By The Editor
The Victorian Treasury department advised the incoming Baillieu Government immediately after the election that tax cuts were needed in a range of areas; otherwise Victoria would become highest taxing state in Australia by the middle of the decade.
The Age’s report revealing Treasury’s advice is a timely reminder about the necessity of lowering business taxes and slashing red tape in the face of increased competition from New South Wales.
Treasury advised the Government that it should pursue a strategy where the overall tax take was no higher than the national average. Victorians are expected to pay $15.4 billion in taxes this financial year, which equals 4.6 per cent of the state’s economy – higher than the national average of 4.07 per cent.
The Baillieu Government faced a fiscal squeeze early in its term, with Commonwealth Grants Commission payments cut, Commonwealth infrastructure payments deferred, expenditure black holes and infrastructure costs associated with summer floods.
Our strong view is that payroll taxes deserve attention as they are a tax on jobs.
Another area of improvement identified was the high rate of stamp duty, including business stamp duties, and cutting business red tape which Treasury calculates is costing the state economy $4-5 billion each year.
We’ve previously proposed many options for cutting red tape, including a single payment form for state taxes, a priority list of SME red tape reduction targets, and a reduction in the number of state regulators.
Planning and environmental laws also come under the Treasury microscope as areas for greater efficiency.
To its credit, the Baillieu Government has already begun work cutting red tape, but as the Treasury advice reveals, there is more to be done.