Victoria misses out on $86bn in Commonwealth tax payments since Federation

VICTORIA has been short-changed $86 billion that could have been spent on our roads, schools and hospitals because of dud tax deals with the ­Commonwealth.

Victoria has been short-changed $86 billion that could have been spent on our roads. Picture: Richard Serong

VICTORIA has been short-changed $86 billion that could have been spent on our roads, schools and hospitals because of dud tax deals with the ­Commonwealth.

The mammoth shortfall since federation has been exposed in a major Productivity Commission review of how GST revenue is shared between the states.

Treasurer Tim Pallas said Victoria had been the “economic powerhouse of the ­nation”, which meant it had “subsidised the federation each and every year since its ­inception”.

But the state government is defending the system that has ripped us off, arguing it has not stopped our economic growth despite the shortfall.

Amid pressure from Western Australia for a greater share of the GST, Victoria is urging the Turnbull Government to stick by the system ­instead of handing WA a permanent bonus “at the expense of all other Australians”.

PM RECOGNISES GST ISN’T FAIRLY SHARED AMONG STATES

The state government, in its submission to the Productivity Commission, argued the cash had been fairly distributed so the states could evenly deliver essential services.

It admitted Victoria missed out on $86 billion it would have received if Commonwealth funds were distributed on a per capita basis.

“This uneven distribution of funds has been justified based on the need to address inequity for the benefit of all Australians,” the government’s submission said. “Victoria fully supports the principles of equity and policy neutrality at the heart of the system.”

Victorian Treasurer Tim Pallas. Picture: Joe Castro (AAP)

Mr Pallas said he was happy to consider proposals to change how the GST was distributed, but added: “We won’t accept Victoria being short-changed.”

This year, Victoria received 93c in every dollar of GST it paid from the Commonwealth, compared to just 34c for WA. Prime Minister Malcolm Turnbull said last month WA’s share “does not pass the pub test” and the government was working on a “better, fairer formula”..

The Victorian government said WA should not receive “preferential treatment” because the downturn in mining revenue had affected its share of the GST.

“Victoria rejects the assertion that states other than Western Australia have failed to invest in ways that enhance Australia’s productive capacity, or that the only form of productive investment available to states occurs in the mining industry,” its submission said.

The Turnbull Government is waiting on the Productivity Commission’s review of horizontal fiscal equalisation — the complex system designed to ensure all states can deliver an equal standard of services.

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