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A property interest group has argued for the end of stamp duty, urging the government to replace it with a more efficient and equitable tax system.
In its latest consultation document, addressed to the NSW government, the Housing Industry Association (HIA) has argued for the abolishment of stamp duty, which it said has created a "constant state of paralysis" for the states.
The consultation document follows NSW Treasurer Dominic Perrottet’s statement that the tax is a relic from a bygone era.
Instead of telling the government to adopt a particular strategy, HIA’s chief economist, Tim Reardon, simply said that the case for abolishing stamp duty is so strong that it doesn’t matter which option is adopted as long as stamp duty is abolished.
“Penalising households for pursuing home ownership does not lead to good economic or social outcomes,” he explained.
The HIA opined that the "ineffective" tax should be replaced with a more stable, efficient and equitable tax.
“A constant state of paralysis has resulted in a cascading of tax problems as state governments have become increasingly dependent on stamp duty for revenue. This is despite stamp duty being universally recognised as one of the most inefficient and inequitable taxes that does not provide a stable revenue stream,” Mr Reardon said.
He explained that there are numerous strategies that can be pursued instead of stamp duty, including phased-in approaches or an opt in/opt out arrangements.
“As with all sound economic reforms, the benefits of the reform ensure that households disadvantaged from the change can be compensated,” he said.
Mr Reardon further argued that the efficiency benefits of the removal of stamp duty are extensive.
“Households able to move to a home that suits the size of the family and the location of their employment and studies can lead to a more efficient allocation of public investment in transport infrastructure.
“It allows an ageing population to shift closer to family and medical support, leading to a more efficient allocation of land and healthcare resources,” Mr Reardon said.
Moreover, he argued that a switch away from stamp duty could offer a better use of land.
“A switch away from stamp duty also offers a better use of land as it penalises low value use of land in areas with high land values.
“This isn’t to ignore the challenges of the reform, as they are significant, but in the case for abolition of stamp duty, the end justifies the means,” concluded Mr Reardon.