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Letter to the Editor
– Aust Financial Review

Dr Terry Dwyer
(Read Dr Dwyer’s Henry Review Submission)

The Henry Tax Review has rightly acknowledged the fundamental economic principle that a tax on land (including resource) rents is the ultimate non-distorting tax. Whether a resource rent tax is the best way to tax resource rents may be perhaps debated but taxed they should be. But the report should not have stopped there. Why tax mineral rents but not agricultural or urban site rents?

Rather than floating silly ideas like removing imputation credits or introducing death duties, the Review could have carried its logic through. It could have observed that if we do not want perpetual land speculation driving Australian families into poverty in their own cities perhaps it was time for landholders, as the beneficiaries, to pay through land rates and charges for the fixed costs of community and public works which inevitably enhance the values of their sites.

Australia used to do this a lot more. Land revenues made the Australian colonies prosperous in the 19th century and Andrew Fisher’s Labour Government in 1910 introduced the Federal land tax. Australia could use a general, inter-governmentally shared, land value tax to cut both Federal and State taxes on labour and capital. Australia has the land and resource endowment to become a tax haven and should become one – as it used to be when it led the world in living standards. Australia should not seek to imitate decaying, high-tax, European welfare states.

Terence Dwyer B.A. (Hons) B.Ec. (Hons) (Syd.) A.M., Ph.D. (Harvard), Dip Law (Syd.)

Visiting Fellow
Crawford School of Economics and Government
Australian National University