Stamping out stamp duty
This week has been a tale of two different templates for tax reform.
The first is the South Australian government's bold decision to abolish all commercial stamp duties over just three years. By 1 July 2018 the tax will be gone for all time in the festival state.
Axing this tax has been a top priority for the Property Council and this welcome decision sends a strong signal to boardrooms around the country.
The move also shows other states and territories that meaningful tax reform is achievable.
The second is an example of tax reform gone wrong and running out of puff.
The ACT Government has abandoned its plans to phase out stamp duty by ramping up land rates. Chief Minister Andrew Barr seems to have hit a political wall after residential rates climbed 9 per cent and commercial rates a whopping 40 per cent.
This rethink on tax reform reflects a clear reality: transferring the full stamp duty revenue base onto land tax is politically and economically problematic.
The two moves also show that a whole of federation deal will be needed to retire stamp duties completely, universally acknowledged as Australia's most distorting tax. Stamp duty is the worst tax in the nation – and it must go. But the states will need replacement revenue.
New calls to consider extending the GST on financial transactions – again from South Australia – suggests the pathway forward for broad-scale tax reform.
Expanding the GST demands the cooperation of all governments – and commitment from our federal government to fly the flag of national taxation reform.