Payroll tax cuts could save 95,000 jobs: Report

A new report yet to be released from the Tasmanian Chamber of Commerce and Industry shows that cutting payroll tax would save 95,000 jobs across the country.

The study, ‘The Human Cost of Payroll Tax’, surveyed 12 of Tasmania’s largest companies with around 108,000 employees – equalling approximately 11% of the state’s workforce liable for payroll tax.

The report found that payroll taxes paid by the businesses surveyed equalled approximately 735 jobs at average pay rates.

The study then expanded that to the rest of the state, estimating payroll tax is costing Tasmania the equivalent of 6,760 jobs or 95,000 jobs across teh whole country.

Six of the 12 companies surveyed also said that their current employment levels are vulnerable in the near future, and that immediate temporary suspension of the tax would save 151 jobs.

TCCI chief economist, Richard Dowling said that eliminating the states’ payroll taxes would cost the Federal Government about $16 billion – less than both of the Rudd Government’s stimulus packages.

“It would be the most cost-effective way to cure unemployment across the nation, and the efficiency would be much higher than what we have now,” he said.

Businesses have lobbied for states to abolish payroll taxes and introduce more benefits, similar to the WA Government’s recent plan to reimburse eligible businesses for payroll taxes.

But Dowling says it is now time for the Federal Government to take a stand on the issue in order to provide the economy with more jobs.

“This is now an issue for the Commonwealth to look at. Obviously payroll tax for state governments is their main source of revenue, which would be why they haven’t introduced it yet.

“But there is an opportunity for a separate tax to replace it. There are two options, either a small increase in the GST or an income tax surcharge. Unfortunately, the Henry review has been told it cannot look at the GST, so the likely outcome would be an income tax surcharge.

“When income tax is levied, an additional amount would be levied on income earners, but the additional surcharge would be levied on behalf of states. It’s just more efficient to do all this through the Australian Taxation Office.”