Scrapping stamp duty needs Commonwealth support, says the Victorian Treasury
Dumping stamp duty in Victoria is almost impossible without Commonwealth support and could require raising GST to shore up state revenue, according to the state’s Treasury boss.
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Dumping stamp duty in Victoria is almost impossible without Commonwealth support and could require raising GST to shore up state revenue, according to the state’s Treasury boss.
Treasury Secretary David Martine also said it was clear the charge was inefficient and can distort the market but warned governments do not know what to replace it with.
Mr Martine was among a group of government officials grilled on Friday over stamp duty as part of a parliamentary inquiry into the unpopular tax.
Figures provided by the department show that in 2021-22 stamp duty made up a whopping 34 per cent of state government revenue.
It also acknowledged the charge can negatively affect household and labour mobility, including discouraging businesses or people to move to a property that suited them better.
“Estimates of its efficiency rank it as one of the least efficient taxes levied by governments across the country with a high value of welfare loss to the economy for each dollar of revenue raised,” Mr Martine said.
“Because you’re taxing the transaction by definition, it will distort behaviour.
“It is correct to say that it is more inefficient tax than payroll tax, land tax, GST etc.
“I’ve got a bookcase full of tax reviews that say exactly the same thing.
“The key issue is what can governments do about it. Because what’s the alternative?
“That’s really to me the big challenge … Trying to work out what one moves to is very, very difficult.”
Mr Martine said he personally didn’t think the change could be delivered without support from the Commonwealth to survive the financial hit state budgets would receive short term.
He said one option may be to raise the GST but this would be extremely complex.
“You’re talking tens of billions (of dollars) to replace everybody’s stamp duty,” Mr Martine said.
“GST could be one option. It could then be a combination of a whole range of different tax measures to replace the single stamp duty.
“The key in this is it needs to be replaced with something and it’s it needs to be replaced with something pretty big.
”Then you’ve got the challenge of how you transition.
“If one was starting with a blank bit of paper, designing a tax system for a state, you probably wouldn’t introduce something called stamp duty.”
Mr Martine said replacing stamp duty with an annual land tax would raise other issues, such as how to charge people in high-value homes but on low incomes.
Northern Metro Liberal MP Evan Mulholland also asked Treasury if there room to reform stamp duty so that older Victorians were encouraged to downsize.
But Mr Martine said the biggest issue for downsizers was likely how the family home is used by the Commonwealth to test eligibility for the pension,
“That is an impediment to releasing some of that housing stock particularly in the inner suburbs of cities,” he said.
“You might have single pensioners in a five-bedroom house. It is not worth their while selling it and downsizing because the difference they get on the sale … That gets picked up in the asset test.
“Even when people move out of the family home, maybe into an aged care facility for example, there’s still some problems.
“That’s where you’ve got examples of just empty properties sitting there.”
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