By Steven Wojtkiw
After the freeze on tax cuts in the 2009/10 Budget as a result of the Global Financial Crisis, it is time for the Victorian Government’s tax reform agenda to resume.
This is particularly so now that the Federal Government has demurred on the Henry Review’s state taxation recommendations, and when recovering economies and revenues will prompt other States to look at tax cuts – South Australia’s land tax cuts earlier this year are a case in point.
With the economy and taxation revenues recovering, we believe the time has come to initiate a new round of business taxation reform.
Such a commitment would complement the State Government’s ongoing commitment to reducing the regulatory burden and would be timely in light of significant cost pressures faced by business. These include:
- Interest rate rises.
- The damaging impact of the Victorian bushfires and drought.
- Higher insurance premiums.
- A high AUD and weaker global demand for key export products and services.
- Persistent wages growth across many sectors of industry.
- Rapidly rising water and energy costs.
In recent times, the introduction of a range of proposed, new or extended taxes and charges has also added to business cost pressures. These include higher waste levies, new stamp duties on leases, the Growth Areas Infrastructure Contribution and the proposed Freight User Access Charge.
In such an environment, it is highly appropriate that the Government do what it can to demonstrate its support for Victorian industry through practical actions that lower business costs and improve the environment for capital and jobs growth.
While WorkSafe’s financial performance came under pressure over 2008/09, due to the impact of volatile investment markets, the overall underlying health of the scheme remains robust, with a $600 million half-year surplus recorded in March.
As financial markets have progressively recovered, we expect this will restore the capacity of the Government to deliver renewed premium relief to employers. With model national OHS laws to become operational in 2011 it is crucial that Victoria maintains an efficient, effective and competitive WorkCover system.
The competitiveness of Victoria’s tax regime generally and the operation of our payroll tax (PRT) and land tax systems in particular play an important role in underpinning economic growth, confidence and investment. In this context, it is crucial that these key tax areas remain competitive against our interstate counterparts.
Key Messages
Business tax must fall because of:
- Need to remain competitive with other States – eg. SA land tax cuts
- Increased business costs: rising interest rates, AUD, energy and water costs
- State taxation revenues are recovering
VECCI recommends:
- A reduction in the payroll tax rate to 4.85 percent and an increase in the payroll tax threshold to $700,000 (effective from 1 July 2010), with the rate falling to 4.75% by 1 July 2011.
- A 0.3 percentage point reduction in the middle-upper land tax rates (total taxable value of landholdings between $1,800,000 to < $3,000,000).
- That the Government reduce average employer WorkCover premiums by 5 percent from 1 July 2010.
We also recommend significant infrastructure expenditure to improve business efficiency and provide a platform for growth.
These initiatives will improve business cash flow positions and make it easier for employers to not only maintain existing employment and investment levels, but confidently expand their operations into the future.
VECCI’s Pre-Budget submission covers a range of Budget-related issues including economic management, taxation, infrastructure, skills, regional Victoria and tourism/major events. The abolition of the Long Stay Car Park Levy (Congestion Levy).
