Punitive payroll taxes put productivity last

06 Jul 2021 |

Australia’s economic recovery is at risk without a commitment from federal and state governments to pursue major payroll tax reforms that will strengthen our international competitiveness and productivity.

Today, the Australian Chamber of Commerce and Industry has released an Issues Paper, Payroll Tax – a handbrake on jobs and investment, highlighting the burden that payroll taxes impose on both employers and employees alike.  These findings were supported by a survey of 620 Australian businesses, which identified payroll tax as the highest reform priority.

The paper highlights the punitive nature of payroll tax, including the:

  • inefficient and inequitable means of raising revenue for state and territory governments;
  • adverse impacts on the profitability and competitiveness of businesses;
  • imposition on job creation resulting in reduced employment and lower wages; and
  • significant compliance and administrative burdens on businesses.

ACCI has long championed comprehensive tax reform and the need for a strategic approach that involves both tiers of government, including in response to the unnecessarily complex payroll taxes that place a heavy administrative burden on businesses.

“A sustainable business-led recovery from the COVID-19 pandemic must be supported by tax reforms that embolden businesses, encourage investment and increase workforce participation,” Dr Ross Lambie, ACCI Chief Economist said.

“Reform needs to identify inefficient taxes like payroll tax and adopt measures that replace the revenue lost to state and territory governments.

“Businesses right across the country are crying out for tax reforms that improve efficiency, drive business profitability and competitiveness, and raise employment and wages. Now is the time for Governments to commit to implementing a simple, fair and transparent tax system that encourages businesses to create jobs, innovate and scale-up their operations.

“The impacts of payroll taxes on the business community are abundantly clear.  Indeed, over 90 per cent of businesses identified that payroll taxes come at the cost of additional jobs.  Additionally, almost three quarters of businesses acknowledged that abolishing payroll tax would result in an increase to wages or number of employees at the firm.

“The release of the fifth Intergenerational Report this week highlights the need for bold, productivity-enhancing reforms that can underpin our future prosperity.  Reform that reduces the burden of payroll tax on businesses is vital to achieving this end.”

Read the full report

Read the survey results

Jack Quail

Media Officer

P  |  0438 730 772

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