Reform taxes for growth, say experts

TASMANIA could be better off to the tune of hundreds of millions of dollars if it embarks upon wide-ranging tax reform, which would also boost private investment, economist Saul Eslake says.

With other states agitating for changes to federal finances, Mr Eslake said Tasmania risked being left behind if it failed to implement changes to property and employment taxes.

His comments come as independent MP Madeleine Ogilvie calls for community discussions around tax reform to ensure Tasmania “isn’t rolled” by the bigger states.

Ms Ogilvie said calls by New South Wales for changes to CommonwealthState funding systems should ring alarm bells in Tasmania.

“With the release of the

NSW Review of Federal Financial Relations, we need to be at the table arguing for Tasmania’s fair share,” Ms Ogilvie said.

“The report highlights a range of potential reforms across GST, land tax, payroll tax, stamp duty, insurance taxes and road funding.”

Mr Eslake has long called for changes to payroll tax in Tasmania, which he said would help entice large companies to the state, leading to greater employment.

Tasmania has the highest rate of payroll tax of any jurisdiction except the ACT and the third-highest threshold, which exempts most businesses from paying the tax.

“The preferential treatment of small business does absolutely nothing to generate more jobs,” Mr Eslake said. “Fifty-five per cent of the increase in private sector employment in Tasmania over the past five years has been at businesses who do pay payroll tax.”

The Grattan Institute has estimated such a change nationally would ultimately boost gross domestic product by $9 billion annually and Mr Eslake said Tasmania’s share of that could be $100-200 million.

“There is potentially a problem for Tasmania if the big states do go down this path and we don’t, because it might adversely affect our share of GST revenues,” Mr Eslake said.

University of Tasmania professor and tax expert Richard Eccleston, whose analysis of the benefits of a broadbased land tax to replace stamp duty informed the NSW review, agreed that the costs of the COVID response and recovery meant Tasmania could “no longer afford to ignore comprehensive tax reform”.