Taxation reform crucial in creating more dynamic economy

The Productivity Commission has recommended abolishing stamp duty on property purchases, introducing road user charges, and ­rethinking dividend imputation credits.

The Productivity Commission has called for crucial taxation reform. Picture: iStock

Abolishing stamp duty on property purchases, introducing road user charges as electric vehicles become more popular, and ­rethinking dividend imputation credits are among recommendations in the Productivity Commission’s five-yearly report.

The commission said “ongoing reform of taxation” was crucial in creating a more dynamic ­economy, noting that based on the ­annual total tax take of $600bn, even a 0.1 percentage point ­reduction in the tax burden would add $600m to the ­economy.

It said “Australia’s taxation ­settings have a key influence on productivity”, and saving and ­investment decisions “can be distorted due to the varying tax treatment of different savings options, gaps ­between the corporate tax rate and marginal personal ­income tax rates, and differential tax rates for large and small ­companies”.

“By taxing some activities at higher rates than others, the system can skew incentives and economic ­activity away from more productive activities,” the report says.

The report adds that property stamp duties have a chilling effect on mobility, and “one effect of (dividend) imputation is to heighten the ‘home country bias’ of domestic investors, including superannuation funds”.