The South Australian government is undertaking a tax review to boost state competitiveness and economic efficiency. Their main focus is considering abolishing conveyencing Stamp Duty and funding this by removing exemptions from the existing State Land Tax.

Prosper Australia has made a submission to the review, energetically endorsing the government’s proposed reforms.

We say:

Stamp duty inhibits transactions. If removed, South Australia will see:

More and better construction
Lower rents
Better matching of families and housing stock
A greater propensity to buy (on ease of exit)
Less traffic congestion
A deeper, more active land market

The discussion paper estimates SA government revenues from stamp duty this year at $886 million. KPMG Econtech estimates the marginal excess burden of conveyancing stamp duties at 34 per cent, and regards this as a serious underestimate as it does not consider the cost to households displaced to renting and the welfare losses in the mismatch of housing and families. Collecting that $886 million therefore imposes a civic burden of at least $1,187 million, of which $300 million is cast on the ground in deadweight losses each and every year.

Further, recent economic modelling by federal Treasury calculates land tax actually has a negative marginal excess burden (hint: that is really, really good) as land tax paid by foreign and domestic landowners is spent solely on domestic households. A boost to state demand of this scale would be welcomed by business and citizens alike. This reform is low-hanging fruit indeed.

A PDF of Prosper’s submission is here: Prosper’s submission.

Congratulations to the Wetherill government for using the ‘I’ word when talking about boosting South Australia’s efficiency and livability. No entity is more important to shaping the state’s fortunes than its government.