Prosper Australia

photo credit: Hyaground

Peter Martin, the journalist with the biggest sieve (catching all those Henry Tax report leaks), wrote recently on the LP’s highly secretive Ergas report:

The report proposes an annual land tax that would extend to the family home and would be used to fund the abolition of real estate stamp duty. ”It would be obvious nonsense to exclude the family home. It would create an unbearably low base.”

Company tax would be modeled on the resource rent tax that is presently in place for offshore petroleum and which the government’s Henry review recommends extending onshore.

Bryan Kavanagh stated:

So, we have a coalition report (the Ergas report) recommending a 20% flat income tax, plus a land tax which must include the family home, and the Henry Report that Glenn Milne initially inferred an across-the-board federal land tax, but which we’re assured by Peter Martin now excludes the family home.

With the GFC still raising it’s ugly head with recent sharemarket tremors, the need for other nations to review their tax system will no doubt continue. With the recent NZ tax review also recommending a greater role for land taxes in a highly mobile marketplace, our beliefs have never been more important.

If governments are serious about avoiding boom-busts, then the harnessing of the community created locational value of land (and other licensed monopolies) cannot be ignored. Billowing credit levels (as per helicopter Ben) will do little for the productive economy or sustainable growth. Resource Rents must be the prime revenue base for an economy concerned with reward for effort.

Watch this short video from our colleagues in Philadelphia to see how the tax system places community activity in the waste bin via the waste-land mentality.

photo credit: mugley

The plot thickens with Glenn Milne reporting

THE Federal Government’s biggest tax inquiry in more than two decades is set to propose a national land tax, a new resource tax and a congestion tax for clogged cities.

The Henry Review, by Treasury head Ken Henry, is also expected to canvass a federal clawback of GST revenues, which now go entirely to the states, to fund the Government’s proposed takeover of the public hospital system.

Dr Henry’s report, due at the end of the month, is also believed to favour a national payroll tax to replace the state system.

One of its controversial proposals is for a national land tax to replace state-based stamp duties payable on the sale of homes and investment properties.

A national land tax would open up the Government to claims of taxing the family home. But it could mean big savings for many Victorians – for houses priced $550,000 and under Victorian homebuyers pay $14,370 more in stamp duty than Queenslanders.

There are many other advantages of a move towards a Land Tax, especially the signal it sends our bloated property market that land speculation is a destructive practice. Such a replacement of stamp duties will remove an impediment to property turnover, helping the market reach a truer price discovery. The efficiency gains this will deliver are undeniable amongst independent economists.

With foreign investment in property growing, having a uniform Land Tax rate will assist the people in sharing from the ever increasing value of land. It also signals in a globalised world where capital is just so mobile, that a Land Tax is the fairest way to ensure that all pay their fair share. Wealth cannot be off-shored under this system.

The move towards a resource rent tax on mining companies is another admission that the earth’s scarce resources are part of our common wealth. Why should workers be taxed so that the privileged can make money in their sleep through resource speculation and hoarding? Check some of our recent tax submissions.

An interesting Christmas break to come…

photo credit: The Rocketeer

The State Government has come under more pressure from the property lobby in Government Criticised for not cutting Land Tax

“The Treasurer should have provided stamp duty and land tax relief as measures to stimulate demand for property investment. They could have done that by increasing existing thresholds or reducing rates.” said TressCox Lawyers partner Michael Westaway

Commercial agents have reported that land tax bills for some prominent city buildings have soared by as much as 100 per cent. These are passed on to commercial tenants on net leases, who are finding the increases bear no relation to the financial health of their business.

That is because land tax is based on valuations taken every two years, and the last valuation was in December 2007, at the height of the property boom.

It also reflects the removal of a cap previously limiting annual land tax increases to 50 per cent.

The government continues to walk into these policy traps. It makes moves like removing the 50% cap but yet doesn’t ensure property is valued annually. With regards to this week’s State Budget, we would have preferred:

• Stamp Duty abolished
• Payroll Tax abolished
• Higher and flatter Land Taxes
• A lower Land Tax threshold
• Yearly land valuations

Many of these issues were promoted in the 2001 Harvey Report into State taxation. Both John Brumby and John Lenders were key signatures to that report.

The real estate industry would approve of the impediment that stamp duty provides to property turnover.
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photo credit: Roger Lynn

The Age today ramps up the property lobby’s annual war against contributing to society in Land tax hike to hit tenants

Knight Frank managing director Paul Burns said landlords had been complaining about their 2009 land tax bills, and agreed that tenants on net leases would be the first to cop the extra charges. But he said competition for tenants would eventually see landlords absorb the cost.

“New tenants come in and look at net rent, plus outgoings. Ultimately, it will pass on to the property owner.

Why shouldn’t landlords contribute something to government for the massive capital gains they have received over the last few years?

We agree that there should be yearly land valuations to avoid these bi-annual spats by the property lobby. It’s also fairer and can’t be too difficult in an era of modern software such as google earth.

We support a higher flatter, land tax. This will fund the removal of payroll and stamp duty taxes. This is part of the move towards supporting the productive economy and deterring speculation. Higher land taxes should be encouraged to remove the incentive for land speculation, the pressure that has pushed us all into so much debt and delivered the GFC. Without speculation, housing will be come a human right again. At present it is a speculative right.
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photo credit: Shavar

Former journalist Lisa Pryor sums up the frustrations of the many at the quarterly roll out of baby boomers complaining about Land Taxes on investment properties. She writes in her It’s Grim Down the South Coast for the Well Off :

Land tax encourages better use of land. An annual tax bill gives the owners of multiple properties an incentive to rent them out, at least some of the time, to pay the bill rather than leaving the properties empty, except for a scattering of boogie boards and dog-eared packs of Uno, until the whim strikes to spend the weekend there. For the same reason, it gives owners of vacant land an incentive to build.

Well done Lisa on a well written article! It would be nice to see a few more journo’s speak out about the inefficient use of our most precious resource – land. Go on, quote us on 2,317 vacant properties in Melbourne’s inner CBD. Yes that’s a 7% genuine vacancy rate rather than the 0.7% publicised rate.

We must remember that capitalism is based on reward for effort, and certainly not a reward for the hoarding of prime locations. Delve deeper and you will see how the encouragement of speculation on natural resources by government’s worldwide has caused the GFC.

photo credit: Dunechaser

It seems that another whitewash of economic theory is being subtly thrust upon us with the ongoing Henry Tax review. According to Henry, he has re-written economic theory.

The 3 sources of taxation are now labour, capital and consumption. The Corruption of Economics continues with Land, the most essential of all factors of productions, all but left out of the equation.

We predicted that the outcome of this tax review would support a higher GST. We still have a year of compromises to go until the final report, but one would expect this damaging development to continue.

And here we have the property lobby commenting in typical unbiased fashion:

The Housing Industry Association’s acting Victorian executive director, Robert Harding, said a higher GST would be a more efficient money-raiser for the states if it were allowed to replace stamp duty, but he doubted that any government would have the political will to push such a change through.

Marc Moncrief quotes an independent source!

Why is the GST the preferred new medium of tax experts? It is a sleight of hand to introduce regressive taxation. A worldwide development is seeing GST as a means to downgrade the importance of progressive taxation (the lesser of two evils).

As the GST is a flat tax, with no tax free threshold, all citizens and visitors pay the same rate. This hurts the poor more than the wealthy.

If the mobility of labour is cited, surely the progressive means to capture revenue is via a Land based tax. A Site Rental on all land at a flat rate would naturally be progressive. Those living in Toorak have a higher site value due to location than those struggling families forced to live in the sprawling suburbs.

In the above quoted article, Brumby states that the Henry push to remove stamp duties and payroll taxes can only be funded by a lifting of the GST. We wait with baited breath in the hope that some sensibility will be reached by avoiding an increased GST. A higher holding charge on land will remove the speculative impetus that has caused this Global Financial Crisis (GFC). It would also fund the removal of the damaging payroll and stamp duties that we have been lobbying for.

Compliance anyone?

Todays Age article on Land Tax Cuts Wont Bring Savings alerts all those interested in defending the communities right to a share of the free lunch land prices reflect. The next few weeks will see the property lobby step up their claims to pay less and less of the one tax their army of accountants can’t dodge.

Some points we agree with. The article states that the State Land Tax cuts over the last 3 years from 5% to 2.5% for the top marginal rate have been offset by rising land prices. Suprise, suprise! Lower holding charges on land encourage more speculation, especially at the top of the market, where capital gains have been higher in both percentage and nominal amounts in many suburbs.

What we do agree with is the warning on bracket creep. The Brumby government should index Land Tax rates to CPI or ultimately to land prices as calculated by the Victorian Valuer General.
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The front cover of today’s Herald Sun has a huge photo of Horse Stud owner Steve Spiteri (looking hard done by!) with a caption: ‘Thanks Premier: Steve Hits Paydirt’. Yesterday’s announcement to rezone all land residential within Melbourne’s 2030 boundary has made landowners, typically land bankers and the occasional farmer on the edge of the sprawl, rich overnight. Mr Spiteri bought his property for $375,000 twelve years ago and with the new zoning is now estimated to be worth $11 million dollars.

How much money will Spiteri make when he sells the property? Lets give him a million dollars for council rates, real estate commissions and to cover the next few years Land Tax (about $330,000 p.a). If we assume he pays capital gains tax at 30%, he will take home over $7 million dollars. This equates to more than 122 years income for the average wage earner.

That’s as if he’s earnt $11,217 per week for the last 12 years. Staggering!
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Sharon council mulls land value tax after presentation by economics official (15/03/07).

Joshua Vincent from the Center for Economic Studies, Philadelphia, provides the data on why switching away from Capital Improved Valuation to Site Valuation is of economic benefit to your community.