Australian manufacturers are calling on the McGowan Government to roll back payroll tax and stamp duty in favour of a general property tax.

The Australian Industry Group, which represents companies employing one million workers, said a broad-based land tax would see property owners pay annually according to the value of their land.

In its pre-budget submission to Treasurer Ben Wyatt, the Ai Group said the State’s financial woes and low GST returns were no reason not to press ahead with long-lasting changes that would benefit the economy.

It said payroll tax and stamp duty in particular were a drag on the economy because one was a disincentive to hire workers and the other dissuaded people from selling their homes.

Ai Group State manager Kristian Stratton said abolishing and replacing them with a property tax would provide a fairer and more stable revenue source.

“WA has been short-changed on the GST for a long time, but there are a number of reforms that we could make at the State level that could provide a sustainable revenue source, while driving economic growth and job creation by removing constraints on business,” Mr Stratton said.

“None of the reforms that we are suggesting would happen overnight, and a lot of work would need to be done on the implementation, but Ai Group believes it is time the State Government took control of its own destiny and embarked on serious long-term reforms.”

The call for a general land tax comes after the Liberal NSW Government floated the idea in 2016 as a way of tackling spiralling house prices in Sydney.

NSW Treasurer Dominic Perrottet wanted the change to reduce the huge upfront costs of buying property in that State, where stamp duty on the median house price of $1.12 million is more than $50,000.

But Mr Perrottet was forced to retreat on the idea when NSW Premier Gladys Berejiklian rejected the idea amid fears it would be electorally unpopular.

Despite this, Mr Stratton said scrapping stamp duty in favour of an “annual charge on the unimproved capital value of land” made more sense and would deliver WA economic benefits.

He also welcomed the Government’s plans to establish independent advisory body Infrastructure WA, though cautioned about undertaking financially unsustainable capital works.