Stamp duty began its life in the late seventeenth century as a tax on documents by reference to their contents. Stamp duty was introduced as a means of proving a document’s authenticity, but over time the emphasis has changed to a handy revenue raising mechanism. Modern stamp duty has broken away from the old documents based tax, to a more modern transaction based tax. In the process, the stamp duty emphasis has shifted solely to revenue raising; during May this year the NSW State Government’s take was $518 million.
This month the Property Council of NSW called for the replacement of stamp duty, because it as a “bad tax” which “should be replaced with more efficient taxes”. This follows a finding that stamp duty on property transfers has effectively increased up to 750% over the past 20 years. It was reported that the Council said the most “logical” option would be either to increase the rate of GST or to broaden its base.
In Australia stamp duty is a tax levied by State governments and, in NSW, makes up a large proportion of the total revenue raised. When goods and services tax was mooted, and then introduced, the political promise was that stamp duties would be abolished. The tension is that GST is a Federal tax. So, a first objective of the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations, signed by the Commonwealth and all States and Territories in 1999, was the achievement of a new national taxation system, including the elimination of several business taxes which were impeding economic activity. It speaks volumes that in NSW, one such to be eliminated tax exists to this day, namely stamp duty on business transfers.
In the words of NSW Minister for Social Housing Brad Hazzard “I don’t like stamp duty [but] the reality is that the State Government does need revenue to deliver for hospitals and roads and schools and all those things that people elect us to do.” There are authoritative views that broadening the GST base is not a solution. The rate of GST has not changed since the introduction of that tax, and at 10% Australia’s GST rate is one of the lowest in the world. In these circumstances, Federal Government might just welcome the invitation to raise the GST rate on another political promise.
While calls for abolition of stamp duty on property transfers should be approached with caution, Coffs Harbour Chamber of Commerce calls on the NSW State Government to abolish stamp duty on business transfers as fiscally achievable, well justified and long overdue.