Abolition of harmful taxes a key test of tax reform

Implementing meaningful tax reform hinges on the preparedness of Government to abolish Australia’s most inefficient taxes and fundamentally redraw the tax base to grow the economy.

The Property Council of Australia welcomes the debate that can now commence in earnest around the future direction of Australia’s taxation system.

Chief Executive Ken Morrison said the debate on tax reform must lead to real change and be more than just an academic or political exercise.

“Governments from both sides of politics have been talking tax reform for years, but the road to real reform remains untraveled,” Mr Morrison said.

“The re-election on the weekend of an incumbent government on the back of a strong reform agenda is evidence that reform isn’t out of reach.

“With the tax white paper process officially kicking off today we have a new opportunity to reset the course for reform and use it to put in place a more efficient set of taxes.

“This needs to be at the heart of the tax debate: how we achieve economic growth through a better tax mix.

“As previous reviews have clearly shown, we have taxes in the armoury which act as a handbrake on economic and jobs growth.

“It won’t be true reform unless the Government is prepared to do away with the worst taxes, and stamp duty is at the top of this pile.

“The tax discussion paper points to stamp duty as a tax with high costs to economic growth and living standards.                

Stamp duties are some of the most inefficient taxes levied in Australia.

Stamp duties also impact on consumers by increasing the cost of buying and selling houses. As house prices increase over time, unadjusted progressive tax rates also increase the tax burden associated with stamp duty. For example, the burden of stamp duty on a median-priced house in Melbourne has almost doubled over the past 20 years ” from 2.67 per cent of the sale price in 1988 to 5.16 per cent in 2011. (Re:think, Tax Discussion Paper, p.145-146, March 2015)

“Taxes are supposed to lean lightly on the economy, not act as a barrier to economic activity, job creation and prosperity. But that is exactly what stamp duty does, and that is why the last major tax review recommended its abolition.

“Stamp duty inhibits economic activity, it acts as a drag on new construction, on job creation and housing mobility.

“We recognise that abolishing stamp duties would mean replacement revenues would need to be provided to fund necessary state government services and we are keen to participate in this debate.

“The Property Council will be releasing new research and a detailed tax position paper to contribute to this debate.

“Maintaining a strong property and construction industry is vital to Australia’s economic well-being.

“Housing supply and affordability are pressing issues affecting the majority of Australians and the Government can not afford to risk exacerbating these pressures further.

“Measures need to be taken to ease these pressures and bring on supply, with Sydney alone facing a shortage of more than 190,000 in the next decade.

“Property and construction is the nation’s largest collective taxpayer, contributing $34 billion in real estate specific taxes alone.

“It is time for a clean sweep, time to get rid of the bad taxes that impede growth and time for a new blueprint for microeconomic reform that will put Australia on the best path for economic growth, more jobs and the best standard of living.”

 

Media contact:  Fiona Benson  |  M  0407 294 620  |   E  [email protected]