Box 4 Impact on GST payments of hypothetical reform ‘cameos’ The Commission has analysed three reform to illustrate how GST payments can be ‘cameos’ affected by changes in State policy. The cameos are hypothetical and show the GST impact for a single year for each State if it was to undertake the reform while the other States made no change. The impacts highlight how sensitive GST shares can be to individual State policies. In the first cameo, a State unilaterally cuts its rate of stamp duty on property in half. The lost revenue is replaced by introducing a new broadbased land tax that applies to all residential land. While the direct impact is revenue neutral, any State that does this would likely end up losing GST payments, with New South Wales, Victoria and Queensland potentially losing about $1 billion — and Queensland and the ACT facing the biggest percapita losses. In the second cameo, a State unilaterally abolishes its insurance taxes. Any State that does this would lose because spending on insurance (and consequently the measured tax base) would increase and because the State would still be assessed as having the capacity to raise revenue through insurance taxes. The GST impacts are lower than the first cameo since the insurance tax base is small relative to other tax bases. In the third cameo, a State unilaterally introduces a new congestion tax in its capital city. This raises revenue equivalent to $200 per capita, which is then hypothecated to public transport. The GST impacts are also modest in this case, though in practice there would be considerable uncertainty about how the CGC might treat the new tax and hypothecated spending. Impacts on GST payments, unilateral reform, 201617
Box 4 Impact on GST payments of hypothetical reform ‘cameos’ The Commission has analysed three reform ‘cameos’ to illustrate how GST payments can be affected by changes in State policy. The cameos are hypothetical and show the GST impact for a single year for each State if it was to undertake the reform while the other States made no change. The impacts highlight how sensitive GST shares can be to individual State policies. In the first cameo, a State unilaterally cuts its rate of stamp duty on property in half. The lost revenue is replaced by introducing a new broadbased land tax that applies to all residential land. While the direct impact is revenue neutral, any State that does this would likely end up losing GST payments, with New South Wales, Victoria and Queensland potentially losing about $1 billion — and Queensland and the ACT facing the biggest percapita losses. In the second cameo, a State unilaterally abolishes its insurance taxes. Any State that does this would lose because spending on insurance (and consequently the measured tax base) would increase and because the State would still be assessed as having the capacity to raise revenue through insurance taxes. The GST impacts are lower than the first cameo since the insurance tax base is small relative to other tax bases. In the third cameo, a State unilaterally introduces a new congestion tax in its capital city. This raises revenue equivalent to $200 per capita, which is then hypothecated to public transport. The GST impacts are also modest in this case, though in practice there would be considerable uncertainty about how the CGC might treat the new tax and hypothecated spending. Impacts on GST payments, unilateral reform, 201617
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