Business finds tax slug unpalatable

BUSINESS has given the Labor Government’s first budget a cool reception, angry about the increased taxes and uncertain the $852 million in public sector savings can be delivered.

The Government expects a modest operating surplus of $51.6 million, driven by about $100 million a year in extra revenue from higher taxes and public sector savings.

It predicts economic growth of 4 per cent – something business feels is optimistic.

The growth rate is backed by increased business investment, but business groups argue the higher taxes will make WA a less attractive investment destination.

The Government is raising the rate of land tax and payroll tax and has introduced a “wealth” tax on residential properties with an unimproved land value of more than $1 million.

The payroll tax base will be increased to rope in the before-tax component of taxable fringe benefits from January 1.

It will be broadened again from July 1 to draw in “employee-like” contractors.

Land tax has been increased from 2 per cent to 2.3 per cent on properties with an unimproved land value of between $2 million and $5 million, and from 2 per cent to 2.5 per cent on properties with an unimproved land value of more than $5 million.

The Government says WA’s tax rate is competitive with other States but business groups believe it needs to be more than competitive.

Property Council of Australia WA branch chief executive Joe Lenzo said WA’s geographic isolation and small market base put it at a disadvantage to investment destinations such as Victoria and New South Wales.

However, business groups were happy with the Government’s commitment to keeping a balanced budget and maintaining WA’s AAA credit rating.

State net debt-to-revenue ratio has been kept to around 40 per cent, strengthening chances of the AAA credit rating remaining.

The Government also has promised $3.3 billion of capital works for this year.

Chamber of Commerce and Industry chief economist Nicky Cusworth said the Government’s 4 per cent growth mark was not far off the mark.

The CCI was predicting growth of 5.5 per cent but is expected to revise that down soon.

“The growth rate is more of a reflection of the trough we’ve come from. There are signs of a rebound. We are seeing a strong spike in residential building for this quarter and the next quarter,” Ms Cusworth said.

However, she believes the tax measures will hit growth next year.

“The WA economy is looking fragile. Its recovery is weaker than other States,” Ms Cusworth said.

Mr Lenzo said the increased business taxes were a bad idea.

“The unemployment rate has gone up and the Government is putting a tax on jobs,” he said.

Housing Industry Association WA director of housing Gavan Forster said the attack on sub contractors and the premium land tax took the shine off the budget.

“I give this budget about five out of 10. If we didn’t have the tax increases it would be more palatable,” he said.

“Getting the public sector savings will be a big challenge for the Government. In the past they haven’t been able to meet public sector savings targets.

“There is not a lot of residential building work in the capital works program and the housing sector is the main driver of employment.”

The tax hikes also are a concern to the mining industry. Chamber of Minerals and Energy president Peter Lalor said the tax increases could not be justified from the WA minerals and energy industry that had already made a significant contribution to the State’s coffers.

“We are concerned about the substantial increase in payroll tax, which will cost WA business about $65 million annually,” Mr Lalor said.

CPA Australia WA director Justin Walawski said this budget was a “bit of a disaster for any struggling businesses” but found three positives from the budget: the intention to get a decent surplus; an attempt to fund spending from its operating surplus; and a good cash management approach.

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