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Parliamentary Budget Office costs plan to abolish stamp duty in favour of broad-based land tax

Parliamentary Budget Office costs plan to abolish stamp duty in favour of broad-based land tax

31 March 2017 Henry Belot

The Parliamentary Budget Office has costed a proposal to abolish stamp duty and replace it with a broad-based land tax, adding to a fierce political battle over housing affordability.

Under the proposal put forward by the Greens, the Commonwealth would provide concessional loans to state and territory Governments to assist the transition.

The loans would hit the budget bottom line by $800 million, although states would rely on rising land tax revenue to repay the debt by 2030.

"States would also be required to cover the Commonwealth's borrowing costs for the proposal, with interest charged annually at a rate equal to the Commonwealth's cost of borrowing," the costings said.

The ABC understands the Queensland and West Australian governments are unlikely to support the proposals, given the significant revenue that stamp duty generates.

The Tasmanian Greens have previously proposed a similar idea, drawing criticism from the then state Labor government.

The proposal has been supported by the Grattan Institute's John Daley, who said it would be politically difficult to deliver but generally regarded as a good policy.

"Obviously if you then increase general property taxes the price of property comes down and that's bad news for existing home owners.

"If you do both at the same time it's a bit of a wash."

Mr Daley said the proposal would also give older Australians more freedom to downsize their homes.

"It deals with the situation of older people who are in a house that is maybe larger than they want," he said.

"They know that if they move from property one to property two then their net wealth will reduce because they will still have to pay the stamp duty."

Grattan Institute fellow Brendan Coates said stamp duty accounted for $19 billion nationwide each year and any increase in land taxes would have to match that revenue.

"To do that you're probably talking about a tax on unimproved land value of about $6 for each $1,000 of unimproved land value," he said.

"Given the median house price in Melbourne is somewhere around $800,000 to $900,000, you're talking about $2,700 for the average homeowner in Melbourne and in Sydney you would be looking a little north of $3,000."

No comment from Treasurer on 'budget speculation'

Federal Treasurer Scott Morrison would not comment on the proposal, saying the Government would not be drawn on budget speculation.

His spokesman said various ideas had been flagged and the Treasurer would continue to work on housing affordability and land supply.

Labor's treasury spokesman Andrew Leigh said the proposal had merit, but the Government needed to curb negative gearing and capital gains tax concessions.

"We know that when you look at the drag on the economy from stamp duty its one of the worst taxes Australia has," he said.

"When you look at land tax it has one of the lowest burdens on the economy of any tax we have.

"If the Government is serious about housing affordability they should take the idea that every serious economist has been urging on them for years, to get serious about the excesses in negative gearing and the capital gains discount."

The Victorian Government recently announced plans to exempt first-home buyers from paying stamp duty on properties valued at less than $600,000.

Mr Morrison welcomed the proposal saying "good on them for having a shot", but questioned its overall impact on the housing market.

"On the issue of stamp duty, I welcome it but at the end of the day if that just means that people just bid up more at the auction because they can borrow more because they don't have to pay stamp duty, obviously, that will just take prices in one direction," he told Sydney radio station 2GB.

Stamp duty reform was discussed by state and territory leaders at the Council of Australian Governments meeting in late 2016.

In 2012 the ACT Government announced plans to phase out stamp duty on house sales by 2022 and to abolish insurance taxes over five years, replacing the revenue with higher rates.

 

Source: Abc.net.au

Date: 18, March 2017