The Baillieu government has just received a major report into Victoria’s economic efficiency that offers a clear path to redesign state taxes, advance living standards and make Victoria an absolute magnet for employment and investment.
“Ted Baillieu can write history and be Victoria’s Great Architect through tax reform.” Prosper Australia Campaign Manager David Collyer said today. “We have a leader who studied architecture and understands great design and how this lifts our animal spirits.
“This is the framework to reverse our decline in productivity and per-capita GSP.
The report – ‘Victoria’s Productivity, Competitiveness and Participation’ – a desktop review of economic reform options was prepared for the Victorian Competition and Efficiency Commission by ACIL Tasman’s David Greig.
“Australia has not had a serious round of economic reform since the Keating Labor government of 1991-96. Those reforms raised incomes and national competitiveness. The Greig Report offers Victoria the same.
“Baillieu will have to stare down entrenched interests and shake off caution and complacency,” Collyer warned. “But the economic and efficiency benefits for Victoria are a glittering prize.
The Report’s Section 9 State Taxes criticizes the inefficiency of Stamp Duty, Insurance Taxes and Motor Vehicle Taxes. It cites the Henry Review’s recommendations to target economic rents and sees three areas for state-based reform:
Land Value Tax: remove the owner exemption and tax at a flat rate or at stepped rates based on the value of the land per square metre.
Payroll Tax: replace with a broad based consumption tax which is much less distorting.
Stamp Duty: eliminate insurance, motor vehicles and conveyancing duties.
”Broadening Land Value Tax to pay for the removal of a host of behaviour-distorting, inefficient and regressive taxes has been recommended to governments by leading economists for many years. LVT has a very low deadweight loss to the economy. It is inexpensive to collect and does not distort economic behaviour. Further, land cannot be hidden in an offshore tax haven. These qualities are extremely rare,” Collyer said.
“Payroll Tax is a vile barrier stifling job creation. It undermines the global competitiveness of our exporting and import-competing industry.
“Ending Stamp Duty would cut the cost of insurance – the cost of protecting ourselves from devastation. On real estate, its removal would increase the velocity of land – the ease and speed of buying and selling – making it much easier to move to better jobs and more closely match house size to family size.
It must be noted Prosper Australia does not advocate an increase in overall taxation or the size of government. We value that Australia is a low tax country and want it to stay that way.
“Premier Baillieu, these tax reforms offer a greater legacy than any grand monument. Also, there are advantages in being the first to reform. Enterprise will clamour to invest and create new jobs in Victoria, not just from other states – from around the world,” Collyer concluded.
Contact: david.collyer@prosper.org.au
The full Greig Report is available at:
http://www.vcec.vic.gov.au/CA256EAF001C7B21/WebObj/ACILTasmanReportWord/$File/ACIL%20Tasman%20Report%20Word.doc
This is a 200 pp document, so look for Section 9 State Taxes pages 126-145.
