Former Victorian Liberal MP Neil Angus has criticised the Labor government for introducing a new round of taxes targeting large businesses and landowners in the 2023-2024 state budget to repay COVID-19 debts.
The new taxes are part of the measures introduced by the Victorian Labor government to address the $31.5 billion (US$20.9 billion) debt incurred during the COVID-19 pandemic.
The massive debt was the result of Labor’s pandemic policies, which plunged the capital city of Melbourne into the world’s longest lockdown and devastated local businesses.
Despite Victorian Treasurer Tim Pallas saying the government’s COVID debt repayment plan would be a “responsible” one, large businesses and landowners appear to be the biggest losers under the tax reforms.
Angus said the new budget was a typical Labor budget, with record levels of taxation and spending.
“It is a disaster for Victorian businesses … It provides no incentive for businesses to stay or start-up in Victoria. Why would a company set up in the highest taxing environment?“ he told The Epoch Times.
“After years of reckless spending and budget blowouts on infrastructure projects, the government appears to have only now realised that its debt has to be repaid.”
Details of Victorian Government’s COVID Debt Repayment Plan
At the heart of the plan is a COVID deb levy on large businesses and landowners, which will last until 2033.
The treasure believed it was a fair move, citing a 24 percent increase in business profit in the past three years and an 84 percent increase in land values in the past ten years.
“We know some did better out of the pandemic than others. And it’s only fair that those that did well contribute to the repayment effort,” Pallas said in his budget speech.
Under the plan, enterprises with national payrolls above $10 million a year will have to pay additional payroll tax from July 1.
The tax rates would be 0.5 percent for businesses with national payrolls above $10 million and one percent for those with payrolls above $100 million.
People dine in a cafe in Melbourne's central business district in Melbourne, Australia, on May 11, 2021. (William West/AFP via Getty Images)
At the same time, the Victorian government will lower the tax-free threshold for general land tax rates from $300,000 to $50,000 from July 1, 2024.
An additional fixed charge starting at $500 will be imposed on landholdings between $50,000 and $100,000, while landholdings above $100,000 will attract a $975 fixed charge.
Furthermore, general and trust taxpayers with holdings above $300 000 and $250 000 will need to pay an additional 0.1 percent tax.
However, family homes will be exempted from this land tax scheme.
The Victorian government hoped to raise $8.6 billion with the debt levy over four years to offset the COVID debts.
Apart from the debt levy, the state government planned to “restore the public service back towards pre-pandemic levels” by slashing 3,000-4,000 jobs and cutting down on consultants and labour hire, which was expected to bring about $3.6 billion in savings.
It would also use the returns from the Victorian Future Fund to pay off part of the debts in the next ten years.
The fund was established in the 2022-2023 budget using proceeds from privatising Vicroads, an agency responsible for driver licensing and vehicle registration in the state.
With the new measures in hand, the Victorian government forecasted that the budget would achieve a $1.2 billion surplus by 2026-2027.
However, the government’s net debt was expected to balloon to $171.4 billion by 2026-2027, up from $116.7 billion in 2022-2023.
Economists Weigh in on the Budget
Gene Tunny, the director of the economic consulting firm Adept Economics, said that while Victoria could attain a surplus by 2026-2027 if the budget were disciplined, the state government’s performance in recent years probably did not give Victorians much confidence in that regard.
“Also, it’s extremely difficult forecasting a few years out, given all the things that can change, such as the expected state of the economy, public sector wages growth, et cetera,” he told The Epoch Times.
The upper house of the Victorian state parliament in Melbourne, Australia, is seen on April 23, 2020. (Darrian Traynor/Getty Images)
Robert Carling, an economist at the Centre for Independent Studies, also remained sceptical about whether the Victorian government could reach its surplus goal, saying a lot could go wrong to derail the plan.
“They are relying on slowing the growth of operating expenses from what has been six, seven or eight percent a year since about 2014 to an average of less than one percent in the next three years,” he told The Epoch Times.
“They should be able to do it given all the over-spending that’s happening, but I don’t know whether they have the willpower and consistency over a period of time to achieve it.”
Regarding the tax increases, Carling said it had a detrimental impact on the local business environment.
“Victoria has become the highest taxing state as well as the most heavily indebted state, and this is not conducive to the business investment and economic growth the state needs,” he said.
“These tax increases will deter business investment and employment. They are relying more on tax hikes than on expenditure cuts, and I would say that is not a sustainable mix.
“Governments can’t just keep coming up with new levies whenever they think they need more money.”
Alfred Bui is an Australian reporter based in Melbourne and focuses on local and business news. He is a former small business owner and has two master’s degrees in business and business law. Contact him at [email protected].
