Tax mix switch would deliver $10bn pay-off

The national economy could be up to $10 billion better off every year and still raise more revenue for governments if Australia relied on a better mix of taxes, according to new modelling released today by the Property Council of Australia.

The new research shows that today’s leaders’ summit should use GST reform to fund the abolition of stamp duty and other inefficient taxes to boost the economy.

A comprehensive report by ACIL Allen Consulting commissioned by the Property Council, Modernising Australia’s Tax System, analyses three tax reform packages that would unlock billions of dollars in economic growth simply by replacing inefficient taxes with more efficient ones.

All three packages use increased GST revenues to retire inefficient state taxes with some options also incorporating company tax cuts or Henry Tax Review recommendations to boost growth.

Economic modelling shows the tax mix switch packages could increase Australian economic welfare (a broad concept incorporating GDP, incomes and labour) by up to $10 billion, while still raising up to $7.8 billion of additional revenue for governments.

Property Council chief executive Ken Morrison said the report demonstrates that Australia’s political leaders have the opportunity of using tax reform to grow the economy.

“Tax reform should be seen as an opportunity to grow the Australian economy, boost investment and create jobs. Changing our tax mix can deliver this,” said Mr Morrison.

“We can both grow the economy and raise more revenue if we rely on a better mix of taxes than what we have today.

“That means being bold enough to embrace GST reform to abolish a range of inefficient state taxes.

“Stamp duty is not just a big cost to homebuyers, it is also a handbrake on economic activity which impacts the whole community.

“Each of the packages modelled in this research is revenue positive, providing the capacity to compensate lower income households for an increased GST.”

Last week a poll of nearly 2000 people from Newgate Research on community attitudes towards tax reform, commissioned by the Property Council, found nine out of ten Australians surveyed supported tax reform that made the system simpler and fairer.

“Our research shows broadening or increasing GST is not the political poison it once was and is now viewed as the fairest of all taxes by Australians,” Mr Morrison said.

“Almost three quarters (72 per cent) of people think it is inevitable that the GST will increase over the next decade.

“This is in stark contrast to stamp duty, with 70 per cent of Australians supporting the idea of abolishing it completely, with strong support for increasing the GST to retire stamp duty.

“Tax reform will not only make the Australian economy stronger and Australians better off, but is overwhelmingly supported by the community.

Attached: Fact Sheet – Tax Reform = Economic Growth + More Revenue

The ACIL Allen Consulting report, ‘Modernising Australia’s Tax System, and the Newgate Research community poll are available at www.propertycouncil.com.au.

Media contact: Matt Cross | M 0402 155 372 | E [email protected]