Debate over GST split ignores bigger issue

“The States should not be threatening to re-impose regressive taxes of the past, but be working with the Federal government to overcome the mis-information prevalent in a property obsessed economy,” stated Prosper Australia Project Director Karl Fitzgerald.

“Treasurer Hockey is concerned at the tax avoidance of Big Tech costing the budget some $5bn p.a. Yet unrealised capital gains in the land market were 84 times greater – a staggering $418.3bn last financial year.

“Land taxes are grossly under-utilised and must be part of the tax reform discussion at this Friday’s COAG meeting. The National Commission of Audit stated: “The States’ own-source revenue could be increased to reduce the vertical fiscal imbalance and provide them with fiscal autonomy. This includes options such as broadening the base of existing State taxes.” This is a coded call to remove the many exemptions from the Land Tax base.

“States should be working to reform their most powerful tax base – Land Tax. In the past few weeks two Treasury papers have extolled Land Taxes as the most efficient tax base available. Not one state Premier commented on this finding, tacitly agreeing to even greater federal subservience by allowing the second best GST to take centre stage.

“The political challenges to such reform are considerable but governments at all levels must engage in serious long term education campaigns on the benefits of Land Tax reform. This is urgently needed to offset the self-interest stoked by property shows such as The Block and Location, Location, Location.

“Instead, the state with the longest tradition of taxing land values, South Australia, is threatening to reinstate the unpopular Financial Institutions Duty as a payback for fiscal imbalance. Premier Jay Weatherill has strong views about the $275m Federal cut from the SA health budget. However, in the 2013-14 financial year, SA land values increased by $18.5bn. Whilst the size of the cutbacks are concerning, such an amount equates to just 1.5% of the land price appreciation.

“NSW is facing an onslaught from property investors chasing a slice of the $203bn in rising land prices. They face a cut of $1bn over four years but Premier Baird would rather privatise than consider a rollback of the rent-seeking frenzy surrounding his state.

“Victorian Premier Andrews wants to privatise the Port of Melbourne for a once off $6 billion budget bonus. That’s 5.6% of Victoria’s annual land price increase. The silence is deafening on the harm resultant mortgage debts are causing the Victorian economy. Instead Andrews is reversing the other way, offering handouts to the property lobby by capping municipal rates.

“In an age of capital mobility, taxing fixed assets such as land will become increasingly important. State governments must start to reclaim their sovereignty by engaging in the reforms suggested to the Victorian government in Prosper Australia’s pre-budget submission” closed Fitzgerald.

Media contact

Karl Fitzgerald

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