Don’t target payroll tax – get rid of it

Apparently governments around the country are set to launch a major crackdown to catch employers around the country that might be dodging their payroll tax obligations.

According to a report in the Australian Financial Review, in Victoria, the Government will target employers who might be getting close to the threshold.

In South Australia, the Government wants to target businesses in multiple states that might be dodging tax because none of their various state operations are big enough to pay tax.

In Tasmania, it’s contractors who are in the firing line.

In Queensland, the Government are auditing large businesses and in Western Australia it’s mining companies in the Government’s sights.

I appreciate that the various state revenue bodies are only doing their jobs in these crackdowns and that level playing fields are crucial in business.

But here’s a thought – why don’t our state governments invest the time, effort and resources that will go into these crackdowns into finding ways to eradicate payroll tax completely?

We’ve said it before at SmartCompany and we won’t stop saying it: Payroll tax is an insidious, counter-productive tax that penalises entrepreneurs for doing the very thing that society needs them to do – create jobs.

Every entrepreneur in Australia hates this tax on growth and success and I am actually willing to bet that plenty of politicians can understand the inherent stupidity of payroll tax.

But do they ever take steps to get rid of it? Of course not.

Federal politicians typically point to their state counterparts, stepping away while saying, “It’s a state issue, it’s a state issue”.

And state politicians will never give up the revenue that flows from payroll tax. Since killing off many state taxes when the GST came in, state governments have become very reliant on gambling taxes and payroll.

So there’s no way the states are giving up their precious payroll tax without some intervention from the Federal Government.

Which is exactly why it would be great to see payroll tax given a prominent place on the agenda for the Federal Government’s tax forum in October.

In fact, if the SME community had its way, the whole two days of the forum could be dedicated to finding a way for the feds and states to kill off payroll tax.

Let’s face it – the tax forum is likely to produce little real action, other than a promise to consider a few things at some vague later date.

Wouldn’t be great if we instead focused on thoroughly, properly fixing just one issue, like payroll tax? Entrepreneurs would be dancing in the street and queuing up to give Treasurer Wayne Swan high fives.

I know I am dreaming. But we’re not letting go of this payroll tax issue.

It’s a stupid tax that holds our job creators back and it should be done away with.