The Australian Chamber of Commerce and Industry (ACCI) has called on state and territory governments to rule out extending the reach of payroll tax to struggling small businesses.
ACCI claims payroll tax is highly inefficient and is levied without regard to capacity to pay.
There is no requirement for a business to be profitable before becoming liable for payroll tax and taxation on business inputs, including labour, is poor policy, ACCI said in a statement.
“The Henry Tax Review found that of the major heads of taxation revenue, payroll tax is one of the most damaging to economic activity.
“Payroll tax is more damaging to the economy than company tax. Ironically, the company tax rate has been lowered in the recent Budget while any significant payroll tax relief remains a distant hope.
“The notion that payroll tax is somehow a proxy for a GST has been completely discredited.”
ACCI claims Treasury ran this argument ahead of the introduction of the GST in order to undermine the case for tax reform.
“In reaching this conclusion they simply assumed that payroll tax was levied on the entire tax base – an assumption glaringly at odds with reality and demolished by KPMG Econtech in their modelling of the efficiency of the tax system for the Henry Review.”
ACCI says payroll tax is “unsalvageable” and should be abolished state and territory governments.
“Today's media speculation in relation to payroll tax has been unhelpful and only served to confuse the public debate, claims ACCI.
“All of which is a distraction from the main issue – unsustainable deficit spending. “Increasing the tax burden is the lazy option for governments, the hard yards have to be made on the spending front.
“Governments need to bite the bullet on spending rather than conjure up new taxes.”