19 May Why the new property tax will slow the state’s recovery?
The tax hikes announced by the Victorian Government have been broadly denounced from within both the property industry and the business community generally.
They have been described as everything from an “own goal” (Property Council) to “taking us backwards on tax policy” (Grattan Institute).
An article in the AFR by Michael Bleby and Michael Read, quoted The Grattan Institute household finances program director, Brendon Coates referring to stamp duty saying “It is the most economically costly tax levied by the state governments” and “Increasing it takes us in the wrong direction”.
Every review of our tax system since the Ken Henry chaired report in 2008 condemns stamp duty. If we were to reduce or abolish stamp duty people are more likely to right size and move, thereby progressively freeing up houses and apartments of any value for people to move to. However against the overwhelming evidence and expert opinion, the Victorian Government has increased this tax. While the increase relates to property sales over $2m, its impact will be felt across the market and it signals their view on this tax.
Property Tax accounts for about 40% of Victoria’s total tax take and the recently announced increases include land tax, stamp duty and value uplifts from rezoning.
More qualified experts than me will opine on the economic impact of these changes, however other Australian states and territories continue to explore ways of removing stamp duty to improve their economic activity through a more mobile workforce, more affordable housing, and better use of our precious residential housing resource.