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New modelling shows 10bn pay-off for tax switch

  • July 21, 2015

New modelling shows $10bn pay-off for tax switch

Australia’s economic welfare would improve by up to $10 billion and raise more revenue for governments through a better mix of taxes, finds new modelling commissioned by the Property Council.

A comprehensive report by ACIL Allen Consulting on behalf of 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.

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

Economic modelling finds tax mix ‘switch packages’ could increase Australian economic welfare – which incorporates GDP, incomes and labour – by up to $10 billion, while still raising up to $7 billion of additional revenue for governments.

According to Property Council chief executive Ken Morrison, the report underscores why the abolition of inefficient taxes like stamp duty should be on the agenda at Wednesday’s COAG leaders’ retreat.

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

Morrison says increasing the GST is no longer “political poison” and is now viewed as the fairest of all taxes by Australians.

A recent report from Newgate Research on community attitudes towards tax reform, commissioned by the Property Council, found nine out of 10 Australians surveyed supported tax reform which made the system simpler and fairer.

The nationwide survey of 1957 people found 72 per cent think it is “inevitable” that GST will increase over the next decade. In comparison, 70 per cent of Australians support the idea of abolishing stamp duty, with strong support for increasing 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,” Morrison adds.

The three tax reform options assessed by the report were: