The NSW government budget documents for 2021-2022 forecast it will bring in $ 41.6 billion in real estate stamp duty in forecast estimates through 2024-25.
But economists said FRANCE that NSW will not be able to match the money it is expected to make from stamp duties over the next four years if it continues with its plan to replace it with an annual property tax, with the government planning to give to buyers the possibility of switching to property tax during a purchase, thus definitively immobilizing this land at the annual tax:
- Stamp duty is expected to become the main source of government revenue.
- Treasurer Dominic Perrottet downplayed the chances of introducing the reform before the next state elections in 2023.
- Some projections indicate that it would take almost 50 years for the government to recover an annual royalty for some properties.
The federal government collects around 80% of the country’s tax revenue, with states and local governments collecting the rest through a narrow tax base, such as stamp duty.
Since the abolition of inefficient stamp duties in favor of property taxes would generate significant productivity benefits for the national economy (see following graph) and the federal government would monetize these benefits through increased personal tax revenues and revenues, the federal government should encourage the reform process through incentive payments to states. This would allow states to participate in the increased incomes that would result from the resulting economy-wide productivity growth.
This is how “cooperative federalism” should work – with federal and state governments sharing in the fruits of reform.
Without the active participation of the federal government in the reform process, important reforms aimed at increasing productivity, such as the shift from stamp duties to property taxes, will remain in the “too hard” basket.
The federal government must provide direct funding to states to move them to more efficient tax bases.