Pitcher Partners partner Craig Whatman said that with forecasts of a healthy surplus of $1.3 billion in the 2014/2015 year growing to $3 billion in 2017/2018, Victoria has a solid platform on which the new Andrews government can continue to grow the economy, attract more investment into the state and to provide assistance to businesses.
Mr Whatman said the new government should take advantage of expected national tax reforms to reduce the state-based tax burden currently faced by Victorian businesses.
“It now appears likely that the upcoming white paper review of the tax system will include the GST,” he said.
“In the event that review results in either an increase in the GST rate and/or a broadening of the GST base, the new Victorian government should take the opportunity presented by the additional GST revenue to review the impact of state taxes on businesses in Victoria, and reduce the ongoing state taxes burden faced by those businesses.”
Mr Whatman specifically called for payroll tax reform, saying it is the most significant and burdensome state tax faced by a majority of businesses in the middle market.
“A potential increase in the GST rate and/or a broadening of the GST base might provide the newly-elected Victorian government with an opportunity to offer businesses more significant relief from payroll tax into the future," he said.
“One of the measures announced in May’s state Budget was a reduction in the payroll tax rate of 0.05 per cent, from 4.9 per cent to 4.85 per cent. While any relief from payroll tax was welcome, the measures announced translated to a modest saving of $75 per annum, for example, for a small business with a payroll of $700,000.
“The equivalent-sized business in NSW or Queensland would not be paying payroll tax at all because they are under the relevant thresholds in those states,” Mr Whatman said.