RBA Governor Philip Lowe has urged a comprehensive tax reform to remove obstacles to economic recovery. Federal Finance Minister Josh Frydenberg confirmed in a statement that he is considering tax reform and a series of other measures to promote the economy, including infrastructure spending, talent planning, and labor relations reform.
Of all the taxes levied by the state and federal governments, the first “action” is bound to be stamp duty reform. Earlier this month, NSW Finance Minister Dominic Perrottet stated that he hopes to eliminate stamp duty and payroll tax to help the NSW economy recover from the epidemic crisis as soon as possible, and emphasizes that stamp tax reform is his Top priority. Subsequently, Victoria was also preparing to join NSW and reform the stamp duty. Victorian Finance Minister Tim Pallas is working on a plan to reform the state’s two largest tax sources-wage tax and stamp tax.
The cancellation of stamp duty overnight will leave a huge hole in the finances of all state and territory governments. Therefore, if you want to abolish it, you must find an alternative. The most common way to fill the loophole of stamp duty cancellation in the current discussion is either to levy a broader land tax, or to increase the scope or amount of GST, or some combination of the three. Economists prefer to replace stamp tax with land tax, because land tax is difficult to “avoid”. Most economists (although not all) agree to increase or expand GST, because everyone needs to buy things, and this tax is also difficult to “avoid” to some extent. Since the introduction of GST in 2001, the tax rate has remained unchanged at 10%. Some countries have raised the GST tax rate, such as New Zealand ’s GST tax rate of 15%.
