Who's winning in the fifth year of tax reform?
Since 2012, general sentiment from those who follow the ACT government's tax reforms during the budget and estimates hearings usually involves a dose of foreboding about the future.
After all, ever-increasing general rates are very real, and the impact felt by families and businesses leaves many to suggest that we've reached a tipping point, where rates increases for the sake of stamp duty abolition is too much to bear.
To this end, general rates are now the largest component of ACT tax revenue, at about 27 per cent of total revenues in 2016-17, compared to 18 per cent in 2011-12. Inversely, revenue from conveyance and insurance duties fell from about 24 per cent of the ACT tax take in 2011-12 to about 15 per cent in 2016-17.
No doubt, the government's plans in 2017 to change rate calculations for multi-unit dwellings, to create greater tax equity between similar priced houses and units, will further add to their revenue bottom line.
The point is, general rates are now an important and predictable revenue base for the government.
In the latest budget, the government has slowed general rates increases to 7 per cent for commercial properties, and 4.5 per cent for residential properties. This is off last year's increases of 8.5 per cent. Equally, over the next five years, the annual increases for stage-two tax reforms will be 6 per cent on average for commercial properties, and 7 per cent on average for residential properties.
In return for these year-on-year increases, the government has abolished insurance duties, increased the payroll tax-free threshold to $2 million, will fully abolish conveyance duty for commercial transactions below $1.5 million by 2018-19, and will implement a conveyance duty flat rate of 5 per cent for commercial transactions above $1.5 million.
Responding to this, the ACT opposition announced it would freeze general rates increases – in essence halting the government's stamp duty for general rates swap.
The Henry tax review in 2010 said: "Ideally, there is no place for stamp duty in a modern Australian tax system."
The stakes are in the ground for both sides of politics on this issue, and as the fifth year of the government's general rates notices arrive in our mailboxes, public and industry receptivity will show whether idealism must give way to pragmatism.
First published in The Canberra Times, 10 July 2016.