Premier's GST call 'a diversion'

Shane Wright and Nick Evans

Colin Barnett has been accused of trying to distract attention from his own shortcomings after urging Tony Abbott to break an election promise and lift the rate of the GST.

Political opponents and even accountants say the Premier raised the GST issue because of the decision this week by Standard and Poor's to cut WA's AAA credit rating.

The credit rating agency downgraded the State to AA+, saying the Barnett Government lacked the "political will" to stick to its plan to reduce net debt, which is on track to reach $22 billion this year.

But Mr Barnett said WA needed more cash from the GST, backing a rate increase during an interview with ABC television.

Pressed yesterday on the issue, the Premier backed away from a higher GST rate, instead calling for an overhaul in the way the tax was distributed.

According to Mr Barnett, an increase in the rate was being driven by Victoria and Queensland.

"When I talk about raising the rate, that is not about WA," he said. "All WA wants is a fairer distribution of the existing bucket of money.

"For WA I don't care if the rate stays at 10 per cent to be honest. What I want is a fair distribution. It's the other States that say the rate has to go up."

The Prime Minister, who plans a review of the tax system including the GST, said there was no chance the tax would be changed. "There will be no change to the GST, full stop, end of story," a spokesman for Mr Abbott said.

WA shadow treasurer Ben Wyatt said Mr Barnett was just trying to distract voters from the credit rating decision.

"This is classic Colin Barnett - running away from his own mistakes and attempting to shift the focus to the Federal Government," he said.

Mining magnate Clive Palmer, who is on track to win a seat in Federal Parliament, took to Twitter to argue "incompetent WA Premier Colin Barnett wants @TonyAbbottMHR to increase the GST to fix his own economic mess".

The Institute of Chartered Accountants said a one-off change to the GST would achieve little. "Tax reform should not be a reaction to credit rating downgrades, it should be driven by the long-term health of the nation's finances, because changes to GST in isolation will not be a silver bullet," spokesman Yasser El-Ansary said.

Even a rise in the GST to 15 per cent would do little to deal with Mr Barnett's credit-rating troubles. Economic analysis suggests a 15 per cent rate will raise an extra $24 billion a year.

Based on how the original GST was introduced, between one-third and one-sixth of that money would have to go towards covering income tax cuts to compensate consumers for higher prices.

WA's current share of the GST, at 4.9 per cent, would then deliver between $780 million and $1 billion. But the State would have to give up some of its own sources of income, most likely the $560 million a year impost on insurance.

It would leave Mr Barnett gaining an extra $200 million to $400 million a year - well short of what would be needed to cover the forecast $6.4 billion increase in net debt over the next four years.