THE ACT Government relies too heavily on a narrow tax base. More than 50 per cent of its revenue comes from taxes on property and that structural flaw is getting worse.
If Canberra is to be a preferred place to live, do business and provide gainful employment, the Government must put aside the temptation to score political points against investors and instead adopt policies which are pro-business.
That doesn’t mean subsidies or special programs; it simply means freeing up business from excessive rules and regulations and getting rid of punitive and inefficient taxes.
The property sector underpins economic growth, jobs and salaries as well as the tax base in the ACT – and pays more than any other industry in Canberra.
And a recent survey undertaken by Auspoll has found that most Canberrans believe the Government is doing a poor job in terms of setting a fair level of taxation when people buy or sell properties. Simply put, Canberra property taxes are too high.
Property contributes more than half of all Territory taxes and pays 23 cents in every dollar generated in economic growth – compared to an average of four cents among other industries.
Will that proportion still be increasing in 10 years’ time? The trend clearly cannot continue without eventually losing investment in property, reducing job opportunities, reducing the tax take and, inevitably, resulting in reduced publicly-funded services.
Many of the taxes, such as stamp duties on property transactions and the Lease Variation Charge, are inefficient, drive up prices and decrease housing affordability in a market of controlled supply, reduce the amount and diversity of residential accommodation, undermine the Government’s own policy of revitalisation and greater housing density near shopping centres and transport routes and detract from economic growth.
Removing those taxes would boost activity, growth and therefore Government revenue.
The best, and possibly only, alternative source of government income is from accelerated private-sector growth.
Canberra must become a more attractive place for private investment. A less onerous taxation regime than NSW would be a good start.
It would also help if the Government dropped its antagonistic rhetoric against property investors. Such attacks by the Government create one more risk factor when an investor is weighing up whether to invest in the ACT.
An investor has to take into account the probability of antagonistic rhetoric ultimately finding expression in higher taxes and charges or increased regulation and compliance costs. Tax on the property sector some six times greater than the average is a reflection of the Government’s view, which warns off investors.
Catherine Carter is ACT Executive Director of the Property Council of Australia