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, to be delivered to the Federal Government, stamp duty would be replaced with a broadbased land tax, which experts say would increase first-home buying and could increase housing affordability.
The tax would initially be opt 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 on Wednesday, 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. And 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.
But Mr Perrottet said that could be offset by a 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 GDP, 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 someone like New Zealand, it is 30 per cent of their broadbased tax base.”
Despite failed attempts to make these dramatic changes in the past, the NSW Treasurer said there was an appetite for change 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.
“And 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 the PM in August last year.
He was joined by former deputy prime Minister John Anderson, former New Zealand PM Bill English, high profile 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.
Originally published as ‘Inefficient’ tax on chopping block