Victoria has been ranked as the highest-taxing state with the largest public sector and most red tape, making it one of the hardest places in the country to do business, a damning new report finds.

More than half the national businesses polled said Victoria was the hardest state to do business in. Four out of five said they had difficulty accessing the labour and skills they needed and only 7per cent said the Andrews government was doing a good job of reducing the cost of doing business.