Support within the business community for an increase in the GST to fund reductions in state taxation is growing, according to a recent survey by professional services group BDO.

The survey, conducted earlier this year following the State Government’s release of its tax reform discussion paper, found 62 per cent of respondents were in favour of increasing the GST.

On other issues, the survey – entitled Starting the Conversation in South Australia – found that State Government “barriers to business” were costing small to medium-sized enterprises (SMEs) around $50 million in lost revenue annually.

“This year, 62 per cent of respondents were in favour of an increase in GST, an increase on last year’s 57 per cent,” the BDO survey says.

Of the total number in support of increasing the tax, 18 per cent were prepared to see it increase by more than 5 per cent, with 44 per cent supporting an increase of less than 5 per cent from the current level of 10 per cent.

“Both groups of SMEs would only support an increase in the GST if it meant meaningful state taxation relief,” the survey says, with payroll tax reduction regarded as the most important tax reform measure.

“Of note, 38 per cent of respondents were opposed to any increase in the GST, convinced that meaningful tax relief would not occur. There were concerns that businesses would wear the cost and that it would lead to further ‘wastage’.”

BDO concluded: “The concept of reducing overall state taxation in favour of increasing the GST is a real option for business.

“BDO recommends GST reform be given adequate consideration in the context of feedback received to the (State Government’s) Discussion Paper, given its strong favour among the business community.”

The survey, which attracted 250 responses from SMEs, found 64 per cent of respondents had encountered State Government barriers to operating or expanding their business, of which half nominated red tape and regulation as “the main barrier to their business success”.

“The second-highest barrier to their business was related to WorkCover, with 27 per cent of respondents advising of this impediment.

“Other significant State Government barriers included payroll tax (23 per cent) and land tax (21 per cent), with a smaller number of respondents including administration/application charges, stamp duty, cost and complexity of tendering and licensing as additional hurdles to jump.

“We asked SMEs what difference the removal of these barriers would make to their revenues. The answers varied, depending upon the industry, size and nature of the business, with the range of responses between $10,000 and $1 million.

“The average amount of lost revenues was $50,000 – $100,000 for each business, per year. Collectively, government barriers were responsible for lost revenues of around $50 million to South Australian SMEs.”

Respondents to the BDO survey favoured, by a margin of two to one, cutting state taxes as an alternative to receiving no tax relief and having the State Government “focus on targeted investment in the local economy”.

Business SA, the peak representative of SMEs in South Australia, has also advocated that the rate of GST be increased and its base expanded, with the extra revenue raised being used to abolish state payroll taxes.

“While there is merit in leaving the GST base untouched in consideration of the existing system already being entrenched, Business SA accepts that this will depend upon how much revenue can be raised from raising the rate alone and whether or not additional revenue from broadening the base is necessary to facilitate the abolishing of inefficient state-based taxes such as payroll tax,” Business SA said in its pre-Budget submission.