Confusion in the ranks

States give Abbott a nasty headache – The Land

It was a green light to the states. Keep raising royalties and the Commonwealth would pick up the tab.

It is not quite that simple. Not all the coalminers hit by Newman’s royalty increase, nor those hit by NSW’s $1.5 billion royalty increase, will necessarily pay the mining tax, meaning they would not be reimbursed for royalty increases.

Wayne Swan has already promised to claw back from the states any royalty increase after July 1 last year, to which the Commonwealth is exposed, but he has yet to specify how and when. Unless he does take the money back, he will have a hole in his budget.

When he does, there will be a hole in the Queensland and NSW budgets. Newman has sparked a war of words with the miners almost as bitter as that between the federal government and the minerals giants about the first incarnation of the mining tax.

The Queensland Resources Council said there would be mine closures and planned projects would be shelved. Rio Tinto and BHP Billiton are crying foul.

In Parliament last week, thanks to Queensland, Labor laughed off Coalition questions about its mining tax.

”It is interesting that those on the other side do not want to talk about the effect on employment of a Liberal royalty increase but they are happy to exaggerate and make false claims about the effect on jobs of a Labor government policy,” the Finance Minister, Penny Wong, said.

With the Victorian Liberal government making cuts and South Australia’s Liberal opposition warning of 20,000 public sector job losses if it wins power, the clear pattern is dwindling revenue and rising expenses.

When Peter Costello negotiated the GST, it was enshrined that any change to the rate or the base needed the agreement of the Commonwealth and all the states. The business community is of the longstanding view there needs to be change. John Howard said recently it was time to remove the exemptions forced by the Senate.

Mike Baird, the straight-talking NSW Treasurer charged by Canberra with finding ways to fund the abolition of inefficient state taxes, stuck his neck out recently and said the GST must be applied to online purchases valued at less than $1000. The other states, including Labor in SA, backed him.

Yesterday, O’Farrell went further, saying the rate and application of the GST needs to be on the table. Only Gillard and Abbott are remaining steadfast against change.

One wonders how long this will last if all the states back O’Farrell. Especially if they are serious about long-term funding for the National Disability Insurance Scheme and Gonski.


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