This opinion article by Business Council chief executive Jennifer Westacott was first published in The Herald Sun on Thursday 25 May 2023
I know it sounds simple to increase taxes on business but let me assure you it doesn't work like that.
The Victorian budget move to put a $4bn tax on medium-sized and larger businesses will actually harm workers, small businesses and the state's economic trajectory.
Here's why. Jobs are created by businesses investing, putting their money at risk, hiring more workers and doing things more efficiently. It also means higher wages for the long-term.
Don't be fooled. The Covid Debt Levy isn't just about big business, it will end up hurting workers, families and small business owners.
Larger and medium-sized businesses keep small and family-owned businesses alive. They work together, with small businesses supplying goods and services to larger businesses, and vice versa. If you hurt one, it hurts the other.
The private sector employs 3.2 million Victorians or almost nine out of 10 of the state's workers.
The new levy comes on top of WorkCover increases and last year's payroll tax hike for mental health services. Each additional impost on companies weighs down their ability to do business, hire workers and keep staff in jobs.
When you add extra taxes on businesses, they are forced to make investment decisions.
Overwhelmingly if things don't stack up, businesses stop investing. They either don't do something or they do it another state or country.
When that happens, it is an extra job that doesn't get created. This levy is a tax on Victorian jobs.
It isn't just aimed at large businesses but also the medium-sized ones that are the backbone of regional Victoria.
Those that almost went to the wall during the prolonged Covid lockdowns in Victoria. It's also the businesses that kept the lights on during the pandemic and managed to keep food on the table.
While we welcome the Victorian Treasurer's decision to reduce payroll tax on small businesses, payroll tax still kicks in today at the lowest threshold for those businesses.
The best way to pay down debt and fund critical services is to control government spending and ensure your taxes are spent delivering better services more effectively.
We are sending a terrible signal to companies, small and large, that Victoria is a more difficult place to do business.
Professor Jennifer Westacott AO is the chief executive of the Business Council of Australia