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Tax, labour relations riling business

HEADING into its second State Budget next month, the WA Government has been put on notice that businesses are unhappy with onerous taxes, let alone plans to increase them.

When WA Business News asked senior executives what the one thing was that government could do tomorrow to make their business better, almost half said cutting taxes would boost the profitability of their business.

The WABN-commissioned survey, also shows labour relations remains the key concern facing WA businesses.

Only 16 per cent of the 129 respondents to the WABN telephone poll undertaken by JMG Marketing wanted the Government to increase spending, while the remainder wanted it to cut red tape and taxes, in order to benefit their business.

And payroll tax was number one on the hit list.

More than 35 per cent want Government to abolish it and a further 16.6 per cent want the GST either reduced or axed.

Business concerns about tax compliance has also been reflected in a survey conducted by PricewaterhouseCoopers.

The PwC survey found that 97 per cent of companies participating in the survey believed the burden of complying with Australia’s transfer pricing regulations had increased in the past five years.

Chamber of Commerce and Industry spokesman Bob Pride said it was important for the Government to take note that taxes must be kept within bounds or they would drain a firm’s resources and capacity to re-invest, killing incentive.

“Business is particularly touchy about taxes if they sense that increases are simply to help the government balance its books or to fund questionable outlays,” he said.

“Businesses have to be pretty disciplined themselves about spending or they go under and they expect, quite rightly, that governments should have to do the same.”

However, when asked what was the biggest issue facing WA businesses today, Perth’s senior executives and managers cited labour relations.

According to the WABN survey 26.35 per cent believed unfair dismissal laws were making it harder to employ staff and that changes were necessary to increase the employability of staff. Unions were also seen as one of the impediments business faced.

Interestingly, 10 per cent of the executives felt globalisation and international competition was the biggest issue that their business faced.

The WA Government confirmed it would have to increase taxes to cover its health spending commitments.

These increases would come in addition to the $500 million in tax increases introduced in Treasurer Eric Ripper’s maiden budget six months ago.

A spokesman for Mr Ripper said the Government was not canvassing just how much extra money would be required or where the money would be coming from. He did not rule out increased taxes for business.

“We are not ruling out anything apart from the premium property tax,” he said.

The spokesman said the increases were necessary to make up for the shortfall that he said still exists with the collection of GST and the drop in Commonwealth Grants to WA.

The increased taxes will come despite petroleum royalties being $50 million higher than expected in the December mid-term budget review when oil prices were at a low point.

Crude oil prices have increased around US$8 a barrel since November 20 to be almost $US26 a barrel earlier this week.

The Government has used an average oil price of US$20 a barrel in its mid-year review.

The total annual mining revenue estimate including the North West Shelf petroleum royalties from the Federal Government varies by around $19 million for each US$1 variation in the price of a barrel of oil.

A strong economic recovery will also provide a lifeline to the WA Government, with Mr Ripper forecasting that the surplus will be better than the $9.6 million forecast in December.

Institute for Research into Inter-national Competitiveness director Peter Kenyon is tipping State final demand to peak at 6.9 per cent on an annual basis in June 2002, before dropping back sharply to around 3 per cent growth heading into 2003.

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