A significant portion of the country’s top economists thinks capital gains tax concessions for property investors should be scrapped according to new research.
The Economics Society of Australia (ESA) survey asked 27 highly ranked Australian economists whether CGT for housing investment should be removed because it overstimulates the market and 44 per cent of them agreed.
That number was actually the majority in the survey, with 40 per cent saying they disagreed and around 15 per cent saying they weren’t sure.
The University of Queensland economist Paul Frijters agreed with CGT elimination when he responded to the survey, quoted in Australian Broker.
“This has been a no-brainer for years,” he said.
“Subsidised housing purchases increase the price of houses and distort incentives.”
“One probably would need to phase them out though rather than remove them in one go because so many people are heavily leveraged on the expectation that the subsidy would remain.”
Adjunct professor of economics Rodney Maddock however, from Monash University, said he thought CGT concessions should stay.
“Their removal would lead to inflationary gains being taxed, even when there has been no real increase in value, that would be bad policy,” he said.
“The fundamental problem is not with the principle of concessions for capital gains but rather with the level, the current concessional treatment is excessively generous.”
“Cutting the rate drastically would reduce most of the potential for abuse.”
Most economists in the survey said they wanted to see a more holistic approach to tax reform and housing market supply and demand focusing on a wide range of aspects, not just CGT reform.