Jean Baptiste Colbert 1666 Goose me!

Jean Baptiste Colbert 1666
Goose me!

The Productivity Commission is out with a major study that recommends ending Stamp Duty on conveyances in favor of a land value tax to avoid trapping people in their homes when better jobs beckon elsewhere.

The Geographic Labor Mobility report examines the match between skills and employment – or more exactly, where these mismatch.   A close fit lifts productivity, incomes and national well-being.  This is a major reason people flock to cities and the biggest cities grow fastest: a wide range of work options within reasonable distance of home means both workers and businesses can best realise their potential.

State governments stand in the way.  They are addicted to Stamp Duty revenues, just as they are hooked on gambling taxes and speeding fines.  Never mind this base is pro-cyclical – it booms in good times and collapses in bad.  No, that doesn’t make it an automatic stabilizer, far from it.  It merely tracks transaction volumes and sucks blood.

Jean-Baptiste Colbert’s famous words from three centuries ago still dominate state government thinking: “The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.”

Governments rank being popular above being economically useful.  They find it too easy to shrug off the issues raised in every independent tax reform report commissioned in recent decades: this tax base is regressive, it traps people in and out of housing, and it favors long term holders over first home buyers.

And worst, it stifles property transactions, as the Productivity Commission notes:

“Evidence from surveys and study participants is strengthened further by the findings of recent academic research on the effects of stamp duty on housing turnover. Using data on Australian house sales between 1993 and 2005, Davidoff and Leigh (2013) found that a 10 per cent increase in stamp duty lowers housing turnover by 3 per cent in the first year and 6 per cent over a three‑year period. Davidoff and Leigh (2013) estimated that the 37 per cent increase in the average rate of stamp duty levied that occurred between 1993 and 2005 resulted in a reduction in home sales of about 11 per cent — equivalent to roughly 39 000 foregone sales per annum.”

Real estate agents ought to be furious over government suppressing their commission income with this tax.  So should builders, who may only hold land a short time and are slammed.

Stamp Duty makes the lives of those who bought at the peak and are now in negative equity a misery.

The Productivity Commission helpfully provides a guide to the cost of this outrage.

Table 8.1          Government fees payable on home purchases in capital citiesa

September 2013


Median house
price ($)b
duty ($)
Mortgage registration fee ($) Transfer fee ($) Total fees (% of median house price)


640 000 24 290 105 209 3.8


500 000 21 970 85 1 339 4.7


445 000 6 825 157 962 1.8


392 000 15 930 148 2 825 4.8


515 000 20 438 160 270 4.1


334 000 11 295 125 191 3.5


568 000 28 116 133 133 5.0


547 800 19 490 121 234 3.6

a Calculated fees are for established homes used as primary residences and do not include any discounts for first home buyers or pensioners. The mortgage registration and transfer fees for Victoria assume an electronic transaction.  b Median house prices are for established homes for the December quarter 2012.  c The ACT Government has committed to gradually phasing out stamp duty over a 20 year period beginning in 2012.

Sources: ABS (House Price Indexes: Eight Capital Cities, Cat. no. 6416.0); Productivity Commission estimates.


So next time you have your state MP’s ear, call for Stamp Duty reform.  They can be a little deaf, so use a loud clear voice.