The hit to the state budgets from abolishing stamp duty on house purchases can be solved by securitising future property tax revenue – but only if the rating agencies play ball.
Former heads of the federal Treasury Ken Henry and Martin Parkinson have added their voices to the many others over the years who have called for replacing state government stamp duties on property transfers with annual property taxes. Given the clear efficiency and social benefits that would result, why hasn’t this idea taken hold in the major states?
The reason, and also the solution, is simple. Stamp duties are a major source of government revenue. Replacing them with an annual property tax applied to all properties would be seen as unfair to existing property owners who have previously paid stamp duty.
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Kevin Davis is Professor of Finance at The University of Melbourne.
