A little over four years ago, I moved from working for large private and public sector organisations to starting our own businesses. It has been a very enjoyable transition and one that has had many challenges, learning’s and successes.
Part of this transition has been coming to grips with the different taxes, regulations and bureaucracy that exists for small business owners. It was an area that was completely foreign to me working in corporate life and I have struggled with the logic of state governments making it hard for small business to actually get on with the business of business.
There are many taxes I could examine the logic behind in blogs as they don’t seem to have any rhyme or rationale behind them. However, this blog focuses on payroll tax which I think takes the cake in driving the wrong behaviours of business owners generally.
Let’s work through payroll tax as a concept. You are a small business owner who is looking to grow a successful business, spend money in the state and city you live in, and ideally employ people locally. You grow your business, employ many people and spend money creating jobs, prosperity for other service providers and also for the community you are part of.
Somewhere down the track you hit a payroll cost threshold at a level where you are spending hundreds of thousands of dollars annually on employing people. The government decides that once you hit this threshold amount, you need to pay a tax on employing more people! What an amazing concept! Not only that, it defies belief and gets you thinking around why you would do it.
Personally, I can say it has driven our business to outsource, contract out and offshore activities that realistically we could have perhaps employed more people locally. We have chosen to remain small with constraints partly due to initiatives like payroll tax and other taxes that generate more record keeping to employ and retain people. This should not be the case for us and other business owners I know who have followed similar paths.
For a city to thrive, you have to have an legislative and taxation environment where business will thrive. Further, you need a Government in place that understands business, promotes and rewards small business to flourish, grow and prosper. My hat will go off to the first state government who weans themselves from the payroll tax suckle and by removing rather than lowering the threshold it unshackles business owners to grow even more successful businesses.
It will be a game changer for them, their state and their businesses. Take the lead of other jurisdictions who have taxation regimes where less is more.