WA slips on tax ranking

Victoria has overtaken Western Australia to be the country’s most competitive state for business taxes, an updated study by the Institute of Public Affairs has found.

The IPA’s state business tax calculator ranks all of the states and territories based on a hypothetical ‘reference business’ scenario as adopted by the World Bank.

It found that the reference business in Victoria would pay $280,978 in state taxes, while same business in WA would pay fractionally more tax at $281,170. In both cases, the state tax bill was equal to 17.7 per cent of its corporate income tax liability

The IPA ranked both Victoria and WA as the lowest taxing states “giving them a distinct competitive edge over other jurisdictions”.

The only jurisdiction to fare better was the Northern Territory; the reference business in the NT paid $232,974, helped by its no-land tax policy.

The Australian Capital Territory was assessed as having the highest level of business taxes, while South Australia and NSW were also grouped as high-taxing regimes.

Shadow Treasurer Ben Wyatt said WA had ranked as the number one State on the IPA’s business tax calculator since 2008. 

“Under Premier Colin Barnett, this prized status has now been lost to Victoria,” Mr Wyatt said.

“Despite inheriting the best set of finances of any government in the country Colin Barnett has overseen a massive deterioration in the State’s books. 

“While general government revenue has increased by $5.5 billion, Mr Barnett has blown the State’s net debt by a whopping 370 per cent or $14.3 billion. 

“This is the reason credit rating agencies now have placed Western Australia on a negative watch.”

The state government’s preferred measure of tax competitiveness is tax as a proportion of gross state product (GSP).

On this measure, the tax burden in WA (3.3 per cent of GSP) is expected to be lower than the average for other states (4.2 per cent) in 2012-13.

In contrast, tax per capita is substantially higher in WA than other states.

A third measure, compiled by the Commonwealth Grants Commission, is ‘tax effort’, which showed that WA’s average tax rate was 3.2 per cent lower than other states in 2010-11.

“Taken in aggregate, these outcomes are consistent with competitive tax policy settings in Western Australia,” the state government’s mid-year financial review stated.