April 9, 2014
Source: Sydney Morning Herald
Author: Matt Wade
Sydney is being starved of desperately needed infrastructure funding because more than 80 per cent of all the tax collected in the city ends up in federal coffers, an influential business group says.
The city’s workers and businesses forked out about $90 billion in tax in 2011-12, analysis by the Committee for Sydney has found. But only 18 per cent of that was collected by the state government, which has primary responsibility for the planning and provision of Sydney’s infrastructure.
The Commonwealth returns to the states the GST it collects and provides grants to fund state services including health and education. But the committee says too little of the taxes that flow from Sydney to the federal government returns to the city for infrastructure funding.
“The current fiscal imbalance is depriving Sydney of investment funds for infrastructure,” its draft report says. “The current constitutional/fiscal arrangements are taking funds not just from the state but from the city, which is the wealth creator.”
State Treasurer Mike Baird said NSW had received far less than its fair share of infrastructure funding in recent years.
“We have long argued for additional Commonwealth spending on infrastructure for Sydney and NSW,” he said. “Now we are finally seeing the result, with the Coalition government responding to these arguments. We have … seen that needle turn, and we are going to push it as far as we can.”
The Abbott government has made road funding a priority and has committed $1.5 billion to the giant WestConnex project that will eventually run from Parramatta through Sydney’s inner-west to Port Botany. But it has ruled out funding urban public transport infrastructure, arguing that has traditionally been a state government responsibility.
The committee has called for a ”new deal” to provide Sydney with a reliable federal funding stream.
Its chief executive, Tim Williams, said western Sydney was missing out because of the skewed nature of Australia’s tax system.
”A new deal on federal infrastructure funding for the city would allow long-term investment and a strategic focus on game-changing infrastructure for western Sydney,” he said.
Mr Williams said public transport was becoming increasingly important for Sydney’s knowledge-based economy and this required federal government support.
“Public transport equals high productivity in a modern global city so it makes no sense for the federal government not to be involved with public transport in the cities.”
The committee’s report says the current infrastructure funding model for cities cannot deliver the “mega-projects” needed in Sydney. It also argues that cities, not just state governments, should have a greater say in how federal infrastructure funds were spent. “We are paying the piper but not calling the tune,” Mr Williams said.
The committee’s draft report found 82 per cent of all tax paid in Sydney was collected by the Commonwealth via income tax and company tax and the GST. “Some of this revenue is used to subsidise other states,” it says. “Much is returned to fund health, aged care and education services in NSW. But relatively little is returned to the state in the form of federal infrastructure funding.”
The tax collected in Sydney rose from just over $60 billion in 2002-03 to about $90 billion in 2011-12.
Mr Williams said that if the GST was raised or broadened a portion of the increase should be hypothecated to city infrastructure investment. “That means it wouldn’t just be a tax increase but an investment,” he said.
The Committee for Sydney is a policy and advocacy group whose members include major banks, law firms, the NRL, Sydney Swans, the Art Gallery of NSW and Qantas.
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