1                This working paper describes the user charges assessment for General Public Services and provides information on its impact on GST revenue distribution for the 2007 Update.  The development of the assessment method is discussed in Volume 3 of the 2004 Review Working Papers.

Description of the category

2                The General Public Services User Charges category comprised user charges collected from fees and charges associated with regulatory activities and many general government administrative functions.  More specifically, the category included revenue from:

·                environment protection fees;

·                agistment charges;

·                fees for the registration of births, deaths and marriages;

·                land fill levies;

·                trade waste disposal; and

·                work cover fees.

3                Table 1 shows average user charges for the last six financial years for General Public Services.  In 2005‑06, average user charges of $112.09 per capita represented 16.45 per cent of total average user charges and 43.45 per cent of category average expenses.

Table 1            General Public Services User Charges, average user charges, 2000‑01 to 2005‑06

Assessment Method

Description of the assessment

4                The General Public Services User Charges assessment for the 2007 Update was carried out using two components: regulatory and planning and other user charges

5                The 2007 Update assessment method was:

·                the regulatory and planning assessment was assessed using differences in Gross State Product (GSP); and

·                the other users charges assessment was assessed equal per capita.

Assessment structure

6                Table 2 summarises the assessment structure for the 2007 Update.

Table 2            General Public Services User Charges assessment structure for the 2007 Update, 2005‑06

Component	Component weight	Factors	Basis of calculation
	%
Regulatory and planning user charges	39.60	Economic environment	Based on GSP of selected industries.
Other user charges	60.40	EPC	Equal per capita

7                The proportion of user charges affected by regulatory and planning user charges were determined by GFS data.

Calculating the category factor

8                Table 3 summarises the components, component weights and disability factors assessed for this category for the last year of the 2007 Update.  It shows the calculation of the category factor for 2005‑06.

Table 3            General Public Services User Charges, derivation of category factor, 2007 Update, 2005‑06

Note:   For each component, the component factor is calculated using the formula in the following paragraph.  The weighted component factor is the component factor multiplied by the component weight.  This is then population weighted to ensure that the sum of assessed expenses equals average expenses.

(a)        Category factor is the sum of the weighted component factors.  It equals A + B.

9                The category factor was calculated as follows:

Category factor	=	regulatory and planning users charges + other user charges
Regulatory and planning user charges	=	0.3960 [economic environment]
Other user charges	=	0.6040 [EPC]

10            In each case, the contribution to the category factor was calculated as the component weight (the percentages in the table) multiplied by the component factor (the bracketed terms in the formulas).  Each component's contribution to the category factor was scaled to ensure the sum of assessed user charges equalled average user charges.

Results for 2005‑06

11            Table 4 shows, for 2005-06, the actual, average and assessed user charges per capita and the revenue raising capacity ratios.  The revenue raising capacity ratios are equivalent to the category factor show in Table 3.

Table 4            General Public Services User Charges, assessment results, 2005‑06

(a)        The revenue raising capacity ratio is the ratio of assessed user charges per capita to average user charges per capita.

12            Table 9 at the end of this working paper shows the actual, average and assessed user charges for each State for all years of the 2007 Update.

13            Figure 1 illustrates the actual, average and assessed user charges for General Public Services for 2005‑06.

Figure 1          General Public Services User Charges, revenue per capita - assessed, actual and average, 2005‑06

Contribution to GST revenue distribution

14            Table 5 shows the category's contribution to the distribution of GST revenues and health care grants (hereafter GST revenue) implied by the 2007 Update.  It also shows the contribution of each factor and component.

Table 5            General Public Services User Charges, contribution of assessment to GST revenue distribution, 2007 Update

Note:    The redistribution due to the component factors includes the effect of interactions between factors. Therefore, the component factor figure may not equal the sum of its factors' redistribution.

Differences from equal per capita assessment

15            The category factor reflected the following on a State by State basis.

·                New South Wales' negative GST revenue distribution was due to its above average capacity to collect revenue through fees and charges for the regulation of its economy.

·                Victoria had a negative GST revenue distribution because it had an above average capacity to collect revenue for the regulation of its economy.

·                Queensland had the largest positive GST revenue distribution because it had a below average capacity to collect revenue for the regulation of its economy.

·                Western Australia had the largest negative GST revenue distribution, due to its above average capacity to collect revenue for the regulation of its economy.

·                South Australia had a below average capacity to collect revenue for the regulation of its economy and a positive GST revenue distribution.

·                Tasmania had a positive GST revenue distribution because it had a below average capacity to collect revenue for the regulation of its economy.

·                The ACT 's positive GST revenue distribution was due to its below average capacity to collect revenue for the regulation of its economy.

·                The Northern Territory had a negative GST revenue distribution, due to an above average capacity to collect revenue for the regulation of its economy.

Changes since the 2006 Update

Effect of assessment on the distribution of GST revenue

16            Table 6 shows the redistribution of GST revenue resulting from the assessments in the 2006 Update and the 2007 Update.  It also shows the sources of change.

17            Changes in the distribution of GST revenue between the 2006 Update and the 2007 Update were brought about because the Commission:

·                used revised user charges data and other revised data in updating factor calculations for the years 2000‑01 to 2004‑05; and

·                replaced 2000‑01 average user charges and factors with those of 2005‑06 to move forward the five year period on which GST revenue distribution was based.  Moving the five year period forward in this way ensures the assessments reflect recent trends in State priorities on the revenues raised and recent trends in State demographic and economic circumstances which affect their revenue raising capacity.

18            Compared to an equal per capita assessment, the 2007 Update General Public Services User Charges assessment redistributed $25.3 million to Queensland, South Australia, Tasmania and the ACT.

Table 6            General Public Services User Charges, effect of assessment on GST revenue distribution, 2006 Update to 2007 Update

(a)        Using the same pool and populations that were used to calculate the 2007 Update redistribution.

(b)       This figure shows the change in the amount redistributed among the States between the 2006 Update and the 2007 Update.  It does not necessarily equal the difference in the total redistribution from EPC between the two inquiries.

19            Table 7 shows the changes in GST revenue distribution attributable to changes to each factor arising from both revising data for 2000‑01 to 2004‑05 and replacing 2000‑01 data with 2005‑06 data.

Table 7            General Public Services User Charges, effect of assessment on GST revenue distribution by factor, 2006 Update to 2007 Update

20            The main reasons for the changes in GST revenue distribution were as follows.

Changes due to revising average user charges and factors for years 2000‑01 to 2004‑05

21            Revising average user charges.  Upward revisions were made to user charges, producing a small increase in the redistribution of GST revenue between the States ($0.1 million).  This change decreased the GST revenue shares of States assessed to have revenue advantages (that is category factors with an average above one over five years) — New South Wales, Victoria and Western Australia.

22            Revising category factors.  The category factor changed as a result of ABS revisions to Gross State Product data used to calculate the economic environment factor.  The changes benefited New South Wales, Victoria and South Australia.

Changes in State circumstances - replacing 2000‑01 with 2005‑06 data

23            Replacing average user charges.  Between 2000‑01 and 2005‑06, per capita average user charges increased by 17.9 per cent compared with an increase in the per capita GST pool (43.3 per cent).  The category became less important to the calculation of relativities, resulting in a lower redistribution of GST revenue.  This change increased the GST revenue shares of the States assessed to have a revenue advantage (a category factor average above one over five years) — New South Wales, Victoria, Western Australia and the Northern Territory.

24            Replacing category factors.  Table 8 shows the actual user charges and implied revenue raising capacity ratios for 2000‑01, the year that drops out of the assessment period, and 2005‑06, the year that comes into the assessment period.  It shows that, for New South Wales, Victoria and South Australia, in 2005‑06 their capacities to raise revenue from user charges were lower than the 2000‑01 capacities.  Replacing the category factors increased their GST revenue distributions ($5.9million).  The GST revenue distributions for Queensland, Western Australia, Tasmania, the ACT and the Northern Territory decreased when their factors were replaced.

Table 8            General Public Services User Charges, actual and assessed user charges, and capacity to raise revenue, 2000‑01 and 2005‑06

 

This working paper was prepared by the Expense — Transport section of the Commonwealth Grants Commission.  If you have any questions about its content please contact Stephen Tregea‑Collett on (02) 6229 8838 or stephen.tregea-collett@cgc.gov.au.

 

 

          Date: 23 February 2007

Table 9            Assessment of expenses, General Public Services User Charges

Note:    ACT user charges may include municipal user charges.  Refer to Attachment A of the 2007 Update, Relative Fiscal Capacity of States for how these figures are compiled.