The association believes that it is in the interests of every taxpayer, in particular landowners, to read the NSW Government's Discussion Paper proposing the gradual replacement of its existing Stamp Duty regime, along with the abolition of the current Land Tax regime, with a new, broad-based, Property Tax, if for no other reason than to understand the potential implications of the proposals for them.
While the association has received some feedback highlighting weaknesses in the proposed Property Tax, it is not adopting a position on the issue as it believes it lacks the necessary expertise & information to fully assess its merits & therefore does not want to risk misleading its readership by doing so.
Having said that, the association does not feel constrained from commenting on the need for tax reform more broadly.
Largely as a consequence of the impact of the Covid19 pandemic this year, all Australian Governments have been haemorrhaging revenue, while expending huge sums to restore the economy & provide some protection to businesses & individuals along the way.
At the same time, all governments recognise that they must continue to invest substantial funds to stimulate economic recovery, while protecting businesses & ordinary Australians, in particular those struggling with unemployment or underemployment, while continuing to fund essential public infrastructure, such as health, education & welfare.
The association believes that in the circumstances there is a real need for a larger public discussion about the need for broader tax reform that would not only allow for the dismantling of regressive tax regimes such as Stamp Duty, but other equally pernicious taxes such as Payroll Tax & Vehicle Registration fees, while finding an effective way to make-up the resulting revenue shortfall.
One way to fund revenue shortfalls is to increase the GST rate (currently 10% compared to the OECD average of 19%) to 12.5%, which would raise an estimated additional $14 billion in revenue & allow for a portion of that revenue to be used for increasing welfare payments & assistance for those on lower or fixed incomes.
At the same time, revenue from the GST could be further enhanced by removing some or all of the current exemptions from the tax, such as food, education, health, childcare, water & sewerage, which would increase revenue by an estimated $21 billion.
NSW raised $7 billion of its revenue last year from Stamp Duty & $4.7 billion from Land Tax, while the proposed Property Tax is expected by some to result in a $2 billion annual shortfall in future revenues. NSW GST revenue is forecast to be $7.6 billion this year, which reflects a $2 billion shortfall against historic levels & occasioned by the shrinking total GST revenue pool.
The association believes that changes to the GST would potentially stop the financial rot in NSW by increasing the size of the pool & its take from the pool, compensating for the loss of revenue from the abolition of existing regressive taxes, while allowing the NSW Government to continue to support economic recovery.
The association is disappointed that attempts to start a national discussion on the need for wider tax reform have failed to-date, although, to his credit, the
NSW Treasurer, Dominic Perrottet, tried to start that discussion earlier calling for a review of
GST arrangements.
Sadly, that attempt is said to have failed largely because both sides of politics in the Canberra are more worried about the potential negative political fallout from supporting such discussions than they are about acting in the national interest.
Hence we are left with the current proposal regarding Stamp Duty, Land Tax & a new Property Tax in NSW which, regrettably, addresses only part of a much more significant challenge.
John Richardson
Secretary/Treasurer
Bega Valley Shire Residents & Ratepayers Association
Tel: 0264945669
Email: secretary@begavalleyshireratepayers.asn.au
Website: http://www.begavalleyshireratepayers.asn.au