Hannah Moore* reports on a bold plan to abolish stamp duty and replace it with an increased GST.
NSW Treasurer, Dominic Perrottet has announced bold plans to end stamp duty as one of many tax reforms to help the nation recover from the economic hit of Coronavirus.
Under the recommendation, which he has sent to the Federal Government, stamp duty would be replaced with a broad-based land tax, which experts say would increase first-home buying and could boost housing affordability.
The tax would be opted in under a lengthy transition period, allowing buyers to pay stamp duty once or land tax annually.
In a speech to the National Press Club in Canberra, Mr Perrottet said stamp duty was “by far the most inefficient tax”.
“[Stamp duty has] grown since the 1850s, and it‘s just become an impediment for transactions to occur,” he said.
“I mean, it stifles economics and jobs growth for all States right across the nation. It‘s time, I think, that we did something about it.”
Stamp duty is NSW’s second-largest revenue stream, and those earnings could take a dive with a switch to land tax.
However, Mr Perrottet said that could be offset by a Goods and Services Tax (GST) increase or by broadening the tax’s base.
“GST is one of our most effective taxes, and it has a relatively low economic cost, but we definitely do not use it as much as many other nations,” he said.
“As a share of gross domestic product, GST revenues are the third lowest of all OECD countries, leaving us reliant on higher income taxes and complex funding agreements to fund frontline services and infrastructure.
“The GST provides about 12 per cent of tax revenue in Australia, whereas somewhere like New Zealand, it is 30 per cent of their broad-based tax base.”
Despite failed attempts to make these dramatic changes in the past, the NSW Treasurer said there was an appetite for change that he believed would help turn his recommendations into legislation.
“As we‘ve gone around and talked to various people, we’ve felt the momentum for change is strong, and it’s not just from a few individual leaders, it’s from a broad base across the sector — business, academics and in the community,” he said.
“For the first time in many years, it appears that we have the mechanisms to deliver quite genuine reform…it is a good opportunity, and we need to grab it.”
Mr Perrottet was asked to conduct a review into Federal financial relations by Prime Minister, Scott Morrison in August last year.
He was joined by former Deputy Prime Minister, John Anderson, former New Zealand Prime Minister, Bill English, former senior Public Servant, Jane Halton, Professor of Constitutional Law and Director of the Constitutional Reform Unit at the University of Sydney, Anne Twomey, and John Freebairn, holder of the Ritchie Chair of Economics at the University of Melbourne.
*Hannah Moore is a reporter at news.com. She can be contacted at [email protected]
This article first appeared at news.com.