- Download our 2020 Vic budget submission (submitted January 2020)
Prosper welcomes the opportunity to contribute to the 2020 Victorian Budget.
It is our position that unearned and unproductive streams of private income which derive from these elements of our economy should be more heavily taxed. This will allow taxes on the productive sector to be eased, making for a more equitable and more efficient economy. It is from this analytical framework that we present our 2020 Victorian budget submission.
The fiscal challenges facing the government are significant due to macro-economic slowdown, revenue volatility, and a deteriorating ecological base coupled with necessary infrastructure investment. However these conditions also present opportunity.
What is needed is a serious look at revenue policy and how to better utilise the land base. The land base needs to be rationalised across the state’s various revenue policies, whether it be land value capture or council rating.
Prosper supports the Victorian Government’s continued focus on housing and related tax policy. Ongoing commitment to value capture in future major projects such as the suburban rail loop and airport rail link is essential for best practice planning and sustainable funding.
We note a number of positive outcomes in previous budgets, including:
- Phase out of various stamp duties concessions
- Introduction of a residential vacancy tax
- No cuts or further exemptions to State Land Tax
- Introduction of annual land valuations
- Phase out of taxi licenses with partial compensation via a small but fair levy
- Policy to support Land Value Capture for infrastructure
- Reduced payroll tax in regional areas
- Move towards public debt financing rather than expensive Public Private Partnerships (PPP) financing
- Introduction of a Gold Royalty
- Removal of the principal place of residence exemption for contiguous land titles (‘tennis court exemption’)
- Closure of the heritage valuation loophole
- Increasing the flexibility and convenience in paying State Land Tax
These reforms are contrasted with less sensible demand-side policies which have clearly capitalised into higher land prices in regional markets, including:
- First home buyer grants
- Stamp duty exemption of properties sold ≤$600K
- Regional commercial stamp duty discounts.
In section one of this submission, we make a series of recommendations regarding land taxes including stamp duty and ratings reform. We’d like to highlight the detailed work we’ve done on transition design for stamp duty-to-land tax reform, including robust modelling of the proposals budget impacts. For the purpose of our submission to the Victorian Government Ratings Review, we’ve also conducted some significant research which demonstrates the superior efficiency and equitability of Site Value (SV) over Capital Improved Value (CIV) as a local government ratings base.
Section two focuses on fiscal policy to support the ambitious infrastructure program being undertaken by the Andrews government. Now more than ever, we must embed sustainable funding sources into urban development projects. Land Value Capture mechanisms must be designed into transport network and urban precinct planning. Late last year, we hosted numerous public discussions to improve the public sector’s familiarity with key value capture mechanisms that are being used around the world to fund large scale public transport infrastructure.
In section three, we implore the Victorian Government to critically assess its current demand side-interventions into the housing market. We present evidence of their failure as well as recommend viable alternatives.
In our section four, we make recommendations around the management of state-owned natural monopolies, including land.