Abolishing stamp duty

Last week, Treasury Secretary, Dr Martin Parkinson made a convincing case for why state stamp duties should be abolished:

Treasury boss Martin Parkinson has backed a move to wind back or abolish real estate stamp duties saying they make it hard for workers to move west and north to take advantage of the mining boom.

Asked at an Australian Industry Group forum which taxes were the biggest drag on productivity, he nominated state taxes on housing which he said inhibit economic adjustments, “whether they be individual workers moving from the Illawarra to Queensland or Western Australia to work in the mining sector, or whether a firm is trying to restructure its business”.

“We need to encourage change, not to stand it in its way. That’s why I make specific reference to state governments,” he told the conference.

NSW made $3.9 billion from real estate stamp duties in the year to June, around one third of the national total. Abolishing the could be paid for by increasing the goods and services tax by a quarter, from its current rate of 10 per cent to 12.5 per cent.

The Henry tax review reported that “ideally there is no place for stamp duty in a modern tax system”. It found they discourage property turnover turnover and penalise property improvements…

“The only positive feature of stamp duty – its relative simplicity – has long since ceased to justify its continued use in the face of the costs it imposes on Australian society,” the review said, recommending they be replaced by a broad land tax.

Professor Neil Warren who reviewed state taxes for the Independent Pricing and Regulatory Tribunal in 2008 told the Herald it was universally acknowledged among the states that stamp duties should go, but said the transition was difficult.

“What about someone who has just bought a house. Does she have to also pay the replacement tax? If so she is taxed twice. If the replacement tax is on land it should be the unimproved value so as not to reinstate one of the faults of stamp duties.”

Certainly, Australia’s state and local governments have for the past decade rode on the back of skyrocketing property prices. The revenues received have funded all kinds of expenditure – from public servants’ salaries to health care, schools and infrastructure. The below RP Data chart shows the extent of State and Local Government reliance on property taxes:


 And around 40% of this tax take has come from stamp duties:

Victoria is the highest taxing state, with the amount of tax payable on a median priced Melbourne dwelling  amounting to around $22,000, or nearly 5% of the median purchase price:

Purchase taxes and fees on a median priced Melbourne dwelling currently consume around a third of one year’s median household disposable income (calculated from the most recent ABS Household Income Survey and extrapolated by wages growth):

This means that an ordinary Melbourne family is currently required to sacrifice around 17 weeks of pay for the privilege of purchasing a home:

So let’s summarise some of the key arguments against stamp duties:

  1. They are highly inefficient, causing a mismatch between the demand for and supply of particular types of housing. This occurs because stamp duties discourage empty nesters from moving from their large family homes into more appropriate accommodation (e.g. townhouses, units and apartments). In turn, these family-friendly homes are unavailable to young families.
  2. Stamp duties are highly inequitable, unfairly penalising households for moving into accommodation that better suits their needs. For example, why should young families be penalised tens of thousands of dollars for the privilege of moving from an apartment into a family home? By the same token, why should empty nesters be penalised for moving from their family homes into a unit?
  3. By significantly increasing the costs of moving, stamp duties reduce worker mobility and potentially exacerbate labour surpluses/shortgages in different parts of the country. For example, a typical household relocating from Melbourne to Perth to work in the mining industry would forgo around 14 weeks of pay just to cover the purchase taxes and fees on a median priced Perth home.

Do you notice how I have not discussed first home buyer housing affordability above? This is because the costs of stamp duties have more to do with the efficiency and equity of the tax system and less to do with housing affordability, since there are schemes that at least partially reimburse the costs of stamp duties to first home buyers, and the costs of stamp duties are typically shared by both the buyer and seller.

With the state governments receiving around $12.5 billion per year in revenue from stamp duties, abolishing stamp duties would be particularly difficult. Two potential options are to replace stamp duties with one or a combination of the following:

  • Increasing the rate of GST; and/or
  • Implementing a broad-based land lax on the owner-occupied home.

Increasing the rate of GST would be relatively simple and efficient. However, since the GST was introduced in 2000, all major political parties have vowed that they would never support an increase in its rate.

This leaves implementing a broad-based land tax. Cameron Murray articulated nicely the arguments for land taxes in an article on his old blog:

First, they discourage speculation. They provide a disincentive for land ownership without immediate prospects of productive use. This idea relates closely to the current (and let’s be honest, old and ongoing) debate about housing affordability and housing supply. A land tax would hinder the ability for developers to ‘land bank’ – artificially stifling supply of new dwellings. It will increase competitiveness of supply in the land market. This is one reason even the proponents of a housing shortage should embrace this tax.

Indeed, they may even encourage planning changes by governments (maybe through pressure on local governments by the federal government) to allow greater density to increase their tax base.

Second, a land tax has the effect of encouraging efficient use of land and investment in buildings. Those wishing to increase density in the cities to reduce urban sprawl should also see benefits here. Owners of land in urban areas would have more incentive for subdivision, and increasing density, to avoid this tax.  In fact the economic success of Hong Kong, Taiwan and Singapore has been attributed to high land taxes – a path that Korea is keen to follow.

Third, they are a difficult tax to avoid, and administratively simple (indeed small land taxes are currently enforced in all States for owners with land holdings above a threshold value). Land ownership is well documented, and tax evaders could have their land compulsorily acquired.

Unfortunately, harnessing public support for broad-based land taxes would be difficult for a number of reasons. First, as also noted by Cameron Murray, land taxes would fall disproportionately on wealthier members of society, since they have the largest landholdings. They are likely to lobby hard against such a tax and popularise the argument that land taxes will add costs that will crush land ownership aspirations. Developers with large land holdings are likely to make similar ructions.

Second, the general public is less likely to support a tax that is required to be paid regularly by everyone than a larger tax paid irregularly by small minority. With only around 5% of the nation’s homes turning over each year, stamp duties only effect a small proportion of the population annually. And once a homeowner has paid their stamp duty bill, they are less likely to support changes that would require them to pay tax again.

What are your thoughts? Would you like to see stamp duties abolished? And if so, what form of taxation should take its place?

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Comments

  1. Land Tax make eminent sense. The arguments, similar to those outlined in your piece, apply equally ,here, in New Zealand. But with a smaller, less dynamic economy than yours ( NB: we don’t have S/D or CGT), we may have little choice other than to impliment the tax to meet the ongoing budgetory shortfalls. After the November elections perhaps, when all past promises can lapse? And as we are trying to harmonise our policies, taxation and all, with yours ( or yours with ours?!)we shall see.

  2. Stamp duty on conveyances is optional because conveyances are optional, even for home owners who are forced to move: http://is.gd/sd_opt .

    One way to reduce the avoidance incentive is to levy the duty on the real capital gain and make it nominally payable by the vendor – not because that makes any difference to the final incidence, but simply because the vendor knows the last transfer price and is therefore better placed to estimate the duty liability from any proposed sale price.

    Under this arrangement, a transfer of title does not create a tax liability, but merely realizes an already accumulated liability. Vendors who have bought more recently are not discriminated against, because their capital gains tend to be smaller. One could even add an ultra-generous “no retrospectivity” feature, whereby vendors who bought before the change have the option of paying duty as if they had sold and bought back on the last day before the change, so that any vendor who pays more under the new system (than under a continuation of the old system) does so because the value of the property has increased since the change.

    • From your link Gavin-

      “By buying the home you want to invest in and renting the one you want to live in, you can optimise both decisions independently, avoid stamp duty on future changes of address, and claim the negative gearing deduction. These advantages are likely to prevail over the capital gains tax liability and, where applicable, the loss of the FHOG”

      I can tell you that many of my friends – 20 and 30 something high earning professionals – do exactly that (as do I). They may have had a little chat with me first.

      But I’m not sure what you mean about “a transfer of title does not create a tax liability, but merely realizes an already accumulated liability”

      Doesn’t the argument that stamp duty stops people better organising themselves in the existing housing stock because it is a cost for home owners to trade, still apply? You still avoid tax by not selling.

      • If the stamp duty is on the purchase price, the purchase both creates and realizes the tax liability. Hence the more often you sell one property and buy another, the more tax you pay; and the more often a property changes hands, the more tax it pays.

        But if the duty is on the real capital gain, the taxable gain accumulates during the period of ownership and is realized on resale; hence the tax is a contingent liability which accumulates during the period of ownership and is realized on resale. Hence, if you sell and buy more often, you pay tax in a larger number of smaller instalments; and if a property turns over more often, it pays tax in a larger number of smaller instalments.

        If the stamp duty is on the capital gain, the effect of “not selling” is that the contingent liability continues to accumulate.

        Of course, if a property is held for long enough, the capital gain approaches the entire value, so that a stamp duty on the capital gain approaches a stamp duty payable by the vendor on the entire sale price. Thus, if the duty is on the capital gain, it makes a difference if a property turns over once every 25 years instead of once every 5 years, but not so much difference if it turns over once every 5 years instead of once a year. But if the duty is on the purchase price, every change of title counts.

  3. Councils are not to make money but provide a service that the users should pay for …
    now that should change the method of assessing rates to a service provided rate not a ad velorum basis (I think they use a hybrid in my area) they can price in future projects as an extra service.
    stamp duty take or leave it … I say leave it… as it
    a) gives bloggers something to complain about
    b) is an inefficent money grab in the name of “the cost of doing business”
    c) as propertyies go up by exactly 7.2% pa then it will only take about 4 months to get your money back …

  4. Can’t do stamp duty reform without land tax reform.

    The Henry Review’s recommendations for a broad-based land tax have been modelled by Gavin Wood. For a preview of his findings – and a persuasive case for reform – see his presentation at:

    http://www.ahuri.edu.au/calendar/event_20110915.html

    Also – there is an affordability aspect to this. Land tax gets capitalised into lower land prices: about 10 per cent lower in inner Melbourne, according to Wood.

  5. You make a lot of really interesting points Leith as per usual. As your analysis rightly points out, Victoria is consistently the highest taxing of all the states and Melbourne is the most expensive city for title transfers and land tax.

    We had a state election here in Victoria last year and there was lots of noise coming for pollies about the dreadful burden of stamp duty and land taxes – however that’s all it amounted to… noise. Any talk of change fails to take into account the palpable lack of political will to stem the rivers of money coming in from stamp duty and land tax that pretty much saved the Bracks/Brumby govt’s arse right through the last decade and will continue to prop up Ted Baillieu’s bottom line as well (at least he’ll be hoping it does). It’s just like pokies reforms proposed by Andrew Wilkie – no state government is prepared to admit the real harm done by pokies to vulnerable people because there’s another river of money ($1 billion plus) coming in from there… the list goes on. All you will get is lots of noise and nothing else. Just like negative gearing at a federal level, there simply isn’t the political will to tackle endemic problems in the tax system because real reform will cost money and/or risk alienating small time landlords/pokies barons.

  6. Land Tax has to be up.

    No doubt, captial gains from land are broadly recongized as “Lazy money”. This is the main reason why In USA, europe and most of Asisa countries, governement is charging high land tax from landlord. In those countries the politicians doesnot want the money/wealther been stored in land. they want the captial to used for production instead of sitting on the land. So the country and whole nation will always full of competition and not get lazy.

    Australia is special.the Land TAX is “Zero”. Plus NG, heaps of money has been piled on Land. This is definetly “bubble”.

  7. Diogenes the Cynic

    I think there is little argument that stamp duties are inefficient and I would support abolishing it.

    However there are a few key issues before you could simply do this:
    (1) What would replace those revenues for the states? At the Federal level if you abolished negative gearing and the capital gains discount both of which distort the housing market and go to mostly higher income households then you could probably pay for stamp duty reduction. But the states will want to hang onto this money.
    (2) If land taxes are the desired option then you would have to examine local council rates which are effectively a land tax. I think land taxes are also a good option but it will be large bun fight.

    The interesting thing about this debate is the timing. If residential/commercial property in Australia declines in value by 40-50% and volumes dry up then you will probably see state governments trying to raise the stamp duty rates in a vain effort to plug their falling revenues from transfer duties. There are hints of this already with the winding back of FHO stamp duty discounts. Abolishing stamp duty will become more attractive to the States if they see those rivers of gold drying up.

    • Really good points.

      You’d hope that a move to land tax from stamp duty would provide a more consistent revenue stream for State Governments, meaning that there may not be a revenue shortfall.

      +1 on the timing issue. I imagine that vested interests will put up less opposition to a switch from stamp duty to land tax, if they see their land values stagnating/falling.

  8. Ken Henry likes a Land Value Tax too (plus RSPT): it doesn’t distort behavior, it is impossible to evade and it is equitable.

    The benefit? Removing 125 taxes that DO distort behavior, are easily evaded and are regressive. That ends a lot of forms and admin and lawyers and accountants.

    This switch is an absolute bargain we should embrace.

    AHURI has modeled the effect of LVT on Melbourne: https://custom.cvent.com/F3F5AEDB537641E496237F57320F14B5/files/event/3d27128f42b6465d97194baa4576c26b/8e1bc9e21e864787bd072f790226448f.pdf

    Imagine an Australia with very low (nil) income taxes and no enterprise taxes. This change would make Keating’s economic reforms look like thumb-twiddling.

    The land can fund all this. And it diverts entrepreneurial activity from rent-seeking to commerce.

    I want an economic golden age and LVT would deliver just that. It would make Australia a magnet for jobs and investment. Please consider.

    • UE, you have nailed a can of worms. 🙂

      This is exactly the line Prosper Australia have been pursuing for, oh, 120 years.

      http://www.prosper.org.au/2011/09/14/please-please-mr-premier/

      As far as I know only the Australian Democrats have LVT at all 3 levels of govt. in their platform. The Greens love a Mining Tax, but are leery of ‘complex’ reforms. The ALP was once all for an LVT but moved right away. I can hear King O’Malley doing cartwheels in his grave.

      • The Democrats also have a policy inclination to get rid of the states, but i dont think anyone is particularly interested in voting for them

  9. I would like to see reform of the whole state/federal revenue fiasco.

    States are responsible for the delivery of the bulk of the services but have lost the bulk of the revenue raising ability.

    Logically, getting rid of the states, funding health, law & order, national parks via Federal, consolidating a lot of the other crap like rego’s and having it administered at a regional level makes a lot more sense.
    The other aspect is that NSW also has a land tax for investment properties.

    I suspect that if they increased the GST, the State govts would still not get rid of the stamp duties.

    • I agree there is no reason for the states and territories to exist in modern Australia. The consolidation of 8 states and territories in the federal government would make it possible to get rid of so many useless bureaucrats which would be a huge saving for the country.

  10. Unfortunately vendors will add the reduction in stamp duty onto their price. Duty still needs to be reduced but I suspect falling values will do this anyway. All gov’ts need to reduce all their charges to help the consumer along. This can be achieved by imnproving productivity at the workplace and cutting waste.

  11. I’m not sure why it would be difficult for stamp duty to be abolished for recent buyers. Couldn’t the government just figure out how much each land owner would be taxed, and the ones that they have recently collected from (stamp duty) would get a land tax holiday until the amount they paid in advance is caught up on?

    Surely the state governments have the information on file to keep track of this?

  12. Can I suggest that as a transitional policy, those who have paid stamp duty recently can offset this amount against their future land tax costs.

    Either wholly or provide a 20-40% discount, so as to “ease” in to the new arrangement.

    However, like most effective policy, this one will be shot down because the 0.1% who have the influence will make sure it dies in flames, either covertly through political negotiation or overtly by using trolls and flamethrowers….

  13. Looks like good policy to me. Perhaps if the ‘Economic Realist Party’ (not rationalist, mind you) holds the balance of power next term, then this may just have a chance. Anyone here care to run for office?

    • I’ve been thinking for a while that there is a need for an ‘economic realist party’. Not many people need to be voted in, just enough to hold the balance of power in both houses. For a lot of people the medicine of change would be bitter but so much needs to be done to properly prepare for the future as it will be, not as we would hope it to be.

  14. I’d also favour a broad based land tax to replace stamp duty, as it’s a state tax that is being replaced it should be replaced with another state collected tax. Increasing the GST instead just cedes more control of state finances to Canberra.

    Perhaps it should be called ‘State Rates’ to make it sound more appealing. Personally I’d rather pay a small annual charge than have to pay interest on a lump sum that is tacked onto a mortgage for many years. Might be a way to abolish payroll tax as well.

  15. Abolishing stamp duty will create a loophole for mortgage owners will ‘swap’ mortgages with another party to take advantage of negative gearing. Mortgagee don’t do this currently because unwinding the swap require stamp duty to be paid by both sides.

    When NSW tried to introduce a broad based land tax under Bob Carr, the media ran stories about pensioner being forced out of their home, causing it to be watered down. Politically speaking a land tax is toxic.

    I have another suggestion. Instead of a land tax, tweak the property laws so the land and houses can be separated. This allows the state government to release new green-field development where the land is leased, while the homeowner owns the house on top. Rates and Stamp duty for these kind of houses are exempted, but the council will continue to charge homeowner for services like garbage collection. Furthermore, negative gearing can not apply to these kind of dwellings.

    From a revenue point of view, the lease will act the same as a property tax. It can be sold politically as taking out the land component makes housing cheaper, This is however just the starting point,

    Eventually, the ‘vested interest’ will push to sell their land to the State and avoid the stamp duty. To fund this, a public/private ‘land trust’ EFT will be established, with the land being the underlying asset. Under this arrangement, land prices speculation will mostly take place on the land, while house prices itself remains insulated.

    When land prices rise, the lease paid by the homeowner will increase. To prevent an excessive blowout, the lease increase must be regulated. The regulated lease price will also acts as a deterrent against wild swings in prices, as it work both as a ceiling and as a floor.

    I believe this arrangement will be easier to implement implement than what is beign proposed.

    • There is a lot of merit in this idea.
      Anything different will help change the mindset. Even a shortage-denier like Cameron might support this idea because he would then get to see the land tax holding down resale prices. Even a shortage-acknowledger like me likes the idea.

    • “When NSW tried to introduce a broad based land tax under Bob Carr, the media ran stories about pensioner being forced out of their home, causing it to be watered down. Politically speaking a land tax is toxic.”

      It is an important point. A land tax would hit people who are “asset rich” (valuation rich?) but cash flow poor. The resulting social dislocation would be highly political. You’d have to empathasise with people who’d worked their whole lives to buy their house and then in their later years, with less capability to deal with such changes, to be forced from their homes because they don’t have the cash to pay for what they thought they’d already paid for.

      A land tax may be economically sensible, I don’t know whether it is or is not, but socially/morally such changes could be brutal.

      • The ability to defer the tax was in Bob Carr’s land tax as well. Politically, it made no difference. This is why the recent proposal by the Federal Government to introduce a “reverse mortgage” to fund nursing home care will suffer the same fate. “Pensioners” is a politically protected species, and the “Baby Boomers” have the weight of numbers behind them.

        Economic policies must take political reality into consideration. This is why I propose a hybrid system, along with a way to transition to a “land tax” being paid as a lease. Regardless of the merits, the land tax as proposed by Henry Tax Review can not survive a sustained campaign against it.

  16. Both stamp duty and land tax (include here municipla rates) are impositions that reduce demand and therefore land prices.

    Australian history has not shown that these taxes have had any significant -ve effect on land prices. Why?

    As UE as pointed out on numerous occassions, without both a reform of urban planning so that we have elastcity of supply land for housing development will remain “high”.

    With the continued availability of cheap credit, government beneficiaries of stamp duties or land taxes based on land values will ensure thet have policies to mximise land values and in effect capitalise the taxes into the land values.

    Stamp duty and land tax reform must come with urban planning and financial reforms or its just more of the same!

    • Happy to run with financial reforms, but town planning has seen reforms over the past decade opening up massive amounts of land for development.

      So clearly, I disagree on that part, and believe that land taxes will have the desired effect mostly through the added incentive for land owners to either use their land more productively or sell to someone who will.

      Remember, all taxes are incurred somewhere. We could be critical that income taxation give government the incentive to keep incomes high so they accrue more tax?

      • Cameron

        I and I’m sure others disagree strongly on the point of urban reform.

        I agree that Australia does not have an under supply of housing. But land for development is controlled and released through a non competitive process where the party controlling the release as well as the land owner benefit from high prices. That’s what needs reforming and what enables value based taxes to be capitalised.

        As governments do not control incomes then your income analogy does not apply

      • Nor do governments control the release of land to the market unless they are the existing owner (which is uncommon).

      • I actually think it is more common than we think. I am aware of two massive land releases , one near badgery’s creek and the other near Campbelltown, where the land was owned by a family company and the main shareholder was the wife of a infamous politician who happened to install the planning and environmental minister into her position and then rewarded her with being Premier.

      • As a simple mind game, Cam:

        What do you think would happen if government did control the level of wages which business pays? What do you think happens when governments control the wages they pay for “essential services”, relative to the rest of the community? What do you think happens to the salaries of Banksters when government support of banks which enables them to make large returns on capital is neither paid for or even acknowledged?

        Governments do significantly impact income levels through direct and indirect action and inaction. Same same for the price of land

      • “…town planning has seen reforms over the past decade opening up massive amounts of land for development. “
        So the implementation of urban growth boundaries (or “urban footprints”) over the past decade or so by Australia’s state governments has opened up massive amounts of land for development has it?

    • Agreed. The other thing that requires reform is immigration. If town planning and also the financial nonsense is fixed and it starts to lower house prices, this work will be undone if we allow a flood of immigrants to snap them all up.
      Immigration should be choked hard enough to bring down housing prices and keep them down.
      I often read about govt trumpeting a massive land release that will allow 2000 or so extra houses. Then I figure this is only enough to house 3 or 4 days worth of immigration.

      • I think we’ve got the space and the ability to cope with relatively high migration if we choose to. You can see that high population growth in Texas didn’t bubble prices. Houston has had much higher growth rates than Sydney for many years, even SE QLD has had close to double NSW rates of growth for 20 or so and yet really only bubbled recently.

        If we’re willing to invest in the infrastructure and not be too precious about farmland or existing suburbs, I don’t see why high migration should be too much of a problem. It’s only an issue because successive federal govts opened up migration, but didn’t give sufficient funding to the states to accommodate them.

      • Interestingly, QLD built more homes in the 1990s than it did in the 2000s. This suggests that QLD’s housing supply has become less responsive over the past decade as the higher prices as well as higher population growth did not cause a supply response.

      • If you could look into markets like Canberra or Darwin, both of which are near as expensive as Sydney for no apparent reason, and if anything, land prices in Canberra are higher than Sydney, I think there is a story there. If you can correlate price booms with changes in planning regimes, I think you will strengthen that side of the argument. I suspect there was a change in the ACT when it achieved self government, as from (dodgy) memory it used to be really cheap compared to Sydney in the 80s & 90s.

        Most of the ‘special case’, or ‘different here’ arguments don’t apply to Canberra. It’s not hemmed in by any geographical features like mounatins, not a desireable coastal setting, flat easily developed landscape, small population, nor is it subjectively seen as a cool desireable city – sh*thole is a more common description, people live there because they have to in a way. So it really should be a lot cheaper than Sydney, but it’s not.

      • Up until recently you had to go into a ballet in order to buy property in Canberra and you had to go through government selected developers. This News.com article from last year is interesting and describes the Canberra supply stangulation well:

        “The ACT’s government resorted to a “virtual” ballot after buyers camped out for a week in freezing temperatures to secure blocks of land… In Canberra’s Forde, a new suburb 14km north of the city, hopeful buyers spent up to a week queuing and camping… Developers eventually allocated numbers to potential buyers and sent them home… “There were campervans, people in caravans and tents – it was quite a sight,” Mr Lynch said of the buyers queuing a week ago to get a toehold in the Canberra market… “

        And this report from the ACT Auditor General is also interesting:

        ““the land supply and release process and programs to date have not been effective in achieving the Government’s stated objectives, which include meeting demand, providing affordable land and housing and establishing an inventory of serviced land…. ACT Government agencies have not used a robust model in identifying residential dwelling demand… Agencies have consistently under-estimated the apparent demand for residential dwellings within the ACT, and ACT Government land release targets have been significantly and frequently revised upwards in recent years. Despite the current accelerated land programs, there was evidence of a shortage of the supply of residential land, capable of being built on, to meet the pent-up and on-going strong demand.”

      • The situation in Canberra sounds like a total disgrace then, and then to remove any further competition in the market by telling you which developers to use, which sounds like third party forcing to me. What a joke, having to go into a lucky dip to buy land in the ACT…. it’s not an island.

        Would explain the textbook case of boundary hopping in this article http://blog.autospeed.com/2011/05/23/your-choice-to-make/

        The author has chosen to move to a little country town and commute about an hours drive each way to and from Canberra to avoid the huge prices.

      • It’s all too common I am afraid Hamish. I lived in Canberra for three years and saw the supply-side strangulation first hand. Many of the people working in the ACT commute from far-flung places like Bungendore and Yass where housing is more affordable. This is why I argue that urban consolidation measures like growth boundaries often lead to increased sprawl and potentially greater fuel use/pollution as people leapfrog the boundary and move to far-flung exurban centres and towns where homes are more affordable.

        It really is incredible that land-rich places like Perth, Canberra and Melbourne can engineer a ‘land shortage’.

  17. innocent bystander

    ummm, these are the same Stamp Duties that were to be abolished when the GST was introduced right? so if we put theat promise in the same camp as the promise to never increase GST then all cards are back on the table.

    increase GST I say.

  18. Yes, scrap stamp duties because they are a real barrier for the young and the struggling with regard to home ownership.

    Don’t raise the GST- it is a regressive and leaky source of government revenue.

    Go down the land tax route- it is more progressive and harder to avoid – but add some transitional compensation for those who have just paid stamp duty for a single primary residence or a block of land for a single primary residence in the previous few years.

    Housing is primarily to meet the universal need for shelter and reducing its role as a wealth investment chip is to be encouraged.

    Those, of course, are basically my beliefs talking rather than any economic analysis. Others will no doubt disagree.

    What will happen? Probably the status quo-this government hasn’t been brave in reform.

  19. I find the amount received in stamp duties interesting, the relationship between volume of sales versus value.

    Even though we have have had large increases in value as a percentage this has been offset to a degree by lower volumes of sales.

    It would be interesting to see a break up via states ie NSW stamp duties as opposed to SA for an example.

  20. Land taxes will keep increasing during this downturn to try an fill the gap of falling Stamp Duty revenue. That’s a given.

    I just can’t see Stamp Duty being removed, but only because I can’t see any other industry or economic facet that would accept a corresponding tax hike without an almighty public tanty. And if the economy does start to slow – where’s the political cohones to hand one or more economic sectors the burden of increased taxation going to come from? The Mining profits tax backdown has set the precedent here unfortunately.

    I can see why State Govts would want to replace a state tax with a Fed Govt tax. But I can’t see a scenario where the Fed Govt would be popular enough to be in a position to increase taxation to cover the loss of Stamp Duties, and not use that political capital on something else.

  21. The discussion here is getting sidetracked about how to raise revenue if stamp duties were abolished.

    Revenues don’t need to be raised, and there is no need for a new land tax.

    There is a huge spike in government spending (most of it towards bureaucrats, red tape and huge projects). The states could easily slash the number of medical bureuacrats and even increase the number of doctors and nurses.

  22. How about those that have paid stamp duty get that amount in credit and then pay the land tax once the credit is used up? That’d be fair.

    For the oldies and hard luck stories that the likes of Today Tonight and A Current Affair digs up, well just allow them to accumulate a debt as a lien against the property with the taxman getting first dibs upon sale?

    • While the lien sounds reasonable, cashflow matters. Most pensioners lives for 25 years after retirement, so effectively 25 years of revenue will be stuck ‘in the pipeline’. That is a lot of money. Inflation must also be accounted for. If the debt is compounded to the CPI over time, most pensioners will owe more than what their property is worth well before they die.

  23. NMT is correct that a land tax is feudal. The feu WAS the land rent, and wages have never again been as high as during the period of the land tax in the 15th and first part of the 16thcenturies. See http://thedepression.org.au/?p=6848

    Bring it on if it gets rid of stamp duty, and why not get rid of state payroll taxes, too?

    With all their exemptions, thresholds, multiple rates and aggregation provisions, existing state land taxes are an atrocious application of a good principle. Ken Henry’s panel wanted this remedied, and so it ought to be.

    The Claw has a nice suggestion about offsetting the land tax liability by any recently paid stamp duty. Also, there’s no reason the land tax can’t be paid in instalments, even directly out of incomes.

    • ony by allowing people to offset stamp duty would a broad based land tax be politcally possible. Thats the trouble with a lot of reform, even though all evidence suggests it will be better its hard to get through politically. Any measure to reduce support for special interest via the tax system and any reform to reduce the overall number of taxes has my support.

  24. This would be a very very good reform. The problem is it would not be a popular reform. The problem with our current democracy is voters aren’t interested in good reform they are interested in popular reform.

    • My wiewpoits is: democracy leads to realestate bubble. this has already happened in USA and Eu. Austrailia is not exceptional. In democracy nations.
      politicains always need to do things the voters like/want them to do. In Australian, 75% of people own their property and will mot be happy if property price significally drop. So in order to win the election,government/politicains only have one way to go: pop up the bubble as big as they can do. then crash.

  25. What a good thread. An intelligent post with comments from informed bloggers.

    I support abolishing stamp duties, adding a land tax, and abolishing the FHOG. After all in many states it is just a stamp duty offset anyway.

    That would take government out of housing, apart from land release and development as Cameron mentioned. A land tax would change the mindset of small developers, although it should be noted that large developers who land bank large landholdings do pay land tax.

    A uniform (it is state based) land tax would help stop imbalances in supply between states.