Accounting giant PricewaterhouseCoopers (PwC) has released a payroll tax report that stated a preference for a nationwide standard when it comes to payroll tax.
The report highlighted 3 potential opportunities for review that federal legislators could adopt that could help to make payroll tax easier to understand, making it easier for businesses to manage administration. Of the 3 options, PwC believes that creating a national standard is the best choice.
Jeremy Thorpe, chief economist at PwC, stated that it is now time to “bring the journey to a conclusion” after a 13 year “harmonization process”.
The report from PwC found benefits in standardising definitions and liability, and streamlining payroll tax collection. This would help to “greatly reduce” complicated related labour costs and other administrative costs.
According to Jeremy Thorpe, the approach had the potential to make “significant savings” for businesses. Instead of having to comply with revenue offices from different states, they would instead only have to comply with a single, national tax office.
Mr Thorpe added that there would be some room for autonomy for territories and states regarding how tax rates are applied.
Another option that could be taken further is replacing payroll tax with an expanded GST. This is after a previous report that by taxing goods or services previously exempt, or raising the GST to 12.5%, an additional $25 billion revenue could be generated. Such a change would effectively mean a like for like replacement of payroll receipts, and this would have to make things more efficient for many businesses. The impact of introducing the change is something that makes it unlikely to be pursued, however.
A third option is to broaden the base of payroll tax and reduce the rate, and this could help to improve wage equity and allow for gains in efficiency. This could help to overcome inefficiencies believed to be present in the taxation system as it is.
There are issues with this option that also make it unlikely, however, according to Jeremy Thorpe. Broadening the base of the tax would mean up to around ¾ million businesses currently avoiding the tax would then have to pay it. This will likely make the changes untenable considering the difficulties companies are already facing due to the pandemic.
Because of the inherent issues with the other 2 options, it is easy to see why the PwC favour the notion of creating a national standard for payroll taxation.