CCI calls for state tax reform

An unexpectedly large budget surplus announced this week by Premier Colin Barnett comes just days after the state’s peak business association highlighted tax and the public sector as areas in need of reform.

The government now has the opportunity to address these issues, with the 2009-10 Annual Report on State Finances showing a general government sector operating surplus of $831 million.

The result was $541 million higher than estimated in the May budget and $780 million higher than the $51 million estimate announced in December last year.

The Liberal-Nationals alliance has performed “patchy” in the two years since taking government, according to the Chamber of Commerce and Industry of WA, which praised the coalition for its work on energy strategy and combating labour shortages, but said more work needed to be done on tax competitiveness and public sector reform.

The CCIWA Government Scorecard 2010 ranks the government’s performance in 11 categories, based on feedback from CCIWA members, regarding the coalition’s first two years in power.

“Overall, CCIWA has seen evidence of action on some critical issues that matter to WA business, but many areas have been ignored,” CCIWA chief executive James Pearson said.

The CCIWA questionnaire ranked the government poorly on public sector performance, however this was one area that Mr Barnett said had “very positive outcomes” in 2009-10.

The CCIWA criticised the government for not acting on the majority of findings in the Economic Audit Report, which outlined a number of ways to improve the efficiency and effectiveness of the public sector.

But Mr Barnett attributed part of the surprise $831 million operating surplus to actions taken to keep public sector costs down.

“The ceiling on staff numbers has resulted in an improved focus on the measurement and management of employees across the public sector,” a government statement said.

“The government also assisted 802 staff exit the public sector during 2009-10 under its voluntary severance programs, at a total cost of $80.5 million.”

Other major contributors to the surplus were higher royalties, mainly from iron ore (up $107 million), and an increase in North West Shelf grants and Commonwealth grants (up $164 million).

Also significant was the increase in WA’s share of GST revenue, up $258 million.

Based on a score out of 10 (10 being positive), the government scored eight for its work on developing the Strategic Energy Initiative.

“The ongoing shift towards cost reflective pricing of electricity is also encouraging and has required political courage,” CCIWA said.

The government received a strong 7.5 for its work to address labour shortages.

“The development of a State Workforce Development Plan is a positive move towards addressing labour shortages in WA.”

“This is an important body or work, and the government must make tackling labour shortages a priority and develop a whole of government approach to growing the workforce.”

Regarding regulatory reform, CCIWA said the government had done strong work in streamlining the state’s cumbersome planning and approvals system, particularly with regard to mining, environmental and planning approvals.

Sectors where the government performed poorly, with scores of three to four, were tax competitiveness, IR and public sector reform.

“Taxation remains a major impediment to doing business in WA. The government has failed to provide meaningful and permanent tax relief, particularly in the area of payroll tax,” the scorecard said.

“There is now considerable urgency for WA to refer its IR powers to the federal government – every other state has been in the federal system since January 1 this year.

“The retention of a state IR jurisdiction perpetuates unnecessary uncertainty for employers and employees due to the complexity and confusion about applicable minimum standards, rights and obligations.”