Doing What Matters-Budget 2023

Private Schools, Property Investors and Big Businesses to pay more to repay state’s Covid debt

When Victorian treasurer Tim Pallas delivered Budget 2023 yesterday, many conservative commentators including Melbourne’s most listened to 3AW radio host Neil Mitchell (today) labeled it as ‘anti-business’ which will drive businesses out of Victoria.

“Close the borders” he shouted opening his program this morning, in an attempt to ‘arrest’ (stop) those big businesses rushing to leave Victoria to move interstate, apparently to avoid paying the tax increases and levies to be introduced in Victoria, announced in this budget.

With a specifically calibrated and targeted plan to repay the COVID debt, the Andrews government announced some very small measures (Covid debt levy of 0.5% and 1.0%) to raise money from big businesses. These charges apply to businesses paying more than $10 million and more than $100 million in wages nationally.

The point missed by many commentators is that the levy applies to Victorian employees of businesses with interstate arms already in place.

The other group who will be paying more in taxes is 860,000 (figure by the treasurer) who own a second property, other than their home of their residence.

From January 2024, property investors with landholdings worth $50,000-$100,000 will pay a fee of $500, those with landholdings worth between $100,000 and $300,000 will pay a $975 fee and those with landholdings worth over $300,000 will pay a $975 fee plus 0.1% of the total land value.

Yes, it is painful but there is hardly any other way to raise revenue.

In the budget 2023, the government has announced it is also cutting down on public service and between 3,000 and 4,000 public servants stand to lose their jobs.

The treasurer, Tim Pallas, called it his “most difficult” budget, which details a “Covid debt repayment plan” to bring the state’s borrowings under control which are set to climb up to $171.4bn by 2026/27.

About 110 high fee private schools are set to lose their payroll tax exemptions which will deliver an additional $422.2m in government revenue.

“We’re ensuring that while our kids will of course have memories of the trauma that was the Covid years, they won’t necessarily be paying for that trauma for the rest of their lives,” Pallas told reporters.

Pallas said the “Covid debt” levies were “temporary, targeted and responsible” and structured to target “those with an ability to pay”.

The two measures, which will be in place for a decade, are expected to raise $8.6bn over the next four years.

The government’s rationale to target big business and property owners is that big businesses profits were up 24% over the past three years, and landlords gained in land values increase by 84% in the past decade. Rents also rose by 25% over five years.

The levy paid by overseas property investors will double to 4%.

Betting taxes will also increase from 10% to 15% bringing them in line with those of New South Wales.

The cuts to public service (of between 3,000 to 4,000) are explained as bringing the size of public service to “pre-pandemic levels”.

Treasurer Tim Pallas maintains the cuts to the public sector will not impact frontline workers such as nurses, teachers and emergency service personnel.

The Andrews government has titled the budget “Doing What Matters”. The used the same slogan during its November election campaign. And using that very narrative, Treasurer Pallas said the budget “funds every commitment made”. This includes $4.9bn for health and hospital upgrades, $2.1bn for new and upgraded schools and an initial $1bn to establish the State Electricity Commission.

The opposition leader, John Pesutto, on Tuesday said: “This budget shows that under Labor, Victoria is broke, life is getting harder and Victorians are being punished for the government’s incompetence”.

Sounding like reading from the same sheet as Neil Mitchell who said prices, rents and taxes will all increase in Victoria as a result of this budget, John Pesutto said it would be a mistake to paint the Andrews government’s ninth budget as only going after the top end of town to repay the state’s record debt levels.

John Pesutto and the opposition also seem to be fixated on costs blowouts in Victoria’s Big Build programs. It is, to be fair to them, not wrong to argue against the costs blowouts but one should also find ways to keep those BIG Build projects and costs under control.

When ABC’s Patricia Karvelas on Radio National asked John Pesutto what he would do differently in budget 2023 if the Liberals were in government in Victoria, he said:

If I’d been premier, we wouldn’t be in this position [in terms of debt]. I’ve always strongly believed that you need oversight of program delivery and also infrastructure projects. A lesson to governments around the country [from Victoria is] get control of your infrastructure portfolio because there are no cost control [here].”

 Our auditor general in Victoria, an independent officer of the Victorian Parliament, has identified at least $30 billion in project blowouts. That is 30 to 40 per cent of the revenue we raise in any one year in Victoria at the moment. So it’s a huge gaping hole in the Victorian budget. So you’ve got to get proper oversight of those infrastructure programs.

 Talking later to Neil Mitchell of 3AW John Pesutto said the government should focus on “growth and investment” and not new taxes.

“It’s through growth that you get revenue without having to jack up taxes,” he said.

“The difference between us and Labor is Labor’s about tax. We’re about investment.”

It will be interesting to see what his alternative plan is – to be outlined in his budget 2023 reply speech.

Stay tuned.

-inputs by Dinesh Malhotra

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