Stamp duty reform is essential to national competitiveness
Abolishing stamp duty must be a central part of the future debate over Federal State financial relations, says the Property Council of Australia, but warned a swap to land tax was unlikely to be politically feasible.
"By scrapping stamp duty and replacing it with efficient taxes we could boost Australia’s GDP by $3.3 billion and increase real consumption by $9.7 billion”, said Ken Morrison, Chief Executive of the Property Council of Australia.
"Stamp duty is an inefficient tax that costs jobs, hurts the economy, makes our cities less efficient and is an unpredictable tax base for state governments.
"Deloitte Access Economics has calculated there is a real benefit to households with replacing this inefficient tax with an efficient one. The benefit equates to an extra $20 per week per household on average – which is more than half of what households spend on fuel and power.
"We all know that state government reliance on stamp duties increase with each year. A typical home in Sydney now incurs a $35,100 stamp duty. In Melbourne it is $32,300, in Canberra it is $20,200 and in Perth $19,200 and in Adelaide it is $17,300.
"One of the consequences of stamp duty is that it makes moving costs inordinately high. Families and couples hold on to homes long after they have outgrown them, or long after the children have left. Scrapping stamp duty will result in an acceleration of housing turnover – with the current average of 13 years falling to 8 years.
"In putting the case for reform, we also have to look at what is politically feasible.
"We appreciate the motivation of those who argue that the states should simply replace an inefficient stamp duty with a new land tax.
"The reality is that businesses already pay very high levels of land tax and there is a political limit to what homeowners are likely to accept.
"Adding a new $16 billion annual land tax on the family home is not likely to pass the pub test.
"There are very strong reasons for abolishing stamp duty, but we have to be realists in this debate – replacing stamp duty with a new broad based land tax on every family home is unlikely to be politically palatable.
"As well, the commercial sector already pays significant land taxes and we question if businesses across the economy can absorb a higher land tax. A shift to higher land taxes will simply increase this burden – and significantly reduce the economic benefits of moving away from stamp duty.
"Every economic analysis shows that Australia would be better off without stamp duty, but to achieve this we will need a more holistic reform effort."