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Axe payroll tax, says MP
North Metropolitan MLC Peter Katsambanis.

A State Liberal MP has called for payroll tax to be abolished - but only if the GST system can be reformed to give WA a fairer share of the national consumption tax pool.

North Metropolitan MLC Peter Katsambanis yesterday described payroll tax as an "incentive-sapping, job-destroying monster" in a speech to the Young Liberals national conference in Fremantle.

"Beyond a certain arbitrary salary threshold - in WA it is currently $750,000 per year - for every new job an employer creates they are slugged with an increase in payroll tax," Mr Katsambanis said.

WA expects to collect about $3.5 billion in payroll tax out of total Budget revenue of $26 billion in 2013-14. With about 11 per cent of Australian's population, WA will receive about $2.5 billion of the $50.2 billion national GST pool this financial year.

Mr Katsambanis said if WA was getting closer to a per capita share of GST, it would have an extra $3 billion a year to spend.

He called for the GST system to be reformed so that 80 per cent of the pool was distributed on a per capita basis, with the remaining 20 per cent on a formula based on an agreement between the States to drive further tax and economic reforms.