Tuesday, September 20, 2011

Our worst tax is stamp duty. Parkinson says so.

Treasury boss Martin Parkinson has backed a move to wind back or abolish real estate stamp duties saying they make it hard for workers to move west and north to take advantage of the mining boom.

Asked at an Australian Industry Group forum which taxes were the biggest drag on productivity, he nominated state taxes on housing which he said inhibit economic adjustments, “whether they be individual workers moving from the Illawarra to Queensland or Western Australia to work in the mining sector, or whether a firm is trying to restructure its business”.

“We need to encourage change, not to stand it in its way. That’s why I make specific reference to state governments,” he told the conference.

NSW made $3.9 billion from real estate stamp duties in the year to June, around one third of the national total. Abolishing the could be paid for by increasing the goods and services tax by a quarter, from its current rate of 10 per cent to 12.5 per cent.

The Henry tax review reported that “ideally there is no place for stamp duty in a modern tax system”. It found they discourage property turnover turnover and penalise property improvements...

“The only positive feature of stamp duty - its relative simplicity - has long since ceased to justify its continued use in the face of the costs it imposes on Australian society,” the review said, recommending they be replaced by a broad land tax.

Professor Neil Warren who reviewed state taxes for the Independent Pricing and Regulatory Tribunal in 2008 told the Herald it was universally acknowledged among the states that stamp duties should go, but said the transition was difficult.

“What about someone who has just bought a house. Does she have to also pay the replacement tax? If so she is taxed twice. If the replacement tax is on land it should be the unimproved value so as not to reinstate one of the faults of stamp duties.”

Doctor Parkinson had little sympathy for business figures who said the industrial relations system was holding back the economy, telling the forum productivity had been slipping for ten years, regardless of the industrial relations system.

There was “no magic pudding” that could help manufacturing businesses through difficult times.

There could not be a return to protection and there could not be intervention to “adjust” the exchange rate.

Manufacturers had to adjust to the higher dollar and reinvent themselves had they had throughout history.

“Our emphasis moved away from dyeing cloth and tanning leather towards automobiles, whitegoods, machinery, and chemicals. Then as tariff walls became unsustainable many Australian producers successfully moved up the value chain.”

The rise of China presented opportunities as well as threats for Australian businesses.

“By 2020 China could have a middle class market that surpasses the United States in dollar terms. Australian industry has always faced continuous change. While not all
have been winners, many have adapted successfully and prospered.”

“There is a certain distinction attached to premium goods that are ‘designed in Germany’ or ‘made in Japan’. Rather than being the cheapest goods, they are labels that signal quality. It is my view the same cachet can and should be attached to those premium goods made or designed in Australia.”

Published in today's SMH and Age


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2 comments:

The Lorax said...

More delusional nonsense from Parko.

“There is a certain distinction attached to premium goods that are ‘designed in Germany’ or ‘made in Japan’. Rather than being the cheapest goods, they are labels that signal quality. It is my view the same cachet can and should be attached to those premium goods made or designed in Australia.”

This has to be one of the more hilarious statements from a senior policymaker in recent months, and there have been some doozies!

Earth to Parko: Japan and Germany have developed their high-end manufacturing expertise over the past 60 years. They are light years ahead of where we are, and we are supposed to somehow catch up at the same time our competitiveness is being smashed by the FX rate and the manufacturing sector is in a death spiral?!

It. Won't. Happen.

We are on the fast track to become a quarry, and the process has been cheered on every step of the way by Treasury, the RBA, and the economic commentariat.

This idea that we somehow have a competitive advantage selling into China and India because of proximity is complete and utter nonsense. Japan is a helluva lot closer to China than Australia, and Australia's east coast ports are no closer to India than Germany.

Get out the atlas and check it out Parko!

Seriously, is the aspirational upper middle class Chinese gonna lust after a Beemer, a Lexus or a Miele, or a Holden Ute with an American engine designed in 1973?

Anonymous said...

by all means get rid of stamp duty for owner occupiers, but for "investors" this will just encourage further flipping and escalating the already high levels of instability in rental accomodation, because "the landlord wants to sell up" Perhaps they need to retain stamp duty levels for investors who just buy and sell without any redevelopment.

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