The Grattan Institute has released a report saying that a new broad-based property levy could raise $7 billion a year and fund the abolition of stamp duty.
The working paper from Grattan, an independent think tank, is called Property Taxes and is focused on addressing Australia’s weakening fiscal position.
The paper argues that a property tax could be an alternative to just raising the GST to pay for the proposed abolition of stamp duty, considered by many to be an inefficient tax.
According to the Grattan Institute research, a levy of $2 for every $1000 of unimproved land value would raise $7 billion a year with an annual charge of $560 on the price of a median-valued Melbourne home.
Previous research from Grattan recently highlighted how state budgets are currently under pressure with spending growing faster than GDP, and Grattan CEO John Daley spoke about this to Brokernews.com.
“Attention is focussed right now on the worsening Commonwealth deficit, but states and territories have a looming funding gap, and have provided little insight into how they are going to fill it,” he said.
The Property Taxes paper presents the argument that a broad-based property levy calculated from the council rates base would be the best way to go about filling that gap.
“While property taxes can be unpopular because they are highly visible and hard to avoid, they are also efficient and fair, and don’t change incentives to work, save and invest,” Daley said.
“Unlike capital, property is immobile – it cannot shift offshore to avoid taxes. Over the last 25 years, taxes on property and property transactions have been the only significant ‘growth taxes’ for States, with revenues keeping pace with the economy.”
Mr Daley said other benefits of a property levy are that that it would be manageable for property landowners and would protect low-income earners.
“Low-income retirees with high-value houses could defer paying the levy until their house is sold,” he said.
Mr Daley said making the transition from a stamp duty to a property levy would provide more stable tax revenue for state governments and add around $9 billion in annual GDP.