The PC draft report on GST system itself lacks comprehension

Comments on Peter Martin "GST system broken 'beyond comprehension', Productivity Commission finds", 9/10/2017

While it would take a careful reading of the draft report to fully understand it and to make constructive comments, a glance at the key points suggests that the draft report may suffer a fundamental weakness, that is, it may have based on incorrect premises and misunderstanding of the current HFE system.

For example, it includes the following key points:
· But the pure may be the enemy of the good: the current HFE system struggles with extreme circumstances, and this is corroding confidence in the system.
- Equalising comprehensively and to the fiscally strongest State means that the redistribution task is too great for any jurisdiction to bear; and is volatile at times of significant cyclical and structural change.
- There is scope for it to discourage desirable mineral and energy resources policies (royalties and development) and State policy for major tax reform (a costly first-mover disadvantage).
- The system is beyond comprehension by the public, and poorly understood by most within government — lending itself to a myriad of myths and confused accountability.

The first two subpoints appear to be incorrect.

The current system has not been equalising to the fiscally strongest State. To the contrary, it equalises to the average capacity of the states, although by doing so, it equalises away the strongest states capacity down to the average.

The second subpoint is misleading at best, because the current system is policy neutral or relies on the average policy.