Business fears budget tax impost will spark a painful slow burn

TWO days before the budget was handed down, WA Treasurer Eric Ripper told Business News the Government had no intention of killing the goose that laid the golden egg.

The goose he was referring to was the business community.

Now, with Labor’s first budget handed down, the biggest sector of the business community – small business – feels that goose has been plucked and is on its way to the oven.

Mr Ripper also said Labor would try and insulate small business from its tax hikes.

However, small businesses feel the hikes to land tax and payroll tax will hurt them, even though they were largely aimed at the big end of town.

They believe the higher taxes hitting big business will flow onto them.

They also feel it will have a deflationary effect on a WA economy that was showing signs of bouncing back from a downturn.

A plan to draw “payments made under contracts wholly or principally for the labour of ‘employee-like’ contractors” into the payroll tax net is seen as a threat to small business.

Small businesses have been struggling under the weight of a declining economy and GST-driven cashflow concerns. The previous quarter boasted a record number of bankruptcies.

Many small business groups believe the Government should have squeezed more savings out of the public sector before moving to rise taxes.

About the only positive from the tax hikes for small business is that most will not be introduced until next July.

However, the Government’s attempt to deliver a balanced budget and protect WA’s AAA credit rating has been applauded.

Small Business Alliance spokeswoman Cheryl Thompson said she was somewhat dismayed with the Government’s first budget, particularly the measures to draw contractors into payroll tax.

“I see this as generating a lack of confidence for big business. If big businesses are hurting, small businesses are not getting the jobs,” she said.

“This (payroll tax) measure is going to create more confusion. I don’t see that this budget has done the business community many favours.”

Mrs Thompson said she would need to see the details of what the Government was proposing with payroll tax before she could comment any further.

Small Business and Enterprise Association executive director Philip Achurch said the image that only the big end of town was being targeted by the tax increases was not correct.

“Small businesses have not been quarantined. Most of these tax increases will hit small to medium-sized businesses. There will be some sort of flow-on effect,” he said.

“The most obvious example is the land tax increase. If the business is an owner-occupier it will have to meet the increase anyway. If it is a tenant then the increase will be passed on to it.”

WA Retailers Association chief executive officer Martin Dempsey said he was disappointed the Government had broken its election promise of not raising taxes.

“Rents are far too high for existing businesses now and these new taxes will only make things worse.”

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