If governments were serious about job creation, they would abandon the counterproductive payroll tax and instead introduce a tax on technology that eliminates jobs, it has been claimed.
Commenting on a story about businesses copping payroll tax audits, a My Business reader complained that the “outdated tax” should have been scrapped long ago, and instead proposed a new tax that would actually work to boost — rather than restrict — job creation.
“If anything, employers should be incentivised to provide jobs: perhaps implement a technology tax on companies replacing people with technology?” the reader suggested.
Payroll tax collectively generates a staggering $23.7 billion in revenue for the states and territories each year, and comprises up to 11 per cent of total tax revenues for those governments, according to The Tax Institute.
In June, the NSW government announced an increase in the payroll tax threshold in a staged increase over four years, claiming that some 40,000 businesses would enjoy a tax cut and around 5,000 businesses would be freed from the burden of paying the tax altogether.
At the time, the NSW Business Chamber said that while any tax relief was welcome for employers, payroll tax is ultimately a tax on job creation and therefore is not in the best interests of the economy, regardless of rates or thresholds.
“Being penalised for creating new jobs is just ridiculous,” its chief executive Stephen Cartwright said.
Technology tax receives lukewarm response
Regarding the idea of a technology tax, senior figures in the business and tax communities pointed to a number of potentially unintended impacts.
Professor Robert Deutsch, senior tax counsel at The Tax Institute, said that while the idea may come from a noble thought, it presents something of a logistical nightmare to implement and adhere to.
“A technology tax, while sounding quite good in theory... it's hard to know exactly how that would be defined in practice,” he told My Business.
“You’re talking about companies that use technology to replace existing jobs. How that would be defined and enforced is an interesting question.
“The extent to which that technology is used in a way to render a number of people or some people redundant is difficult to pin down… so practically it is difficult to make that a workable idea.”
Professor Deutsch also said that under current thresholds, only medium and large businesses are required to pay the tax, and that implementing a blanket tax on technology use would penalise small businesses.
Meanwhile, COSBOA chief Peter Strong suggested a technology tax “actually punishes innovation”, adding that it would not necessarily impact employment growth because it would lose jobs where others were saved.
“I don’t think it would help create jobs, probably the opposite,” Mr Strong told My Business.
“Even if jobs disappear, the technology may open up areas where jobs can be created.”
Such a tax, he argued, would do little if anything to dissuade businesses from seeking technology options to cut operating costs.
“The technology tax would have to be very high if it was to impact on businesses using automation or streamlined software processes.”
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