasury appears to assume that GST revenues will return to a longer-term trend. However, they do not appear to know when. Despite GST revenues having been revised down over the last two budgets, the current forecasts still predict strong growth in the size of the GST pool.

Chart 1: Changes in forecast GST receipts (billions)

Changes in forecast GST receipts (billions) 

The decline in GST receipts may be associated with changes in consumer behaviour such as higher household savings rates as households pay-down debt and increased online shopping. The recent trend of lower rates of GST revenue growth may reflect a structural change in the economy. If this is so, there will be significant implications for States’ and Territories’ ongoing fiscal positions.


 

[1].      J Ferguson, ‘Collapsing GST revenue has Baillieu braced for further cuts’, The Australian, 23 April 2012, p. 2, viewed 10 May 2012.

[2].      D Crowe, ‘Ratings fear as states eye GST hit,’ The Australian, 4 May 2012, p. 6, viewed 10 May 2012.

[3].      J Gillard (Prime Minister) and W Swan (Deputy Prime Minster and Treasurer), ‘Review of GST Distribution’, media release, 30 March 2011.

[4].      W Swan (Deputy Prime Minister and Treasurer), ‘GST Distribution Review Interim Report’, media release, 23 April 2012, viewed 11 May 2012.

[5].      Productivity Commission, ‘Inquiry Report No. 56: Economic Structure and Performance of the Australian Retail Industry’, 4 November 2011, Commonwealth of Australia, viewed 11 May 2012.

[7].      Australian Government, Australia’s federal relations: budget paper no. 3: 2012–13, Commonwealth of Australia, Canberra, 2012, p. 122, viewed 11 May 2012.

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