The state’s peak business lobby group has called for more than $500 million in tax cuts as part of reforms it says are needed after releasing research that shows Western Australia has the highest per capita tax take.
The state’s peak business lobby group has called for more than $500 million in tax cuts as part of reforms it says are needed after releasing research that shows Western Australia has the highest per capita tax take.
The Chamber of Commerce and Industry report has revised debate over the most appropriate method for comparing state taxes.
The traditional measure was tax revenue per capita, but the state government switched three years ago to a new measure that calculated tax collections as a share of Gross State Product.
The latter measure is more flattering to WA – the government’s mid-year financial projections statement released last month showed that WA’s tax collections were about 4 per cent of GSP, whereas the average for other states was about 4.5 per cent.
In contrast, the CCI report has focused on tax collections per capita, which show that Western Australians pay 17 per cent more than the national average.
It believes the government’s preferred measure has masked the true position by making revenue look smaller because of the massive value of WA resource exports.
The CCI said the state tax take had almost doubled since Labor came to office to $5.9 billion, with the per capita revenue rising from about $1,500 per person to around $2,700, ahead of NSW at almost $2,600.
The CCI research also showed WA was the second highest taxing state when compared on the basis of state final demand.
CCI has made a pre-budget submission calling on the government to reduce taxes and introduce indexation to stop bracket creep.
The biggest of the changes it wants is a reduction of payroll tax to 5 per cent from 5.5 per cent, a saving to business of almost $170 million.
CCI also wants broader tax relief by reducing stamp duty rates on property transactions to 2001 levels, indexation of tax thresholds for payroll tax (currently $750,000), and conveyance duty to stop bracket creep and further simplification of land tax.
CCI said that the number of employees a company could employ on average wages before stating to pay payroll tax was 12, down from 15 in 2004.
“With the wages explosion we have had the amount of people a business can employ (before becoming liable for payroll tax) is shrinking,” CCIWA chief economist John Nicolaou said.
The chamber’s stance remains that the government has become complacent and allowed spending to surge on the back of rising tax revenue.
It believes the state must commit to a longer term program of cutting taxes and costs to improve WA’s competitive position, especially with an easing of economic conditions expected.
Mr Nicolaou said the cuts suggested were affordable, and were below the $841 million in increased revenue the state has projected on top of its original May budget forecast.
Premier Alan Carpenter has refuted the claims that WA is the highest taxing state in the nation, saying CCI’s per capita measurement was simplistic given the state economy had more than doubled in the period since Labor took office in 2001, and infrastructure growth was significant.
Mr Carpenter said current taxation levels were appropriate, and he was not prepared to comment on the possibility of tax cuts in the May budget.
“If we set tax levels that were deterring business investment you would have to reconsider them...but business investment is flooding into the state,” he said.
