Business warns of exodus if next week’s Victorian budget imposes more taxes

Business leaders are warning the Victorian government ahead of its budget on Tuesday that if they do not get the balance right, companies will leave the state, taking jobs with them.

Victorian Treasurer Tim Pallas. Picture: NCA NewsWire / Luis Enrique Ascui

Business leaders are warning the Victorian government ahead of its budget on Tuesday that if they do not get the balance right, companies will leave the state, taking jobs with them.

As the property sector also warns of a recent downturn in housing investment in Victoria as a result of increased taxes and charges, Treasurer Tim Pallas has said it is “not our intention to increase the burden either on developers or on business” in what will be his 10th state budget.

In recent years, the state government has introduced payroll tax levies on businesses to help fund mental health services and repay $31.5bn in Covid debt, as well as increasing a range of land and property taxes and WorkCover premiums – with the Australian Bureau of Statistics in April confirming Victoria as the highest taxing state in the nation, raking in $5795 per capita in state taxes in 2022-23.

With Victoria’s net debt headed for $177.8bn by 2026-27, Victorian Chamber of Commerce and Industry chief Paul Guerra said next week’s budget was “critical” for the state.

“It needs to thread the needle of restoring business confidence, managing debt and providing the stimulus for business growth,” Mr Guerra said. “That means no increases in taxes, an increase in stimulus around innovation, certainty on energy rollout, and a clear fiscal strategy that demonstrates a path to debt reduction.”

Victorian Chamber of Commerce chief executive Paul Guerra. Picture: Mark Wilson

Mr Guerra said last year’s tax increases as a result of the Covid debt levy had been a “bridge too far” for many businesses.

“It meant that businesses started to look elsewhere to locate staff in what will be a clear preparation for moving the business entirely out of the state,” he said, adding that there was “no question” businesses would depart if next week’s budget failed to get the balance right.

“If business is hit through this budget, it will be the last straw for many businesses, and they will not just think about leaving the state, they will leave the state.”

Housing Industry Association senior economist Tom Devitt said despite housing investment nation­wide being “relatively strong”, recent months in Victoria had seen a slowing.

“Investor activity in Victoria has started to retreat. Additional costs and taxes imposed by the government certainly aren’t helping. The overwhelming trend is that the more costs and taxes you add to home building, the less of it you’re going to get,” he said.

Victorian Premier Jacinta Allan. Picture: NCA Newswire / David Geraghty

Property Council Victorian executive director Cath Evans said the housing affordability and supply crisis gripping the state was being exacerbated by an extremely challenging investment environment, “compounded by an uncompetitive and complex tax and regulatory regime”.

“Increased property taxes or more of the same in next week’s budget … means investment dollars will be making – and very literally building – a home some­where else,” she said.

Mr Pallas said he intended to show Victorians next week “that we’re not going to impose on them or on families inordinate burdens as a consequence of us getting our balance sheet in order”.

“I can give you an assurance that it’s not our intention to increase the burden on developers or business in the context of this budget,” he said, promising an ongoing “dialogue with business” amid calls for stamp duty reform.

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