WA Premier Colin Barnett has queried the Federal Government’s ability to withhold GST payments from states that increase mining royalties.
Barnett questioned if the Commonwealth could reduce or hold funding for infrastructure to penalise states that waver from the Government line, according to The West.
"I don’t think the Federal treasurer can do that," Mr Barnett told ABC Radio this morning, adding that GST arrangements were law.
"Remember the states gave up their constitutional right to income tax and company tax in exchange for that.”
Federal ministers Wayne Swan and Martin Ferguson have previously threatened to withhold close to $2 billion in funding if Western Australia tried to increase royalty rates under the Mineral Resources Rent Tax (MRRT).
Barnett hit back, saying that $2 billion over a decade from the mining tax for infrastructure was not enough.
"I would much rather not have a mining tax and not have that $2 billion," he said.
"That would be a relatively small contribution to the infrastructure needs of this state."
This comes after Fortescue Metals Twiggy Forrest also attacked the MRRT, saying that it was unfair tax that was essentially designed by BHP.