Economists believe there is no need to adopt similar plans to those adopted by US president Barack Obama last week, who implemented a $US400 billion jobs plan to bring the country’s unemployment rate down from 9.1%.
However, accountants have pushed for similar cuts to payroll tax, and are expected to make their case to the Government next month at the Tax Summit in Canberra.
As part of CPA Australia’s submission to the Government in preparation for the Tax Forum, the organisation has called for reform to both payroll tax and GST. Obama’s plan extended payroll tax cuts for businesses in order to get SMEs hiring again.
“In some of our modelling that we’ve done, we’ve actually shaved a bit off payroll tax in a number of scenarios,” spokesman Paul Drum says.
Yasser El-Ansary, tax counsel at the Institute of Chartered Accountants, says in terms of payroll tax cuts proposals, “clearly there are some parallels we could draw between the US and Australia in this particular area”.
“In the same way that the US is trying to stimulate employment growth by giving employers added incentive to recruit new resources or at least attain the human capital they have on board, precisely the same sort of initiative could be considered as part of a renewed focus on employment growth.”
El-Ansary says there is scope to consider even a temporary cut, which is the same approach taken by the US Government, and says the introduction of a new Jobs Summit to take place after the Tax Summit in October provides ample room for discussing such types of benefits.
“Most definitely. There are precedents here in Australia for introducing a temporary incentive of that order, most typically though, the type of temporary incentive we’ve adopted or favoured adopting is the investment allowance type policy.”
“That really has some similar attributes to an economic viewpoint, but it’s not specifically targeted at employment growth.”
While El-Ansary says the payroll tax issue is a state-based one, the Federal Government could help host discussions at COAG meetings.
“It would need to be part of a suite of reforms that provide incentive to retain and acquire new resources, but it also needs to be considered in the context of other reforms that help businesses manage the structural shift of the economy.”
However, economists say other aspects of the US job plan wouldn’t translate to Australia, as we simply don’t need them.
“The circumstances regarding the Australian economy as far as being similar to the US are completely worlds apart,” says Westpac senior economist Matthew Hassan. “I think we’re seeing an increasingly desperate situation over there.”
“I also think people calling for payroll taxes are talking about more structural tax reform aimed at incentivising particular behaviours, that’s the historical way tax has been approached.”
AMP economist Shane Oliver says while there may be scope to introduce infrastructure spending if the economy deteriorates, he points out the Government may respond by saying infrastructure had been a key part of the budget during the financial crisis.
“I think that’s certainly something that can be looked at if our economy is deteriorating, but at this stage they may say we already did quite a bit of infrastructure spending.”
“So I think there are things that can be done, but by and large we are looking at two very different situations.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
