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ACOSS Calls For Australian State Taxes To Be Replaced

by Mary Swire, Tax-News.com, Hong Kong

19 April 2016


The Australian Council of Social Service (ACOSS) has called for the replacement of state stamp duties with a broad-based land tax.

ACOSS has published a new policy brief, "The case for tax reform: Stamp Duties and Land Tax," in which it urged the federal Government to design and implement the necessary changes. It argued that while states and territories are increasingly reliant on property stamp duties to raise revenue, stamp duties are an unstable, inconsistent, and largely unpredictable source of revenue as collection levels are tied to volatile housing markets.

ACOSS also said that existing land tax regimes contain broad exemptions for owner-occupied housing, resulting in distortions in the housing market, upward pressure on rents, and a reduction in the potential land tax revenue base. Land taxes are currently levied on the aggregate value of a landowner's holdings, rather than the individual property, which, according to ACOSS, discourages broader investment in housing.

ACOSS said that reform would ideally "minimize exemptions and broaden the land tax base as widely as possible in order to yield greater revenue for state governments and lessen distortions in the market." It added that a broader land tax "would need to be coupled with appropriate concessions, deferrals, and exemptions for low-income groups, such as pension[ers] and other income support recipients and people who are 'asset rich and income poor.'"

ACOSS suggested that to account for the prior payment of stamp duty by existing owner-occupier landholders, credits could be offered when determining the rate of land tax that should apply to them.

ACOSS likewise recommended a transition period during which the proposed new regime would be phased in. It said: "Over this period, broader land taxes would be gradually phased in while property stamp duties are gradually phased out. States and territories may require additional support from the Commonwealth to cover fiscal gaps that arise as stamp duties [are] phased out and broader land taxes phased in."

ACOSS CEO Cassandra Goldie said: "If the goal of tax reform is economic growth, then the best reform option is a switch from stamp duties to efficient land taxes. This necessary reform should be implemented before consideration of further tax cuts to individuals or companies, at a time when governments have a serious revenue problem. The case for personal income tax cuts in the current environment is weak. The combined effect of eight successive tax cuts over the past decade is that people are now paying lower tax rates than they would have been before the cuts, and that will remain the case until about 2020."

"We understand that this will be a politically difficult reform, but it is a fundamental one that will require leadership. We also recognize that low-income earners and those who are asset-rich and income-poor, such as farmers and retirees, would be impacted and might need to be compensated. For instance, owner-occupiers who had recently paid large stamp duties could be given credits to make the system fair in the interim."

"The federal Government cannot abrogate its responsibility here. If the Prime Minister is serious about a growth friendly Budget he needs to allocate some funds to support the states and territories to steer the path towards a broad based land tax in the interests of economic growth."

TAGS: individuals | tax | investment | property tax | Australia | tax rates | stamp duty | tax reform

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