I am pleased to announce that Commonwealth, State and Territory leaders
have today signed a landmark Agreement
that will transform Commonwealth-State financial relations, as promised
in the Commonwealth Government's Tax Reform: not a new tax,
a new tax system.
The Commonwealth has introduced legislation to provide all of the
revenue from the GST to the States and Territories and to protect
the rate and base of the GST in accordance with this Agreement. The
Agreement will commence on 1 July 1999. As a further sign
of the Commonwealth's good faith, the Commonwealth will attach
the signed Intergovernmental Agreement to the A New Tax System
(Commonwealth-State Financial Arrangements) Bill 1999 and similarly
the States and Territories will attach the Agreement to their legislation.
The new arrangements will provide the States and Territories with
a stable and growing source of revenue to fund important community
services. The States have committed to abolish nine inefficient taxes,
removing their reliance on these distortionary and growth-reducing
taxes and charges. The Agreement will also remove the States and Territories'
current reliance on Financial Assistance Grants.
In each of the transitional years following the GST's introduction,
the Commonwealth will compensate any State whose budgetary position
is temporarily worse off. It has also agreed to more generous transitional
arrangements from the third year. As GST revenue increases, all States
will receive large financial gains, even after abolishing stamp duty
on non-residential conveyances.
The Commonwealth has also agreed to provide further assistance to
the States and Territories in relation to the effects on State and
Territory budgets of the abolition of wholesale sales tax equivalent
payments by Government business enterprises and to ensure that local
government benefits fully from the removal of wholesale sales tax
and excises on their purchases. It has also agreed to provide funding
to meet increased public housing costs as a result of tax reform,
subject to the resolution of the new Commonwealth-State Housing Agreement.
A Ministerial Council, chaired by the Commonwealth Treasurer, will
oversee the operation of the Agreement. It will meet at least once
a year. It is also envisaged that the Council of Australian Governments
will meet at least once a year for Heads of Government discussions.
Canberra