Australia’s states and territories collected $137 billion in property, mining and gambling taxes over the past five years — or roughly 13% of their overall revenue — raising the question of whether they are too reliant on these three industries, and whether they are able to regulate them impartially.

Figures compiled by Crikey from state and territory budget papers show property taxes, including land tax and stamp duties, accounted for the biggest share over the five years to 2013-14 at $67 billion (7%), followed by mining royalties of $41 billion (4%) and gambling taxes of $27 billion (3%).

State government revenue by industry

The figures show Western Australia has by far the greatest reliance on revenues from the three industries at 28%, twice the national average and markedly higher than the 23% level of five years ago. Victoria (15%) and South Australia (14%) are next most heavily reliant on these industries.

Percentage of state revenue from gambling, property and resources combined

Western Australia, which has been the most vocal critic of the formula used to allocate GST revenues among the states, is an outlier, with substantial growth coming from volatile mining royalties — a massive $21 billion over five years, rising from 10% of state revenues in 2009-10 to 17% last year. In almost every other jurisdiction the overall figures have been remarkably stable despite the ups and downs of the property cycle and commodities prices.

While the overall revenue from property, mining and gambling makes up only 13% of total state and territory revenues, which include GST and tied and untied Commonwealth grants, it would comprise a much higher proportion of the revenue streams that are controlled by the jurisdictions themselves. Going by the most recent ABS figures for 2012-13, for example, revenue from property, mining and gambling combined made up 25% of state revenues including from sale of goods and services, interest and other income, and 38% of revenues just counting taxes and royalties. This gives state and territory governments a direct financial incentive to approve projects that would increase the revenue base, whether through property development, mining or gambling venues such as casinos and pokies.

The federal government is handing back extra responsibility for environment and planning to the states and territories, and preparing separate white papers on tax and the reform of the federation. Last Friday Prime Minister Tony Abbott released an issues paper on the federation that flagged that the revenue base of states and territories would be considered in an effort to tackle the long-standing problem of “vertical fiscal imbalance”, in which states raise insufficient revenues from their own sources to finance their spending responsibilities.

The issues paper noted both Commonwealth and states had fallen into structural deficit since the global financial crisis, with the states not expected to rebound to surplus in aggregate until 2016-17. The paper blamed rising infrastructure spending and lower post-GFC revenues for the slump into debt, and flagged other sources of revenue would need to be considered, “such as user-charges or co-payments from people who use publicly subsided services and can afford to make a greater private contribution to their cost”.

In 2009 the review of Australia’s Future Tax System led by former Treasury secretary Dr Ken Henry found that “although the states currently have access to significant taxes, there are problems with either the quality of these taxes or the way they are levied”.

The Henry Tax Review proposed reforming inefficient states taxes including land transfer or stamp duties in favour of broader-based land taxes, suggested a profits-based mining tax instead of volume or gross sales-based mining royalties, and called for options for “reducing conflicts in policy-making between regulation and revenue-raising” as regards gambling taxes.

The property and gambling industries have long featured prominently on lists of political donors and at national and state level. Retired academic Norman Thompson, who compiled the democracy4sale.org website, told Crikey that in the decade to 2009, when donations laws in NSW were reformed, the property industry donated almost $19 million to all parties, while hotels, clubs and gaming donated $7 million. The mining industry donated less — just under $700,000 over the period.

Recent hearings of the NSW Independent Commission Against Corruption have exposed corrupt deals between politicians and proponents of new property, infrastructure and mining projects, ranging from Cascade Coal chairman Travers Duncan’s Mt Penny tenement in the Bylong Valley, to Buildev Group part-owner Nathan Tinkler’s coal loader at Newcastle, to Nabil Gazal’s shopping centre rezoning at Orange Grove in Western Sydney.

Also in NSW, there has been controversy over billionaire James Packer’s Crown Ltd, which is developing a new casino at Sydney’s Barangaroo and received highly favourable treatment from the O’Farrell government after a novel “unsolicited proposal” process. On Monday Four Corners raised serious questions about the fastest-ever probity checks of Crown’s new casino by the state regulator the Independent Liquor and Gaming Authority, despite concerns about connections to organised crime. Also this week a cosy deal between the Victorian government and Crown, including compensation for any future regulatory changes to deal with problem gambling, caused an uproar.

NSW collected $27 billion from the three industries over the last five years, including $12 billion in property taxes, $9 billion in gambling taxes and $6 billion in mining royalties, although this made up a below-average proportion of total revenue at 9%, which was stable over the period.

*Read what analysts say about the potential for a conflict of interest here.