Tax Reform Key to Sustainable and Resilient Regional Communities

“PVW Partners believes government policy should be about enabling small to medium enterprise to succeed.”

Author: Carl Valentine

I was recently asked by Townsville Enterprise to outline tax measures which could to be considered by the Federal and State Government to assist North and West Queensland in its recovery, resilience and sustainability efforts. This is both in specific response to the February 2019 flood disaster events and more generally as the broader region recovers from a sustained period of depressed economic activity.

In order to retain and grow sustainable regional populations, I believe regional economies need:

• Enabling infrastructure and catalytic projects;
• Aligned government (local, state and federal) policies to facilitate the above; and
• Progressive and regionally relevant policy settings to enable the private sector to invest in and grow local economies for job creation.

There is no doubt that taxation policy can play an important role, with two key current and relevant examples of this.

Regional and Remote Area Tax Concessions and Payments

The recently passed legislation to provide $1,080 in tax relief via the low- and middle-income tax offset for many taxpaying Australians benefits not only those taxpayers, but also their families, the communities in which they live and our economy as a whole. Both our Prime Minister and Treasurer have reflected recently on the positive economic stimulus provided by letting Australians keep more of what they earn. Appropriate reductions in taxes increases the consumption power of taxpaying Australians and this provides grass roots economic stimulus.

Increasing the level of regional and remote area tax concessions provides an opportunity to double down in regional Australia on the economic stimulus provided thus far by the changes to the low- and middle-income tax offset. The positively magnified and multiplied effect in our regional economics would facilitate not only recovery efforts (e.g., in the flood impacted areas of Northern and Western Queensland and also the drough areas throughout Queensland, New South Wales and into Victoria), but also helps build resilience and sustainability throughout regional Australia.

PVW Partners argues that the Productivity Commission’s study of Regional and Remote Area Tax Concessions and Payments provides a real opportunity for changes to the current system to promote:

• The development of Regional Australia;
• Grass roots economic stimulus;
• Growth for sustainable communities, thereby easing the pressure on capital cities;
• The public service decentralisation agenda of all sides of politics; and
• A new wave of decentralisation for our larger corporate groups.

With the right reform, the Remote Area Tax Concessions and Payments policy has a strong role to play in economic decision making for individual and their families. That can include where to live, levels of education, jobs, business and economic investment in a particular region. Enabling our regions to attract, grow and retain population is a key to the future economic success of the many communities across Regional Australia.

PVW Partners also advocates for a change in the current Remote Area Tax Concessions and Payments policy in Australia to incorporate businesses as well as individuals. For regional centres like Mackay, Townsville and Cairns to remain competitive and attractive places to do business, more needs to be done in the form of enabling policies.

We consider the core potential benefits from meaningful reform to the Remote Area Tax Concessions and Payments to be as follows:

• A geographically spread national population would allow for the pressures to be taken off capital cities in areas such as transport, housing, hospitals, schools and other infrastructure. This would allow for the creation of sustainable communities across Regional Australia, including Northern Australia.
• Investment in the regions provides a higher rate of return than further investment in the capital cities which sees diminished returns on investment.
• Supports the Federal Government agenda to decentralise Government Departments and move portions of them to rural and remote regions of Australia (with a similar impetus created for Australia’s larger corporates to decentralise their activities).
• Tool to encourage migration, thereby creating business, economic and jobs growth across rural and regional Australia.
• Grass root economic stimulus means more cash in the hands of taxpayers in regional cities to spend in their local economies.

As a base case, it seems equitable that the Zone Tax Offset at least be indexed in line with inflation (with varying views from past submissions to Treasury as to whether that indexation should start from 1945, 1993 or some other date).

Regional payroll tax reform

In addition to the Coalition Government’s policy of objective of lower personal taxes in Australia, the Coalition also has a policy objective of boosting regional employment. We consider that regional payroll tax reform has the potential to play a key role in helping the Coalition boost regional employment – and to of course help regional economies recover, become more resilient and sustainable.

PVW Partners argues that payroll tax by its very nature is an obtrusive tax which hinders the growth potential of tens of thousands of businesses across Regional Australia it sends a very clear and succinct message to employers that if they hire additional employees, they will quite literally pay the price.

We acknowledge that payroll tax is a State based tax and thus under the jurisdiction of our States and Territories and their Treasurers. We do consider, however, that the Federal Government can facilitate regional payroll tax reform through either directly or indirectly influencing state and territory policies.

When it comes to Queensland specifically, but also recognising that Victoria has taken the lead on regional payroll tax reform, PVW Partners believes that regionally focussed payroll tax reform provides a real opportunity to promote:

• The development of Regional Queensland;
• Growth of sustainable regional communities, thereby easing the pressure on an increasingly urbanised South Eastern Queensland;
• Resilient, sustainable and growth focussed regional businesses;
• Recognition of the challenges of doing business in regional Queensland, including due to the impacts of natural disasters (drought, flood, fire and cyclones) and the resultant increased cost pressures in the wake of those disasters; and
• Awareness and recognition of both a Federal Government and Queensland Government that is truly committed to growing Regional Queensland.

There is potential for the Federal Government to facilitate regional payroll tax reform through either directly or indirectly influencing state and territory policies via, for example:

• incentivising continued regionally relevant payroll tax reform via amendments to the GST distribution formula to reward those states and territories that implement such policies (with the very real potential for additional Federal income tax collections from greater levels of employment and stronger business profitability – each dollar of deductible payroll tax paid comes at up to a 30.0% income tax cost to the Federal Government); and 

• negotiated outcomes to redirect other federally funded programs in return for meaningful regional payroll tax reform.

With a purpose of Regional Australians Growing Regional Australia, PVW Partners believes government policy should be about enabling small to medium enterprise to succeed; thereby allowing them to employ more people, put more resourcing back into local communities and ensuring our regional economies are the engine room powering our national economy.

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