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The Victorian government should follow NSW's lead in abolishing stamp duty, according to the property industry, and move to a new system that gives home owners the choice of opting in or out.
With speculation mounting that Victoria might follow its northern neighbour in abolishing the charge when it delivers its budget on Tuesday, one of the authors of a review of the Australian Capital Territory's eight-year tax reform effort said the economic benefits were worth any short-term political pain.
The price of stamp duty stops many home owners from moving.Credit:Fairfax Media
NSW Treasurer Dominic Perrottet unveiled a blueprint for ending his state's reliance on stamp duty for more than 25 per cent of its revenue-raising capacity on Tuesday, with the transaction charge to be gradually phased out and replaced with a broad-based property tax.
In Victoria, where stamp duty income is the state government's third largest revenue stream, after Commonwealth GST receipts and payroll tax, the government continued to be coy on Wednesday about the possibility of a reform program in its coming budget, with Premier Daniel Andrews batting away questions on the subject.
"I've got no announcements on tax policy today," Mr Andrews said.
"We've got to leave the Treasurer something to talk about on budget day.
"He'll deliver the budget and you’ll have all the answers to those questions then."
Property Council interim executive director Matthew Kandelaars told The Age that the challenge of reforming what he called "our most inefficient and harmful tax" had long been in the "too hard basket".
"The challenge has always been how to replace it without shifting its billions-of-dollars burden on to other taxpayers," Mr Kandelaars said.
"The NSW proposal contains some features that will be critical to its success, including optionality, avoiding double taxation and revenue neutrality over the longer term."
"Importantly, the NSW government has committed to a period of industry and community consultation as part of its reform process.
"We'll be watching how it progresses very closely."
Jason Nassios was on a team of economists from Victoria University's Centre of Policy Studies that reviewed the ACT's reform effort this year and said the shift from stamp duty to property tax made sound economic sense for the whole community.
"If Victoria wanted to pursue tax reform, then this is the one that gives you the biggest bang for your buck," Dr Nassios said.
The ACT's reforms were different to those proposed by NSW, with the territory gradually scaling down the level of stamp duty charged on transactions while scaling up the amount households paid through the rates on their homes as well as abolishing insurance duties.
"Insurance duties and stamp duties are two of the more distortionary state taxes and when they [the ACT] began that transition over the period that we studied, 2012 to 2018, we found increases to real gross state product, real consumption and real investment activity in the ACT," Dr Nassios said.
"So there were real economic benefits from the transition from general rates."
The senior research fellow said governments embarking on tax reforms may face political challenges trying to sell their plans, but in the end the benefits to the community were worthwhile.
"We all benefit from a reform of this kind, at least from an economic perspective. It boosts real incomes, so we all feel a little bit richer for it, it boosts employment opportunities because you're removing economic distortion in some key sectors," Dr Nassios said.
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