22 October 2013

MELBOURNE:- Overnight, Australia’s property industry has endorsed removing Stamp Duty on property transactions, the AFR reports – a major tax policy shift welcomed by Prosper Australia.

“Scrap Stamp Duty and fund this by also removing the principal place of residence exemption from State Land Tax,” Prosper Australia Policy Director David Collyer said today. “This reform has been urged on governments for decades in every arms-length economic report they have commissioned.

“Stamp Duty is deeply regressive. It traps citizens in and out of housing. It means many cannot take the best job opportunity on offer if distant from home, or endure long commute times to advance their careers. It obliges costly and inefficient renovations when a larger home in the next street would serve better. It means many others live in homes bigger than they need or want.”

“We have been shielded from what Martin Wolf calls the ‘Controlled Depression’ that mires the rest of the world. We cannot change their circumstances, but we can change our own with bold, prosperity-enhancing tax reform to un-tax labor and business and raise instead from immovable bases such as land that cannot be hidden, avoided or passed on.

“The mechanics of exchanging Stamp Duty for State Land Tax are quite simple. To be scrupulously fair, government could back-calculate SLT and credit this against SD previously paid at purchase. The retired could defer paying through a charge on their land, as is often done with council rates.

“Australia urgently needs to end taxes with large deadweight losses. They diminish everyone. Most offending taxes are state-based, and Stamp Duty is one of the worst. KPMG Econotech estimated these losses at $70 billion nation-wide in 2010; they are now significantly larger. This is money, work and success simply destroyed.

“It must be understood Prosper does not seek to enrich government at the expense of taxpayers. The government share at around 23.5 per cent of GDP is low by OECD standards. We want it to stay that way,” Collyer concluded.

NB: The Australian Housing and Urban Research Institute has modelled the economic consequences of the change from SD to SLT for Melbourne. Dr Gavin Woods’ report is at: http://tinyurl.com/l4mafuz

About Prosper: Prosper Australia is a tax reform lobby group and think tank that is now 120 years old. It seeks to move the base of government revenues from taxing individuals and enterprise to capturing the economic rents of the natural endowment, notably through land tax and mining tax.