GOODS AND SERVICES TAX

Mr PICCOLO (Light) (14:40): My question is to the Treasurer. Can the Treasurer tell the house what he is doing to ensure that South Australia's fair share of GST revenue is maintained?

The Hon. J.J. SNELLING (Playford—Treasurer, Minister for Workers Rehabilitation, Minister for Defence Industries, Minister for Veterans' Affairs) (14:42): As members of the house would be aware, the Prime Minister and the federal Treasurer announced a review of the GST distribution last year to examine the current GST distribution arrangements—

The Hon. I.F. Evans interjecting:

The SPEAKER: Order!

The Hon. J.J. SNELLING: —and the underpinning principle of horizontal fiscal equalisation. It is nice to see the member for Davenport awake! South Australia is the beneficiary of current HFE arrangements—

The Hon. I.F. Evans interjecting:

The Hon. J.J. SNELLING: Sorry, Wang Wang? There is a bit of movement from Wang Wang; excellent. South Australia is a beneficiary of current HFE arrangements—

Members interjecting:

The SPEAKER: Order! I can't hear the Treasurer.

Members interjecting:

The SPEAKER: Order!

Mr Pederick: He is an absolute disgrace; he can't run the zoo.

The Hon. J.J. SNELLING: Oh dear. South Australia is a beneficiary of the current HFE arrangements, and given the importance of this issue to the state—sorry, there is someone at the back there.

Mr Pederick: Yes, there was.

The Hon. J.J. SNELLING: The voice of Christmas past? Three submissions have been lodged with the federal government's GST Review Panel. The submissions can be viewed on the South Australian Department of Treasury and Finance website and the commonwealth's GST distribution review website. South Australia's first submission to the review stated that a comprehensive approach to fiscal equalisation in Australia is a fundamental strength of our federation. All states should have the capacity to deliver the same standard of services irrespective of their economic or demographic characteristics. SA's submission states that HFE is not detrimental to national economic growth, does not undermine incentives for states to pursue growth-enhancing reforms and does not provide disincentives for states to pursue greater efficiency in service delivery.

The submission also makes the point that the current methodology used by the Commonwealth Grants Commission is not too complex given the magnitude and the importance of the equalisation objectives. South Australia has recently lodged two supplementary submissions. The first supplementary submission is based on analysis undertaken on the state government's behalf by respected economic modeller Chris Murphy from Independent Economics. Chris is well-known for his work on the Henry tax review.

The Independent Economics report shows that the welfare of not just South Australians but the entire Australian community would be diminished if HFE were abandoned. Per capita living standards would be lower in all states. This is because people's incentives as to where to live would not be based purely on economic opportunity. The abolition of HFE would allow mining rich states such as Western Australia to offer tax breaks to entice people to live there, effectively allowing resource rich states to create tax havens. No-one would think it efficient if the commonwealth government allowed tax havens to operate in any part of Australia, and those states that are opposed to HFE are effectively trying to be allowed to act as tax havens at the expense of other states and territories.

In November 2011 the terms of reference for the GST distribution review were expanded. The expanded terms of reference called for possible changes to the form of equalisation, firstly to ensure that HFE does not provide a disincentive to state tax reform; secondly to utilise HFE to provide incentives and disincentives to promote future state policy decisions which improve the efficiency of state taxes and mineral royalties; and thirdly to examine the incentives for states to reduce the mineral resources rent tax or petroleum resource rent tax revenue through increasing state mineral royalties.

South Australia's second supplementary submission in response to the expanded terms of reference comments on the review's proposal that the HFE system introduce an incentive scheme to allow the commonwealth to influence state tax policy and penalise the states for raising their mineral royalty rates. South Australia is prepared to explore tax reform options which are beneficial to the community, but not at the expense of the state's autonomy and revenue base.

South Australia does not consider that the current HFE system is an impediment to the achievement of a more efficient tax system. The best way for state tax reform to be achieved is through multilateral negotiation between the commonwealth and the states. Each state should retain the ability to adjust its taxes to respond to budgetary conditions. Removing HFE completely could leave a $1 billion hole in the South Australian budget every year. If this were to happen, South Australia would find itself in a position where it would be unable to maintain basic services. That is why I am fighting to ensure the current HFE system is maintained.

I have distributed copies of the first submission to all federal South Australian MPs and senators so that they are aware of the importance of HFE to our state. I have also written to the federal treasurer to convey South Australia's concerns about the commonwealth's expanded terms of reference. The GST distribution panel is expected to provide its interim report to the federal Treasurer soon. I hope the panel will consider the legitimate concerns that South Australia has raised and that the commonwealth government will not support any changes that would adversely impact on the standard of living of the people of South Australia.

The SPEAKER: Before I call the next question, I just remind ministers that they are also subject to the sessional orders, that there is a time limit and there is also an option for me to send a minister out, if necessary.

Mr WILLIAMS: Madam Speaker, may I seek a point of clarification? I understand that the minister just then went over the four minutes. I understand that yesterday a minister went over four minutes. I understand the day after we introduced those sessional orders the Premier went over the four minutes. Are there any sanctions against ministers who flout the sessional orders, the ones that they thought were so important that they railroaded them through the parliament?

The SPEAKER: Thank you, member for MacKillop; you can sit down. There is a provision in the sessional order that if the minister is interrupted they can be allowed to go longer. Sometimes because of the importance of the answer I let them go a bit longer, but I would ask ministers to keep that in mind, that they do have four minutes and in theory I should sit them down straightaway. Please keep that in mind. I thank you for your point of order.

Mrs Redmond interjecting:

The SPEAKER: If you read the sessional order you will see that if a minister is interrupted they are given time at the discretion of the Speaker. The member for Norwood.