The AFL stadium has made people realise just how the GST system works, writes Ruth Forrest.

If you want to know what people are thinking, try door knocking.

Having spent the best part of the past month doing just that, I, as part of my recent election campaign, from Burnie to Smithton, across Somerset to downtown Queenstown and Tullah, I discovered that encountering a thylacine was more likely than meeting a stadium supporter.

Almost in every case, the first thing people wanted to talk about was the proposed Macquarie Point stadium.

The forgotten people haven't fallen for the bread and circuses routine pushed by the stadium spruikers.

They are not fooled by the mixed messages.

One pleasing thing about the recent public discourse is the growing realisation of how the GST system, the state's lifeblood, actually works.

Most specific grants are taken into account when the Commonwealth Grants Commission (CGC) calculates each state's relativities in order to split the GST pool between them on a fair and equitable basis.

The CGC has a clear principles based framework for deciding which grants are included when deciding the GST split.

As a rule, if a specific-purpose grant is in support of a state service, say health, that payment is taken into account in the GST calculation.

In most cases this results in Tasmania getting more GST.

National Partnership Payments (NPPs) are specific-purpose grants. If a NPP is given to all states on a percapita basis, which is not uncommon, Tasmania will receive less than if the grant was based on CGC relativities because we have a smaller population.

Hence when the NPP grant is included for GST calculation purposes, Tasmania receives a larger share of the GST pool.

Other federal grants paid to states that flow through to local government grants do not affect GST calculations.

Grants paid directly to third parties, such as sporting clubs, grants that do not support a state-type service or when the CGC can't assess a need for the service, are all excluded from GST calculations.

Unfortunately, this has led to an increasing use of federal grants, particularly by the Morrison government, which were designed to sidestep the CGC system, the sports rorts saga being a case in point.

Politicians turbo-charged the use of public funds for electoral gain, and in doing so seriously undermined the integrity of the CGC system, which has proven to be a fair and equitable way of distributing federal funds.

We often hear how West Australians were unhappy to receive a smaller share of the GST due to the windfall receipts from mineral royalties, which the CGC takes into account when calculating relativities and hence GST shares. WA now gets a minimum of 70 per cent of the amount they would otherwise get if assessed on a per-capita basis.

It's been a huge boost for WA, but a huge hit for other states. The pain hasn't set in yet because the feds guaranteed a no-worse-off situation until 2026-27. The GST reductions in the recent federal budget is pocketmoney compared to the losses Tasmania will suffer in a few years.

WA's bonanza plus the hijacking of federal grants for political purposes are seriously undermining the CGC system that has served Tasmania so well. There is almost universal agreement that it's a transparently fair system, albeit very complex.

It is a core part of the federation and, like Medicare, needs to be preserved and strengthened.

Federal Treasurer Jim Chalmers in his budget speech said he wishes to see a new co-operative approach between federal and state governments, which if true can only mean quarantining the current grants system from rorting politicians.

Back to the stadium issue. A careful reader of the federal budget papers would have noticed the words used to describe the specific-purpose grants for the McLachlan (sic) Point stadium and the UTAS Stadium in Launceston.

They were lumped together as "Hobart and Launceston - place-based co-investments". The choice of words is not accidental. It means the grant is intended to support state services - infrastructure and housing - although we don't have many details yet. This means the CGC will include it when calculating Tasmania's GST.

The CGC also has well-developed policies to deal with instances of sporting complexes used for major or international sporting events with national benefits such as Olympic Games.

However, the overriding principle is if grants support services normally provided by states they are included in GST calculations.

At best Tasmania might get, say, 50 per cent of the $305m grant quarantined as occurs with major roads and bridges, but the remaining 50 per cent, plus overruns, is likely to be clawed back via future GST reductions.

To offer the state a carte blanche GST quarantine for something that is still on the drawing board would highlight the flawed politicisation of the very system that needs fixing.

The Mercury, Monday 15 May 2023