Stamp Duty Alternatives !

The vexing subject of stamp duty is attracting the attention of economists and there is a suggestion that it be replaced by increasing the GST from it's present ten percent to a new level of of twelve and a half percent - and be applied to a wider range of goods and services.

The Property Council has run this suggestion across a broad spectrum survey with a finding that forty-seven percent approve, thirty-two percent decline and twenty-one percent are undecided.   The main objection to stamp duty is concentrated on first home buyers, making it harder for them to gain a foot on the home ownership ladder.

What seems to have escaped attention is the repetitive nature of this tax.  Back in the early days of the last century we lived an entirely different lifestyle.  A young couple married and he became the "breadwinner " and she became the "homemaker ".  It was rare for married women to continue to be employed and most men continued in the same job for the rest of their working lives - and they lived in that first home they purchased until they died of old age.

Today both partners can expect to work for the greater balance of their lives and economists claim that not only will they have several job changes, they will need to retrain in entirely new work categories to remain skills relevant.  It is likely that as a result they will probably have  several changes of city and most probably changes of state - and that means changes of housing.

Often, the first purchase is a city apartment to suit working in the CBD and the arrival of children make a move to the suburbs attractive to gain more space and a small backyard.  It is almost certain that eventually retirement will involve a purchase in a retirement village - and in every occasion that dreaded stamp duty will apply to their housing costs.

One of the problems of trying to modify stamp duty is the fact that it is a state tax and as such is subjected to different political outlooks and vastly changed land values.  In New South Wales it returned  $ 7.3 billion to the state treasury in 2014/15 and delivered a surplus of $ 2.1 billion.  It is therefore an integral part of the finance pie.

Of course, it would be logical to trim the rate that applies to stamp duty as the price of housing elevated, but that would deprive state treasuries of much needed funds and the loss would need to be replaced by some other form of tax.   We seem to be heading towards a compromise that would see the stamp duty rate lowered, but compensated by a small increase in the GST.   The one thing that would founder on politics would be any move that reduces state income.

It s a fact of life that all forms of government become instantly addicted to income flow, just as drugs take hold of the lifestyle of users.  There is also the issue that stamp duty applies to a lot of other transactions and not just house purchases.  With hindsight it might have been a better tax collected when a house was sold rather than bought.  In today's market, this impost could be better afforded by those quitting the market than those trying to gain a foothold - but trying to create such a change would be a nightmare.

Our GST is out of step with most other world economies  in that food is excluded.  This was probably necessary at the time of implementation to try and "sell " a brand new tax to a suspicious public but there is building pressure to reform taxation and close off a lot of tax breaks and collect tax wherever spending takes place - on the basis that the rich spend more than the poor.

While there is a certain logic in the tax net collecting when money is spent rather than when it is earned - and that does tend to close down the "black " economy - it would need to be very carefully orchestrated to compensate the lower income strata from becoming seriously out of pocket.

There is a tendency to set targets based on the average person.  Unfortunately, this usually delivers excess dividends to those at the very top of the pyramid and abject penury to those at it's base.   It will take the efforts of a very clever economist to deliver tax justice across all earning categories.

Whatever proposals that involve the GST will need a very thorough work evaluation to determine the final outcome !