The Baird Government could boost the state economy by $5 billion by eliminating stamp duty and substituting it with a broad-based land tax, new modelling shows.
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The NSW Business Chamber, the NSW Council of Social Services and the NSW Branch of the Australian Manufacturing Workers Union have combined to call for stamp duty on property purchases to be dumped and replaced by a newly designed land tax.
Modelling by KPMG for the State Chamber and NCOSS shows the tax switch could increase Gross State Product by more than 1 per cent - currently equivalent to about $5 billion - and create up to 10,000 jobs.
The findings ramp up pressure on the NSW government to introduce significant state tax reforms amid a national debate about how states will cover the ballooning cost of health and education services.
The new call for property tax reform, which unites a peak business lobby, a peak welfare group and a large union, comes days after premiers and chief ministers rejected a federal government proposal for them to levy their own income tax.
NSW already has a narrow land tax system but it does not apply to owner occupied land. Under the proposed tax switch, property buyers would no longer pay stamp duty but a broad land tax would be applied to all owner occupied land to eventually raise a similar amount of revenue.
NSW Business Chamber Chief Executive, Stephen Cartwright, said the modelling made it clear that stamp duty is not serving the people of NSW.
"Business, unions and the community sector have found common ground on the urgent need to abolish stamp duty in favour of a more efficient system of tax; it is now time for the NSW Government to put stamp duty on the table if it is genuine about tax reform," he said.
The NSW government expects to collect more than $8 billion in stamp duty on property transfers this financial year making it one of the state's biggest sources of tax revenue.
But it is a highly inefficient tax that has been blamed for pushing up property prices and unnecessarily discouraging people from moving house.
Recent official modelling found the economic cost of collecting each additional dollar of revenue through stamp duty on property is 72 cents in the dollar, compared with 19 cents for the GST and virtually zero for a broad-based land tax.
A 2011 audit of NSW's finances by former Treasury Secretary, Michael Lambert, declared stamp duty on property to be the state's worst tax. He proposed a broad-based land tax to replace it but the recommendation was shelved by the Coalition government now led by Mike Baird.
Last month the McKell Institute called for stamp duty to be replaced by a annual land tax of 0.75 per cent of land value. Under the plan a transitional arrangement would protect those who had recently paid stamp duty and asset rich, cash poor retirees would be entitled to a deferral scheme.
Mr Cartwright said stamp duty reform should not be an opportunity for the Government to lock-in a higher overall tax burden, but to create a more efficient tax system.
"By distorting buyer behaviour in the property market and limiting the ability for skilled workers to re-locate to meet employer demand and live closer to where they work, the exorbitant cost of stamp duty in NSW puts employees and businesses at a competitive disadvantage and harms the long term growth prospects of the state economy," he said.
