DLS Response to the Henry Review
DLS submitted a Submission to the Henry Review. Given this Inquiry was the most comprehensive tax review ever conducted in Australia, and the importance of the land tax regime in NSW and other States, we believed it was appropriate that we should contribute to the debate.
In our Submission, we outlined a single, broad based tax that could be introduced in NSW. It would replace not only the current land tax system but also stamp duty regime. We maintained that the new system could collect the revenue currently being received from both land tax and stamp duties - whilst being a fairer, more efficient and transparent tax collection regime than the current one.
We suggested the new tax be termed the "Property Owners State Tax" (POST).
Most of the Submissions to the Henry Review were critical of the current tax system. Those Submissions dealing with reforms looked at reforming existing taxes but offered little in the way of wholesale reform at the State or Federal level. The DLS Submission was the only one which contained any suggested replacement for the current tax regime.
The Henry Review's Final Report made the following Recommendations in relation to land tax and stamp duty and the introduction of a broader based tax system:
C2 - Land tax and conveyance stamp duty
Recommendation 51: Ideally, there would be no role for any stamp duties, including conveyancing stamp duties, in a modern Australian tax system. Recognising the revenue needs of the States, the removal of stamp duty should be achieved through a switch to more efficient taxes, such as those levied on broad consumption or land bases. Increasing land tax at the same time as reducing stamp duty has the additional benefit of some offsetting impacts on asset prices.
Recommendation 52: Given the efficiency benefits of a broad land tax, it should be levied on as broad a base as possible. In order to tax more valuable land at higher rates, consideration should be given to levying land tax using an increasing marginal rate schedule, with the lowest rate being zero, with thresholds determined by the per-square-metre value.
Recommendation 53: In the long run, the land tax base should be broadened to eventually include all land. If this occurs, low-value land, such as most agricultural land, would not face a land tax liability where its value per square metre is below the lowest rate threshold.
Recommendation 54: There are a number of incremental reforms that could potentially improve the operation of land tax, including:
- ensuring that land tax applies per land holding, not on an entity's total holding, in order to promote investment in land development;
- eliminating stamp duties on commercial and industrial properties in return for a broad land tax on those properties; and
- investigating various transitional arrangements necessary to achieve a broader land tax.
In our view these Recommendations (and other comments throughout the Final Report) endorse our Submission on the inadequacies of the current land tax and stamp duty regimes, and our Submission in relation to POST. The endorsement marks the culmination of a ten year struggle by this firm to achieve reform for the future benefit of all NSW residents whether they are property owners or not.
Regrettably the Final Report made no comment on the details of our proposed new system.
We are now focusing on persuading the NSW Government and the NSW Opposition to jointly request that the NSW Treasury implement the above Recommendations by adopting POST or some other broad based tax scheme that might emerge after an advertised period for submissions has closed.
We believe that the first State to abolish stamp duty on property transfers and spread the current land tax liability among all property owners will achieve a very substantial competitive advantage over the other States in the quest to introduce new business, employment and investment opportunities.
We sincerely hope NSW will be the leader in the area of tax reform - not a follower. It is now up to the Premier and the Leader of the Opposition to progress matters.