Victoria's strong financial position means we can afford further, responsible cuts to business taxes and WorkCover premiums, says VECCI.

"Victoria is an attractive investment destination but the footloose nature of capital and investment means policy changes can have a significant bearing on the decision to invest or reinvest in this State, particularly when businesses are facing increased cost pressures", says VECCI Chief Executive Officer Mr Wayne Kayler-Thomson.

"In this context, it is crucial that Victoria's business tax system remains competitive against our interstate counterparts.

"While State taxation revenue as a share of nominal Gross State Product (GSP) puts Victoria ahead of New South Wales in the tax competitiveness stakes, we are still broadly in line with the Australian average, not below it.

"Other measures of tax competitiveness – such as data from the Commonwealth Grants Commission (GGC) show that Victoria's taxation raising effort was slightly above the national average in 2006/07.

"While last year's Budget contained some welcome relief in WorkCover premiums, land tax and payroll tax - in line with our pre-Budget representations – there is now scope to use the opportunity to substantially reduce or remove taxes and charges that have worked against the competitive interests of Victorian industry. These include:

1) The current levy on owners of non-residential, long stay off-street car parks, which has added to compliance costs with no hard evidence of reductions in congestion as a result of its introduction.

2) VECCI's well established policy position that the abolition of payroll tax must remain a major medium term priority for Government.

In the interim, the Government should use the coming Budget to signal its commitment to ensuring Victoria has the most competitive payroll tax (PRT) regime of all the States by 2010. This commitment should be backed by a timetable of further, progressive reductions in the rate of PRT, as follows:

* Scheduled to reduce to 5.0 percent under current arrangements

Such relief is both possible and responsible on the basis of:

• Cost pressures on business as a result of interest rate rises, increased fuel costs, skills and labour shortages and a higher Australian dollar.
• The overall health of the State's financial position, particularly the current significant operating surplus, as well as projections for the forward estimates period.
• The likelihood of continuing strong employment growth over the forward estimates period which will contribute to increased payroll tax revenue.
• The level of grants (both general and specific purpose) from the Commonwealth Government are expected to increase in 2007-08 and beyond.
• The Government's own forecast that land tax collections will generally continue to increase over the period to 2010/11 due to projected increases in house prices and continuing strong underlying dwelling investment.

3) Land tax – the relief package announced in the last State Budget provided some timely relief for Victorian land tax payers. However, with current land tax notices now based on 2006 property valuations and Melbourne property prices continuing to trend up over the past year, it is highly likely that a sizeable number of businesses will again experience sharp increases in their land tax liabilities over the next twelve months.

"Our specific recommendations are aimed at `middle bracket' land tax payers and are outlined below:

4) WorkCover premium relief - last but not least, previous years' WorkCover premium reductions have boosted Victoria's business competitiveness, and the Victorian WorkCover Authority's 2006/07 financial results provide Victoria with an opportunity to cement this further.

"A further ten percent cut in premiums would be a strong step towards this", says Mr Kayler-Thomson.