What is horizontal fiscal equalisation in practice?
The current operational definition of HFE that the commission has adopted is:
“State governments should receive funding from the pool of GST revenue such that, after allowing for material factors affecting revenues and expenditures, each would have the fiscal capacity to provide services and the associated infrastructure at the same standard, if each made the same effort to raise revenue from its own sources and operated at the same level of efficiency.”
The current methods used by the Commission to determine State shares of the GST revenue are outlined in the 2015 Review. The history of the Commission’s previous methods and decisions are outlined in the History page.