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The Forum > Article Comments > Housing industry ploy > Comments

Housing industry ploy : Comments

By Karl Fitzgerald, published 18/4/2012

The housing industry is attempting to re-write economic laws by pushing 'as fact' that a GST on food is more efficient than land tax.

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The Author doesn't seem to understand we already have the highest median house prices in the English speaking world; and or, that his proposals would simply compound that problem or worsen housing affordability?
The proposal he critiques is an expanded GST. One agrees, it's definately dumb and would simply add to current contraction.
What is required is a a govt with the courage of conviction, and the vision and foresight to implement reform!
The current raft of inordinate complexity, ought to be completely and totally jettisoned, and replaced with a single stand alone unavoidable expenditure tax, collected via the banking fraternity.
Bank main frames are already programmed to collect and transfer various/vast amounts overnight to other banks and various govt agencies. Given there'd no longer be any compliance or reconciliation outcomes, businesses would be able to pocket the 7% currently ripped out of the bottom line by compliance and reconciliation.
Govt departments would then have immediate access to these funds, rather than borrow against a contracting revenue flow, which cannot be actually accessed until reconciliation procedurals; that tie up tax receipts for up to a year.
A vastly simplified stand alone unavoidable expenditure tax, would end this absurdity, which can see a govt obliged to borrow up to a hundred million a day, ostensibly to continue to fund around 26 billion per, completely unnecessary outlays, intended as entirely undeserved/unearned welfare for the rich.
One can agree, with an onerous capital gains tax being applied quite viscously to undeveloped rezoned land, unless it is completely developed with housing; inside a rigidly enforced time zone, say twelve months.
Failure to comply could even result in seizure of said land in lieu of any unpaid capital gains.
This way we could finally eliminate the entirely unproductive land baron speculation/speculators. Who simply add exponentially to affordability outcomes? Rhrosty.
Posted by Rhrosty, Wednesday, 18 April 2012 11:19:21 AM
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Karl Fitzgerald

Although some points in the article are correct, there are a few problems.

Firstly I agree that stamp duty should be abolished and replaced with a uniform, low land tax perhaps with a mid-range threshold so that it is not overly regressive. Housing is expensive in Australia, as Rhrosty points out, and that change would help when it comes to buying houses. There is no case for substituting an extension of the GST for a land tax.

However, this point about GST being inefficient is quite wrong. Certainly micro-enterprises without proper computing systems struggle with the required activity statements. But a PC and the right software would fix this and help the business keep its books in order (this is what the ATO says and, for once, I agree with them - the era of keeping receipts in a shoe box is over; the statement can even be filed online).

Although the GST should not be extended to cover a dropping of land taxes, food should neve have excluded. It made the tax far more complicated for little gain to anyone.
Posted by Curmudgeon, Wednesday, 18 April 2012 11:49:45 AM
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Rhosty: Presumably you understand that high "house" prices are actually high "land" prices and have been driven up by speculation: people buy now because they expect prices to rise, and their buying drives up prices and fulfills the expectation -- until people can't afford to drive up prices any more, so prices stop rising, so the alleged justification for today's prices is taken away...

The upswing is driven both by greed ("Buy now and sell for a capital gain!") and by fear ("Buy now before it's too late!").

Land tax dampens speculation by imposing a holding cost on the land. As prices rise, so do holding costs, causing pressure to sell, which dampens the price rise. Better still, the holding cost makes it necessary to generate income from the land. This opens up the land for housing, making housing more affordable.

And yes, higher taxation of capital gains -- relative to current income -- also dampens speculation.

By an "expenditure tax", I presume you mean a consumption tax implemented through the income-tax machinery:

Consumption = income minus net saving.

The claimed advantage of this over a conventional (indirect) consumption tax is that the base can be taxed at progressive rates.

Be that as it may, there are other ways to reduce compliance costs by involving the banks in tax collection. Employees' income tax could be collected by employees' banks instead of employers. Company tax could be assessed by the company's bank. Even land tax could be collected through the land owner's bank.

But more importantly, if the land is mortgaged to a bank, then the "owner" should pay the land tax only on his/her equity, and the bank should pay the tax on the rest, because it owns the rest!

Curmudgeon: The efficiency of GST consists in the fact that it zero-rates exports. But it still reduces sales by domestic producers to domestic consumers, and reduces the purchasing power of workers' wages without reducing the cost to employers. Yes, it's more efficient than payroll tax or income tax, but it's not without deadweight costs.
Posted by grputland, Wednesday, 18 April 2012 1:02:21 PM
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