Choke hold: The 33 taxes, levies and duties Victorians are paying that have us at tipping point

Victorian businesses, property owners and the opposition have issued a plea for tax relief on the eve of the state budget, warning the cumulative effect of nearly three dozen state-based taxes is choking economic growth and blocking Victoria’s path out of debt.

A previously unpublished Parliamentary Budget Office paper shows there are 33 state-based taxes, levies and duties on Victoria’s books, including 18 separate but overlapping imposts on property ownership, investment and transactions.

Treasurer Jaclyn Symes hands down her first budget on Tuesday. Credit: Eamon Gallagher

The growing burden has left Melbourne’s depleted manufacturing sector saying they are struggling to absorb recent land tax hikes, and retailers bracing for the future impact of a proposed expansion of Melbourne’s congestion levy which will next year add $4.5 million to the annual running costs of a popular Richmond shopping centre.

Victorian Chamber of Commerce and Industry chief executive Paul Guerra said Victoria’s still rising debt and the government’s decision to resort to higher taxes to balance its books had created a crisis of confidence that was deterring private investment.

“Victoria has a confidence issue – confidence of people within the state and confidence of investors wanting to invest in the state,” Guerra said. “That is driven by two things; the debt and uncertainty over how that debt is going to be dealt with.

“Our view is that you can’t tax your way to growth, you need to inspire and facilitate business to grow. That is the only way out of this. Business needs certainty, and investment needs stability.”

Catten Industries owners Latinka and Ian Cubbitt say tax hikes on their Bayswater factory have made it more difficult to compete with overseas suppliers.Credit: Eddie JIm

The Property Council of Australia has lobbied the government to reconsider previously announced congestion tax changes which would increase the rate levied on city car park owners and add Richmond, South Yarra and much of Prahran to the collection area.

The council’s Victorian executive director Cath Evans said a proposed 73 per cent increase in the levy would be borne by consumers. “The levy is an ineffective tool for reducing congestions which ultimately punishes asset owners, discourages investment and increases costs for Victorian businesses and consumers,” she said.

In contrast to Sydney’s congestion tax, retailers are not exempt from the Victorian levy. Vicinity Centres, which manages Victoria Gardens, a Richmond shopping centre which houses one of Melbourne’s two Ikea stores, on Monday wrote to tenants informing them that the proposed change would add $4.5 million to the annual running costs of the centre.

“This could have flow-on effects for parking fees, operations, outgoings, and ultimately, customers – at a time when affordability is already under pressure,” Vicinity manager John Nadalin wrote.

“We are deeply aware that this is a regressive tax that will hurt all retailers and the wider community and is counterproductive when we are trying to support our retailers and small businesses post-COVID.”

Honi Walker, the chief executive of the South East Melbourne Manufacturers Alliance which represents about 235 manufacturing businesses, said land tax increases announced as part of the government’s plan to repay debt incurred during the pandemic had hit her members hard.

According to figures compiled by the alliance, the family-owned Catten Industries, a husband and wife-run sheet metal manufacturer which employs 40 people, had seen its land tax bill increase by almost 230 per cent from $13,500 in 2023 to $31,000 this year.

Owner Ian Cubbitt said the increase was due to the appraised value of his Bayswater factory and the land beneath it. “It sounds like we are crying poor, but you have to find this money from somewhere, and it affects our ability to invest in equipment or people and skills and the things we need,” he said.

One of the business’s largest contracts is to supply sheet metal parts to make 100 next-generation trams for the Victorian government. “We are finding it difficult to compete against overseas suppliers,” Cubbitt said. “If the cost to produce here keeps going up, it makes it really difficult for them to look locally to buy.”

Treasurer Jaclyn Symes on Monday said there would be no new taxes in her first budget and no tax increases beyond those already forecast to rise. She claimed a previously announced, 12-month extension of a stamp duty exemption for off-the-plan purchases of apartments and townhouses was a tax cut and said the budget would contain measures to reduce the cost of regulatory compliance to business.

“There is nothing in the budget that changes the tax settings,” Symes said. “That is what business has told me is important – no new taxes and making things easier to do business in the state of Victoria. That is what you will see.”

Symes said the budget would reflect initial savings identified by former Department of Premier and Cabinet secretary Helen Silver in her interim report into the size and efficiency of the Victorian Public Service. Silver’s final report will be handed in after the budget.

Shadow treasurer James Newbury says state-based taxes have started to cannibalise economic outcomes.Credit: Justin McManus

Shadow treasurer James Newbury said while Victoria had a more narrow tax base than other states with large resource industries, its punitive tax regime was “choking” parts of the economy.

“Victorians think we are paying too much tax, and we pay more tax than anywhere else,” said Newbury, who commissioned the Parliamentary Budget Office study of Victoria’s state-based taxes. “The government’s need for more revenue is cannibalising economic outcomes.”

Newbury said that his budget reply speech, to be delivered next week, would start mapping out the opposition’s plans to rebalance Victoria’s tax take. “When it comes to tax, we need to talk about not only what we think is wrong but start offering solutions to fix it.”

Symes (in burgundy jacket) on Monday descended into budget week.Credit: Justin McManus

Guerra said that Victoria’s over-reliance on business and property taxes meant the entire tax system needed to be reviewed. “Depending on who you listen to we may or may not be performing better than other states but who cares?” he said. “There is investment wanting to come into Victoria that won’t while the tax regime is where it is at and the debt situation remains unaddressed.”

This financial year’s total tax take is expected to top $39 billion. Of this, $18.2 billion is forecast to be generated from property taxes. The state’s tax take is about 6 per cent of gross state product – above all other states.

Charter Keck Cramer researcher Richard Temlett said that since it was first elected, the Victorian government had imposed 29 new or increased taxes on the property sector, making it Australia’s most heavily taxed property market.

“I am constantly hearing from investors that they are attracted to Victoria but are not investing because of the higher taxes and charges and now the greater levels of sovereign risk when compared to other states and territories,” he wrote on LinkedIn.

“Many of the tax policies and changes implemented by the state government to date have been reactive and regressive. They appear to be based on the assumption that property prices will keep rising and that developers and investors can afford these taxes.”

Credit: Matt Golding

The budget will forecast a skinny, $600 million operating surplus for 2025-26 – about $1 billion less that forecast six months ago – and healthier operating surpluses for the forward estimates but confirm that Victoria’s overall fiscal position will remain in deficit due to the size and cost of the government’s major infrastructure projects.

Net debt is forecast to top $155 billion by July 1, according to the most recent budget update. The Treasury Corporation of Victoria, the independent agency which manages the state’s debt, last month reported $200 billion in total borrowings. This covers the combined debt of Victoria’s government sector, public non-financial corporations and public finance corporations.

Ratings Agency S&P Global Ratings said while Victoria’s budget position remained weak, it expected to see small operating surpluses forecast in the budget papers and for debt to rise at a slower rate than in recent years. S&P Global analyst Rebecca Hrvatin said fiscal discipline would be key to maintaining the state’s AA credit rating.

“What we will be looking for in the next budget is the state’s commitment to controlling operating costs and stabilising debt levels,” she said. S&P Global in its most recent ratings report on Victoria noted the state’s economy was wealthy, well-diversified and fundamentally sound.

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