Political cowardice, bad taxes and the FIRB furball

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The Australian people are being distracted from the main game by a mad side-show over foreign nationals buying our land.

The sheer scale of this buying is further inflating our sorely overheated property market, imposing great costs on first-time buyers, giving a free carry to existing owners and adding to the distortions in our economy already struggling as a temporary mining construction boom slashes earnings and activity in services, manufacturing, tourism and agriculture.

The exclusion of the young from land ownership risks revolution or mass emigration or both.

The best measure of foreign buying is from the NAB:

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This problem is very real, but nested inside it is a deeper one: the rents.

Rents are a private tax landowners impose on the landless.

If the profits is circulated within an economy, rentiers can control and direct the tenantry – all quite invisibly. This is vile, but when the rents are consumed somewhere else the life-blood of the nation is drained away. Consider Ireland and Scotland in the era of absentee landlords, who insisted on being paid in currency, then spent it in London. The tenants starved.

Australian land is held in perpetual freehold title. Ownership is yours forever, no matter who you are or where you live, defended by law, the judiciary, the police and by custom.

What’s to be done?

The Treasury has the answer: use land tax, which is paid by domestic and foreign landowners and spent on domestic households. Their recent modelling demonstrates this tax base is profoundly different to all others because it actually makes us wealthier. Every other tax base has negative excess burdens where activity is displaced, the liable pass on the tax or arrange their affairs to avoid it.

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Treasury’s table suggests each dollar raised in land tax costs us 90c. Compare that with conveyancing Stamp Duty where a dollar raised costs the taxpayer $1.70. The 80c difference between the two taxes is simply wasted, spilled on the ground. Across Australia, we are talking tens of billions of dollars each and every year.

Are we so wealthy we can afford such extravagance?

If a tax exists with a positive excess burden, we have an obligation to examine its features and shortcomings with a microscope.

Australia’s Future Tax System recommended introducing two taxes: a land tax and a Resource Super Profits Tax, and using the revenues to remove 125 very bad taxes that cause actual injury.

We would then welcome foreign investment in land, because they would be paying more than their fair share of tax.

Politicians glibly dismiss land tax, fearing the predictable outcry from vested interests. Their cowardly and untested assessment costs us dearly.

2 Comments

  1. THEO12-08-2015

    Now you’re getting the message across, Using the words cowardly, vested interests is a good beginning. Its time to take the gloves off. I would like to see the word corruption used a lot more. Also, the voter should come under equally if not more heavy criticism as they give approval to all these continuing problems.

  2. paul meleng18-08-2015

    To add to this move we now have the big topic of offshore profit shifting and tax avoidance . .. “legal” if you can afford worlds best tax lawyers. How silly. Again, land tax,rent is the solution. It absolutely nails the revenue to the nation providing the security and services. who cares how much Apple makes out of doing business in Australia if they tale up no space. Meanwhile presumably Australians make money from Apple.
    Land Tax Only would make us a tax haven for the highest tech highest intellectual capital in the world and yet to the extent they and the highly paid employees take up space the land rent is collected and pays for the care and protection of the nation. instead we are only attractive to resource pirates and land speculators.
    All this silly waste of time over other taxes could be chucked in the bin and release a wave of human intellectual and innovative energy.

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https://prosper.org.au/2015/08/11/political-cowardice-bad-taxes-and-the-firb-furball/