Land tax no magic pudding

Land tax no magic puddingAs business and community groups call for stamp duty to be abolished, the Property Council warns that a simple swap with land tax is not politically palatable.The Australian Council of Social Service (ACOSS) has released a new policy briefing paper, highlighting the economic cost of stamp duty.ACOSS is calling for governments to replace property stamp duties with a broad-based land tax, which it says would strengthen future economic growth and jobs, improve housing affordability, put downward pressure on rents, remove barriers to market entry and encourage greater investment in new stock.The ACOSS paper follows a similar paper released by NSW Business Chamber earlier this month.Property Council of Australia chief executive Ken Morrison says business and community groups continue to raise stamp duty as the “first port of call” for tax reform.”We do not necessarily agree with some parts of the ACOSS paper, but its overarching view that stamp duty is an inefficient tax that hurts Australians is right,” he says.Economic modelling has found that scrapping stamp duty and replacing it with an efficient tax would provide a $3.3 billion boost to GDP, increase consumption by $9.7 billion and create 00 new jobs.It would also remove a major inefficiency in housing markets, increase the turnover of housing from an average of 13 years to eight years, and save purchasers tens of thousands of dollars.But while the abolition of stamp duty must be a top tax reform priority, Morrison says it is not realistic to expect this to be achieved solely through a new land tax on the family home.New research by Deloitte Access Economics, commissioned by the Property Council, suggests that a straight stamp duty for land tax swap would not be politically feasible.”While the purists like the idea of swapping one property tax with another, Deloitte found it would cost the typical household $2360 a year, or about $45 a week – and that is without carve-outs for low income earners.”This is an average figure and many home owners in our cities would pay considerably more. A typical suburb in Sydney or Melbourne with ‘million dollar values’ would see householders pay $100 a week.”This is not likely to be politically palatable. Land tax is not a magic pudding and there will be real political limits to applying it to the family home.”However, we should not forget that the typical householder in Sydney now pays $35,000 in stamp duty and $32,000 in Melbourne and these costs are put on to mortgage repayments.”Morrison says the substantial economic benefits within reach make it imperative that governments collaborate.”Stamp duty might be a state tax, but it’s weighing down the national economy.”Download Deloitte Access Economics – The revenue raising potential of land tax.