The peak lobby group for the real estate industry, The Property Council of Australia (PCA) says stamp duty on property purchases should be scrapped because it’s “an opportunistic tax grab”, arguing that the state government cash cow “offers no services, lacks accountability, and the community is increasingly questioning where the funds are being spent”.
The PCA claims that because of the big rise in real estate prices the “average stamp duty costs have increased by between 527% and 795% across the states and territories in the last 20 years, slugging homebuyers and throwing up a major barrier to home ownership in Australia.”
That’s a massive increase. And anyone who has a bought a property over the last few years can attest to the additional impost that stamp duty adds to the overall purchase price of a home.
But to be fair, the PCA’s research also highlights that that property prices are up between 347% for Darwin and 497% for Sydney over the same period. That means its not all about a tax gr. PCA members, such as real estate agents, are also benefitting from rising prices and probably pocketing a lot more cash as well.
It is certainly true that stamp duty and conveyances make up a large proportion of state and territory tax revenue. But Federal government data suggests the take is a lot less than the 46% claimed by the PCA. But, either way, whether its 46% or the Federal Treasury’s estimation of 24%, the PCA’s call to scrap stamp duty will leave a massive hole in state and territory budget coffers.
Sydney’s booming property market essentially put the Baird government’s 2013-14 budget back in the black last year.
The PCA’s plan to make up for the lost government revenue is an increase in the GST, which they argue is too low and should rise.
The Property Council recognises that states and territories would require a replacement revenue source. Increasing the rate and/or broadening the base of the GST is the most logical option. The Tax Discussion Paper specifically emphasises the efficiency, simplicity and transparency of the GST, and points out that Australia’s GST rate is substantially lower than OECD nations, with our close neighbor New Zealand currently at 15%.
There is no arguing the GST is the future of the Australian tax system. Whether by political will or necessity it is likely to need to be increased in the years ahead as the working population relative to total population shrinks. It is also true, as the property council argues, that stamp duty was one of the inefficient taxes slated to go when the GST was first introduced.
The PCA also says it is “interested in working with governments on other potential pathways to achieving this reform. An alternative revenue source that has been canvassed by state governments such as ACT and South Australia is the imposition of a broad-based low rate land tax”.
But when Australians recognise exactly what the PCA is recommending they might not be too keen to embrace the ideas. Both the GST and a broad-based land tax would spread the burden from the property buyers PCA members are selling to, across to the entire Australian population, and entire economy.
It would also mean that state governments cede control of a major revenue stream – stamp duty goes straight into state coffers, so if your state’s market is booming, the state gets the direct benefit – to the federal government and the formula for GST allocation that currently has Western Australia complaining loudly is unfair.
That’s not to say it isn’t the right way for the Australian taxation system to progress. But like all changes to the tax system there are winners and losers across the economy and hardly ever in equal measure. The PCA’s proposal seems to favour its interest group above others.