12 June 2008
The development industry has welcomed a NSW Independent Pricing and Regulatory Tribunal (IPART) finding that stamp duty on property purchases is inequitable and that there should be substantial reductions in the tax.
IPART says the tax scores poorly for efficiency because it adds to the cost of real estate transactions and so can distort investment decisions, and because it applies to a narrow base (only those properties sold during the tax year). The duty was also found to score poorly for robustness, because the revenue it generates can change dramatically from year to year, depending on the property cycle. It also scores poorly for equity.
The IPART found that purchase stamp duty is relatively inefficient as it adds significantly to the cost of real estate transactions and can deter people and businesses from purchasing property. The report goes on to say that since it is a tax on improved value (market value) it can discourage property development for resale.
The reports also concludes that stamp duty on property purchases hits less affluent taxpayers who move and more tax than affluent landowners who do not move off the hook. The IPART also found that NSW taxes are not as efficient as they could be, and that NSW relies more heavily on inefficient taxes than it could. This means the burden of taxation on businesses and individuals is greater than it needs to be.
We welcome IPARTs bottom line: that this tax is ˜inequitable, Mr Gadiel said.
We congratulate them for having courage to call a spade a spade.
There has been an increasing reliance on stamp duty on property purchases over the last 20 years as a result of bracket creep.
The tax is one of the reasons that NSW is struggling to supply the housing and well-located employment that we so desperately need.
Mr Gadiel said there had been a state-wide collapse in new home construction.
The Australian Bureau of Statistics show that only 29,000 new homes were built in NSW last year, Mr Gadiel said. Thats the lowest level since the ABS began collecting data on the subject in 1980.
Its only two-thirds of the average rate of new home construction in the 1990s and thats despite significant population and demographic changes.
Since new home construction has been in freefall, rents have skyrocketed by 26 per cent across Sydney (Department of Housing Rent and Sales Reports March 2005 March 2008).
The IPART is right to query whether the States reliance on stamp duty on property purchases has distorted the market.
Im pleased that there is official recognition that this tax may be preventing the States stock of commercial and residential properties from being used to their full potential, Mr Gadiel said.
The IPART is also right to argue for a move away from the heavy reliance on taxing property purchases.
However, the government should not try to fund stamp duty reductions with increases in other State taxes such as land tax.
The best solution would be to get a better allocation of tax revenue between the Federal and State governments.
The Federal Government raises more than 80 per cent of the total tax revenue collected in Australia which is significantly more than it needs to meet its spending responsibilities.
Some of this cash should be used to reduce the States reliance on property duties.
The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.
Media Enquires:
Aaron Gadiel,
Chief Executive Officer,
Phone: 0417 477 904 or (02) 9238 3955
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