Abolishing stamp duty would grow the economy
Australia’s GDP would increase by $3.3 billion and real consumption by $9.7 billion if one of the nation’s most economically damaging taxes – conveyancing stamp duty – was replaced with more efficient revenue sources, according to new modelling by Deloitte Access Economics.
Their report, The economic impact of stamp duty, commissioned by the Property Council of Australia, reveals the extent to which stamp duty holds back economic growth and conservatively models the substantial benefits which would flow from three reform options.
“Getting rid of taxes which harm the economy benefits everybody and should be a key objective of tax reform,” said Property Council Chief Executive Ken Morrison.
“That’s why abolishing stamp duty has to be on the agenda when federal, state and territory leaders meet this week.
“Stamp duty is universally recognised as one of the most inefficient and harmful taxes and this new study reveals just how much it really hurts not just homebuyers but the whole economy.
“It lays out the evidence to demonstrate how abolishing stamp duty would grow the economy and improve the wellbeing of all Australians.
“The report shows that the increase in GDP from abolishing stamp duty is equivalent to doubling the size of Australia’s entire dairy industry.
“The boost to consumption from abolishing stamp duty is so significant that even replacing it with GST revenue would see households more than compensated.
“Deloitte’s modelling calculates that households would on average be better off by an extra $20 per week – which is more than half of the average weekly household expenditure on fuel and power.
“Stamp duty costs Australians and costs the economy. It’s a barrier to economic growth and stops people and businesses making the best property decisions for their needs.
“Governments must end their reliance on what is one of Australia’s worst taxes.”
The report found that abolishing non-residential stamp duty, such as the South Australian Government has announced, is an affordable option with significant economic benefits.
It also found that a higher GST would negatively impact housing supply, however that the abolition of stamp duty on new housing would offset this.
Key findings from the Deloitte Access Economics Report, The economic impact of stamp duty:
- Stamp duty is one of Australia’s most economically inefficient taxes.
- Abolishing stamp duty and replacing it with the same amount of GST revenue would:
- Benefit the economy by increasing investment and transaction activity
- The average turnover of housing would decrease from 13 years to 8 years.
- Generate up to an extra 340,000 property transactions.
- Boost GDP by $3.3 billion (investment effect only)
- This is more than the GDP of the entire dairy industry, two thirds of the GDP of car manufacturing, and one quarter of the impact of international tourism.
- These benefits flow merely by switching to a more efficient tax.
- Boost Consumption by $9.7 billion (investment + transaction effect)
- This would more than compensate for the impact of GST on households.
- It equals an extra $20 per week per household on average, more than half of household expenditure on fuel and power.
- Much of this economic benefit comes from abolishing non-residential stamp duty
- This makes up 23% of total stamp duty revenues.
- It was included in the 1999 GST agreement but never abolished.
- A higher GST on its own would negatively impact housing supply
- Abolishing stamp duty on newly constructed housing would offset this and should be part of any GST agreement with the states and territories.
Media contact: Fiona Benson | M 0407 294 620 | E [email protected]