Prosper Australia

If you own a piece of land, the State government wants to know. Why? Because you expect the government to enforce your exclusive right to occupy or let that land. Moreover, as the total supply of land is fixed, it is a matter of public interest that you are depriving other people of a certain part of that supply. Fair enough.

If you claim a patent on an idea, the Federal government wants to know. Why? Because you expect the government to protect your exclusive right to profit from that idea, and because it is a matter of public interest that other people cannot use that idea without your permission. Fair enough.

But if you bake a loaf of bread and sell it, the Federal government still wants to know. Why? You’re not claiming an exclusive right to bake bread. The supply of bread isn’t fixed. You’re not taking bread from anyone else. So why should the government want to know what you’re doing? Because it wants to tax you for it!

And if you hire someone to help you bake the bread, the State and Federal governments want to know. Why? You’re not claiming an exclusive right to hire workers. You’re not even claiming an exclusive right to hire that worker. So why should two governments want to know what you’re doing? Because the State wants to tax you for hiring and the Commonwealth wants to tax the worker for working!

We think this has got out of hand. As long as you’re not hurting anyone else, there’s no need for Big Brother to know what you sell or whom you hire or whom you work for. To avoid invading your privacy in the name of taxation, governments should tax you only on things they need to know about anyway — things like the land you own and the patents you hold.

Otherwise we say your business is… your business.

Spin: The venerable D&J Evans Hardware store was unable to pay its $120,000 land tax bill. So it would be forced to close and 32 employees would lose their jobs [Russell Skelton, “Soaring Land Tax Costs Jobs, Investment”, Sunday Age, Nov.21, 2004].

Reality: The big news was buried in a subordinate clause further down the page: “Although the site was sold to Woolworths for a record $15.25 million…” Oh. So the land tax was so onerous that Woolworths volunteered to pay $15,250,000 up front for the privilege of paying the land tax in perpetuity! The article said nothing of the number of jobs that would be created by Woolworths, or re-created by Evans Hardware when it reinvested the money.

Spin: The Whitehorse Inn of Hawthorn (Victoria) was forced to close because the lessee, Jim Ryan, was unable to pay the land tax bill which had increased from $1440 (in 1998) to $40,000. Some 15 staff would lose their jobs. Mr Ryan was liable for the land tax because he had signed a contract containing a tax-increment clause, whereby the owners could charge their land tax to the lessee [according to Farrah Tomazin in The Age, Feb.15, 2005].

Reality: By the time Mr Ryan got into trouble, tax-increment clauses in rental contracts had been banned in Victoria, but contracts signed or renewed before the ban were grandfathered. The Parliament could have capped land tax increases for lessors in grandfathered tax-increment contracts in order to protect the lessees, but failed to do so. So the fault lies not with land tax as such, but with the legislators, who botched the initial implementation and then botched the correction.

Horror story: John Ribbands of the Metung Hotel faced a land tax bill of almost $81,000, which had doubled in a year [according to Kirsty Simpson in The Age, Mar.6, 2005].

Reality: Actually the land tax bill was for the hotel site plus the adjacent vacant site, not just the hotel site. But because of this “usurious” tax, poor Mr Ribbands sold the hotel and the adjacent site to David Strange for more than $4 million [Christopher Webb, “Strange Metung spot is a real little boaty”, The Age, July 19, 2005]. Mr Strange’s plans to develop the adjacent site [www.metunghotel.com.au/land.htm] are a textbook example of how site-value taxation encourages investment and creates jobs. The new owner acknowledged as much when he said that the income from the existing hotel alone “wouldn’t support the land value” — that is, it wouldn’t cover the tax on the combined land value.