Picture: AAP

Premier Colin Barnett has dismissed the prospect of States being allowed to levy income tax, saying he did not want the issue to distract from his main aim of fixing the distribution of the GST.

At yesterday's Council of Australian Governments meeting in Canberra, Mr Barnett and South Australian Premier Jay Weatherill traded barbs over the carve-up of the GST during a testy news conference.

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Mr Barnett warned WA's plunging share of GST was affecting the State Government's ability to provide services and suggested that a future WA government might decide to leave minerals in the ground.

"It's affecting our Budget position and the only alternative, Tony, is to close the border," he quipped to the Prime Minister.

But Mr Weatherill gave him short shrift, saying until 2006 WA had been happy to be a net recipient of funding.

"They've struck it rich and decided they want to essentially cut themselves adrift from the rest of the Federation, which I think is intellectually bankrupt and morally bankrupt," he said.

"If you want to take this to its logical extreme, all the dough should stay in the Pilbara, it shouldn't flow to Perth. That's how ridiculous this gets."

Though the Commission of Audit was not on the agenda for yesterday's COAG meeting, its radical proposals hovered over discussions.

In one of its key findings, the commission recommended the Federal Government cut its income tax take and allow the States to impose a surcharge to collect the same amount of revenue.

It also backed the push being led by WA and Victoria for the GST to be allocated to States on a per capita basis.

Mr Barnett told The Weekend West that as a Premier, the idea of being able to collect income tax was attractive but he doubted it would happen because it would add complexity to the tax system.

"I think it could be quite clumsy, so for me I wouldn't want that to distract attention from what is the critical issue for us, which is the GST," he said.

"I think there is a general consensus among the premiers the system is broken and needs to be fixed."

Although the PM said the audit had made a "useful" contribution with its recommendations over tax reform, he played it down yesterday.

"No one should assume that just because it was contained in the Commission of Audit that it is necessarily likely to happen or it is in some way the Federal Government's favoured position," Mr Abbott said.

Mr Barnett has also raised objections to Mr Abbott's paid parental leave scheme, refusing to hand over funds set aside for State public servants on maternity leave.

Under the PM's scheme, the States would hand over cash they would normally pay out as part of their public service leave plans.

"From WA's point of view, we are not prepared to do that," Mr Barnett said.

The West Australian

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