Businesses have reacted with fury after Treasury chief Martin Parkinson suggested the states should take more responsibility for their own revenue bases and consider extending one of the imposts companies hate most — payroll tax.

The Australian Chamber of Commerce and Industry’s chief economist Burchell Wilson urged state and territory governments to rule out extending the reach of payroll tax to small businesses.

He slammed payroll tax as inefficient and unsalvageable, and said it should be abolished.

“Increasing the tax burden is the lazy option for governments; the hard yards have to be made on the spending front,’’ Mr Wilson said.

“Governments need to bite the bullet on spending rather than conjure up new taxes.’’

On Tuesday, Dr Parkinson backed the Abbott government’s tough budget stance on the states. The Treasury secretary said they had relied for too long on the commonwealth as an easy touch and should be forced to take greater responsibility for their own affairs, possibly including an extension of payroll taxes.

He rejected suggestions the answer to the states’ financial problems was to increase the GST, instead saying they were failing to make full use of the tax bases at their disposal.

While payroll tax was often derided as a tax on labour, Dr Parkinson said this was disproved by tax economists in the 1950s and it was shown companies passed on the impost in prices.

It was effectively a tax on consumption and just as efficient as the GST, he said. “I’m not suggesting that (the states) need to race out and fix their payroll tax, but they’re making public policy choices and they have to take the consequences,” he said.

 

Source:  The Australian – read original article here