Nsw Follows Victoria's Lead
The Age
Wednesday June 4, 2008
THE NSW Government has followed Victoria's lead by cutting payroll taxes in a bid to wrest business investment away from other states.
As part of a $47.6 billion state budget announced yesterday, the NSW Government said it would be the first state to index the threshold at which payroll tax kicks in. The threshold will rise from $600,000 to $623,000 in July and then increase annually in line with Sydney inflation.The Iemma Government also promised to gradually reduce the payroll tax rate from 6% to 5.5% by 2011, but this will still leave it higher than the 4.95% rate announced by the Victorian Government in last month's budget. Together with cuts to stamp duty taxes, the measure will cost the NSW budget $2.2 billion over four years.NSW Premier Morris Iemma said the payroll tax changes, which will offer relief to an estimated 28,000 businesses, would mean NSW could better compete with the other states for jobs and investment.Chris James, of the Victorian Employers Chamber of Commerce and Industry, warned that "while NSW still lags Victoria in business tax competitiveness, this is a sign that . . . NSW is trying to get its act together and we have to be vigilant and keep striving to be tax competitive".The NSW budget also offered what Mr Iemma billed the "biggest infrastructure investment in the state's history" - a $57.6 billion, four-year program that will increase the state's net debt by $20.9 billion by 2011-12. But while the Government pleased the business community with its tax cuts and infrastructure investment, it angered the unions by pledging to keep a lid on public sector wage rises. The repeated interest rate rises of the past year and slower global economic conditions are expected to slow the NSW economy, with growth predicted to drop from 2.5% this year to 2% in 2008-09. State final demand - which measures consumer, business and public sector spending - will slow even more dramatically from 4.5% to 2.5%.
© 2008 The Age