Vic budget: Are the new taxes affecting the most vulnerable groups?

Dr Venkat Narayanan, Senior Lecturer in Accounting 

Topics: Victorian Budget, payroll tax, land tax, cost-of-living, businesses.  

“At a time when most vulnerable people are facing a cost-of-living crisis, increasing taxes in areas where it has a direct or indirect impact on low-to-medium earners is not appropriate.  

“There are many opportunities, using tax, to repay state debt without impacting the most vulnerable. 

“To some extent it does make sense to tax owners of properties as they are not the most vulnerable group.  

“However, the increase in land tax will drive up rents, eventually affecting low-income earners. 

“Targeting taxes at properties above a certain value may be an option. For instance, properties over $1.5 million are unlikely to be let out to lower-income earners. Therefore, those groups could cope without having to pass on the cost to their renters or, even if they do this increase, it may be more easily absorbed by renters. 

“In regard to big businesses being hit by the new payroll tax. Although the increase in tax is justified as only affecting 5% of businesses, these large businesses employ large parts of the working population. 

“There is a possibility that increases in payroll tax may reduce employment opportunities, although unlikely. 

“The reduction in payroll tax for small businesses is a welcome move and has the potential to make payroll tax compliance for smaller businesses fairer. 

“Additionally, it should further improve their ability to employ more people. However, there are risks that it may only increase casual employment, instead of permanent ones – which is a whole other employment issue. 

“However, if following the taxation general principles, new taxes or increased taxes can work, even in the current inflated environment.  

“These principles are equity, simplicity and administrative effectiveness.  

“In other words, if new or increased taxes do not directly or indirectly place the burden of repaying state debt (which, arguably, is due to poor government decisions during the pandemic years) on the most vulnerable people in our community, they can work. 

“Unfortunately, the Victorian government’s motivations are now looking to get a surplus, rather than looking at what would be economically responsible that would benefit long-term."  

Dr Venkat Narayanan is a Senior Lecturer at RMIT’s School of Accounting, Information Systems, and Supply Chain. His research relates to social and environmental accounting, management accounting, Australian taxation law and policy, accounting education, and more.