Business groups say tax hikes will lock in pain

Gold miners have warned of devastating consequences from a higher royalty rate, including potential mine closures, while business groups have also taken aim at proposed payroll tax hikes for larger employers, after both were targeted in a $1 billion revenue grab by the state government in today’s budget.

Premier Mark McGowan said he was sorry about the tax increases, which backtrack on an election promise, but believed they were reasonable, after the government faced large write-downs to expected revenue.

Chamber of Minerals and Energy of Western Australia acting chief executive, Nicole Roocke, said many of the gold industry’s 25,000 employees would have their jobs put at risk by the move, which introduces a new 3.75 per cent royalty rate that applies when the gold price is above $1,200 an ounce.

The state government estimated it would raise $392 million over four years, commencing in January next year.

An exemption for the first 2,500oz produced per miner will also be abolished.

It follows a 2014 report delivered under the previous state government recommending an increase in the gold royalty rate, and is expected to affect about 50 mines.

Association of Mining & Exploration Companies acting chief executive officer, Graham Short, said the previous review had been flawed, with the changes representing a 50 per cent increase in royalty payments.

“It will be paid for in jobs, investment and mineral exploration activities,” he said.

“The perplexing issue is that the majority of the revenue raised will go out the back door to other Australian states and territories through the GST redistribution process, whilst the jobs will be lost in WA.”

Northern Star Resources executive chairman Bill Beament said it was a disappointing move.

“WA’s gold miners cannot pass on these additional costs,” he said.

“This means they will have no choice but to cut costs elsewhere, jeopardising jobs, exploration expenditure and future growth opportunities.

“Rather than helping to solve WA’s economic problems, this increased tax will simply make matters worse by imposing another hefty cost on a local industry that is playing a vital role in creating local jobs and driving economic growth for the benefit of the whole state.”

Among other measures announced today by Treasurer Ben Wyatt was an increase in payroll tax rates for larger businesses.

Mr Wyatt said the levy would be temporary, lasting until 2023 and raising $435 million across the forward estimates.

Starting from July 2018, the payroll tax increase will lift rates from 5.5 per cent to 6 per cent for businesses with Australia-wide payrolls of more than $100 million, while the rate jumps further to 6.5 per cent on businesses with a payroll of more than $1.5 billion.

Modelling in the 2010 Henry Tax Review suggesting payroll tax was one of the most economically damaging taxes, with every $100 million or revenue raised costing society around $140 million.

In 2014, the WA Economic Regulation Authority recommended the state’s payroll tax system be made more efficient by broadening the base and lowering rates.

Chamber of Commerce and Industry of WA chief economist Rick Newnham said the government’s payroll tax decision went against all sound economic advice.

“WA already has the highest payroll tax burden, and this budget puts us further out of line with the rest of the country, making WA a less attractive place for business to create jobs,” he said.

“Penalising businesses that employ the most people in WA will destroy job creation and could affect the viability of existing and future projects, particularly in the mining sector, effectively locking in another five years of pain.

“For the government to claim that this payroll tax increase will limit the impact on households is completely misleading.

"A tax on jobs is a tax on every West Australian."

The third tax hike will be a new 15 per cent point-of-consumption wagering tax, worth about $52 million across four years.

That will start in 2019 as part of a move agreed between states to streamline the system.

Those three moves come on top of two revenue measures previously foreshadowed – a higher charge for port usage and a foreign homebuyer tax.

About $95 million is to be raised from a 17 per cent rise in Pilbara Ports Authority fees, while $48 million will be made from a surcharge on foreign property buyers beginning in January 2019.