The states and territories have agreed to use the GST windfall to fund the abolition of bank account debits (BAD) tax from July 1 next year.
Agreement also has been reached to review a range of state and territory business stamp duties, as required under the 1999 GST Intergovernmental Agreement (IGA).
The review will report to the Ministerial Council in 2005.
Treasurer Peter Costello, speaking after today's meeting with state and territory Treasurers, says the Commonwealth is asking the states to employ the $34 billion in GST distributions in 2004/05 to continue to abolish the raft of taxes earmarked under the IGA.
Under the agreement, the states and territories agreed to abolish debits tax by July 1, 2005, subject to review by the Ministerial Council, as well as review the need to retain a range of taxes including stamp duty on business.
"The states have a very large windfall, and that windfall ought to be used to reduce the tax burden on Australians," Costello says.
"The Commonwealth will be asking the states to use that windfall to continue to abolish the taxes that we have earmarked for abolition, starting with the bank accounts debits tax, which we want abolished in every state and every territory by 1 July [2005]."
The nation's Treasurers also agreed to a review of the formula used to carve up revenue from the GST.
A majority of Treasurers signed off on a review that will examine:
- whether the present approach, which is based on a comprehensive assessment of virtually all receipts and expenses in the operating statements of states, is appropriate and necessary
- the size and trend of current redistributions
- possible simplification of the current highly complex redistribution calculations
- the reliability of the data plugged into the current system.
Costello, however, is sceptical of all states agreeing to change.
"If the states agree on a new methodology, we wouldn't stand in their way. But you would have to get the agreement of all the states," he says.
Implementation of NSW Treasurer Michael Egan's call for funding to be distributed on a per capita basis, he adds, would mean people in Tasmania, Western Australia, Queensland, South Australia the Northern Territory would all lose out.
"And New South Wales would do better. The question is, do you think there should be some fairness to all Australians, or do you think that some Australians should do better.
"From our point of view, we have an independent commission that looks at all of these issues, and we follow its decision. But if the states can agree on alternative distribution, we would be very happy to look at it," he says.