GST system is paying for lost principles

The decades-old formula for distributing a big pot of Canberra money to even up the fortunes of rich and poor states was supposed to take the politics out of Australia’s fiscal federalism. Instead, Friday’s stoush between federal and state treasurers over the $89.5 billion GST pool confirms that it has become captured by politics.

It shows, as The Australian Financial Review concluded late last year, that the division of national tax-raising and the sharing of tax revenue remains a dog’s breakfast of ad hoc deals, cost shifting and blurred responsibilities between increasingly indebted federal and state governments which are consuming more of the national income.