CANBERRA, July 5 (Xinhua) -- The Australian government has offered states and territories a 5.3-billion-U.S. dollar incentive in a bid to push through new Goods and Services Tax (GST) reforms.
Australia's Treasurer Scott Morrison looked to end a 10-year feud on Thursday with the proposal of a model that would change the distribution of the annual GST revenue pool, now worth almost 50 billion U.S. dollars.
Under the new system, a safety net would guarantee a return of at least 51 cents per person per U.S. dollar of GST revenue to their state government by 2022, and would increase to 55 cents by 2024.
The funding "boost" for states would begin with a 443-million-U.S. dollar annual payment, increased in line with the annual growth in the GST pool.
A second injection of 185 million U.S. dollars would be made in 2024-25, bringing the total figure to 5.3 billion U.S. dollars by 2028-29.
Due to the downturn of its mining boom Western Australia was set to receive the largest boost at 2.4 billion U.S. dollars, followed by Queensland, 382 million U.S. dollars. Larger states such as New South Wales and Victoria would receive 259 million and 313 million U.S. dollars respectively.
"This plan means that services in smaller states will continue to be cross-subsidized by the larger ones through the GST, but we will also ensure that by phasing in the changes to the system, all states and territories will receive increased revenue each year - they will all be better off," Morrison told News Corp on Thursday.
"This is a real plan for dealing with the GST problem. It's not a political quick fix, nor does it try to buy individual states off forever with endless one-off deals no one can rely on."
The federal government also rejected a recommendation made by the Productivity Commission which called for an average GST revenue distribution to be maintained across all states and territories.
Instead, the Australian government opted to restore a horizontal fiscal equalization system whereby larger states subsidize smaller states.
