The Tax Man Cometh !

With the pandemic starting to ease, the New South Wales Treasurer is looking for ways to dig his way out of the financial hole in the state's income.  There are three tax areas in his sights and the one that will have the biggest impact on ordinary citizens is stamp duty.  Treasurer Dominic Perrottet is planning to abolish stamp duty and will probably replace it with a land tax.

Stamp duty is also known as " transfer duty " and it applies to the purchase of homes and the huge escalation in housing prices in recent years has taken it to thousands of dollars a home buyer must pay at that critical time when their finances are most stressed providing a deposit to secure a mortgage.

We are yet to see the details of this proposal but obviously it would be unfair to demand an annual land tax on the family home of those who have paid stamp duty at the time of purchase.  Land tax is likely to be an annual impost similar to the rates imposed by the council.  It is hard to see how it can be imposed equably without becoming a " double taxation " imposition.

The problem is that stamp duty is now the biggest source of state revenue and last year contributed $7.5 billion to the state economy.. Reforming it is a juggling exercise made more complex because stamp duty applies to more than housing.  It also applies when cars are transferred into our name and on many other financial transactions which would not be compensated by applying a land tax.

The next biggest contributor to state income is payroll tax, and that is also labelled as an inequity.  We are facing a growing unemployment problem and yet we are placing a punative tax on the very people who relieve that problem by seeking to employ the unemployed.  Payroll tax is an old war tax that was never rescinded when the war ended.

The third leg of the triage that make up the bulk of state taxes is the levy placed on gambling revenue. The state collects its share from the money that pours through poker machines and also heavily taxes both the TAB and bookmakers.  The closure of clubs and pubs during the virus lockdown would seriously impede gambling revenue and we can expect an austerity mood to prevail during the recovery.

Of necessity the tax regime has to change.  The Treasurer has the job of crafting a tax regime that is judged fair and equitable.  That would be difficult enough starting from scratch, but he has to juggler change to balance the taxes that are in force now and how these will interact with what people will pay into the future.

How that is received will depend on whether the public go looking for the Treasurer armed with pitchforks - and with tar and feathers in mind, or declare him a genius.   That old maxim about the inevitability of " death and taxes "  comes to mind  !