‘Dud tax’ will seep down to jobs, consumers

13 September, 2017

More than 400,000 West Australian employees’ jobs could be impacted following the McGowan Government’s state budget payroll tax hike.

Last week’s budget contained a ‘progressive payroll tax scale’, which will be implemented from July 1, 2018, and will see employers with payrolls between $100 million and $1.5 billion pay a higher tax rate of six per cent on the proportion of their payroll above $100 million.

Businesses with a payroll exceeding $1.5 billion will also pay a higher tax rate of 6.5 per cent on the proportion of their payroll above $1.5 billion. 

CCIWA Chief Economist Rick Newnham says the Government may claim it is only the top one per cent of businesses that will be impacted by their increase to the payroll tax burden, but these businesses employ more than 400,000 people in WA.

“That’s 400,000 people whose jobs are now on the line to pay for the Government’s $435 million cash grab that is being stripped from business to prop up their budget bottom line,” Newnham says.

“The money has to come from somewhere and the first place these businesses will be forced to look is wage freezes, job cuts, and fewer working hours.

“Based on the total amount that will be raised by the hike, CCI estimates that this will cost at least 1300 jobs. It’s just a question of who it will be.”

Newnham says all businesses will be impacted by the tax hike, either directly or indirectly and he is calling for an increase in the payroll tax threshold of $100,000 – from $850,000 to $950,00 – to help offset the 1300 jobs that will be lost.

“Research commissioned by CCI found that lifting the payroll tax threshold by $100,000 would create nearly 900 jobs in WA – directly and indirectly – with a $283 million economic benefit to the state,” he says.

Retiring Wesfarmers and Managing Director and Chief Executive Richard Goyder didn’t hold back on payroll tax or the previous government’s spending when he spoke at CCIWA’s Lighthouse Leaders lunch on Tuesday.

“There haven’t been enough people who have held Government to account in recent times about spending; and spending profligacy has consequences. The consequence is what we now have in WA, which is significant structural debt position, which is going to take years if not decades to pay,” he told business leaders.

“Do I like the impost for another five years at least of increased payroll tax? I hate it. I reckon payroll tax is a dud tax, it means as the largest employer in WA we’ll probably pay the most amount in payroll tax.

“We pay about $60 million now and we’ll pay another $10 million per annum.

“It’s always big business that’s first hit because we don’t have that many votes.”

He said inevitably businesses would adjust for the cost impost and consumers will eventually pay more.

However, Goyder said he was not ‘super critical’ of the Government because it has a job to do and he would be the number one critic if they didn’t get their fiscal house in order.

“I hope Ben Wyatt is a hard edge treasurer. I hope he knows what’s got to be done,” he said.

Find out how much your business will pay with the CCI tax calculator.

Visit CCI’s website to view our expert analysis of the 2017-18 State Budget.