As today’s editorial in The Sydney Morning Herald begins: “A much-needed overhaul of property taxation is finally afoot.”
Both our major mastheads have chosen to focus on stamp duty in their daily editorials. Here’s a taste of both.
Good riddance to stamp duty: Herald editorial
This renewed momentum for change is positive. But the overhaul of property tax will be complex and the NSW government must now make sure the best possible reform path is adopted.
The demise of stamp duty has been a long time in the making. Criticisms of this outdated levy, introduced in 1865, have been around for decades. All taxes impose an economic cost, but multiple studies have found the effects of stamp duty on property transactions to be especially wasteful and inequitable.
It has been blamed for exacerbating Australia’s housing affordability crisis and discouraging people from moving to accommodation appropriate to their needs. Stamp duty is an important source of revenue but because it is subject to fluctuations in the property market, it can be volatile. This undermines efficient budget planning.
The 2010 Ken Henry-led tax review concluded stamp duty on property transactions is “inconsistent with the needs of a modern tax system”.
There is an encouraging consensus about what should replace stamp duty.
Stamp duty reform should be on the agenda: The Age editorial
Economist Ken Henry famously derided stamp duty on housing transactions as a “diabolical tax”: clumsy, inequitable, antiquated and a drag on the economy. The case against it is overwhelming. It adds another impediment for first home buyers. It encourages current home owners to over-invest in larger properties by renovating and enlarging rather than moving.
It punishes those home owners whose circumstances, such as divorce, force them to sell and buy again. It discourages downsizing, which would free up larger homes for growing families. More broadly, economists deride its effect on the labour market, discouraging home owners who might otherwise move suburbs or states for work.
Indeed, in their seminal 2010 report into Australia’s tax system, Henry and his colleagues were unequivocal about stamp duty: it had to go. In its place, they recommended some form of ongoing land tax. Only the ACT listened, embarking in 2012 on a 20-year transition to replace stamp duty with higher property rates.
In Victoria, despite the strong case for reform and constant pleas from all manner of lobby groups and industry bodies across the political spectrum, our governments have not put forward an alternative system.