TRANSCRIPT
THE HON PETER COSTELLO, MP
TREASURER

Question & Answer
King David School Business Breakfast
Zinc at Federation Square

Melbourne
Thursday, 31 July 2003
8.20 am

SUBJECTS: Stamp Duty

QUESTION:

With respect to stamp duty that you talked about the other day and the

housing boom, how reliant have the States become on the income from stamp

duty and is it a realistic proposition for States to assess the level

of stamp duty they may charge?

TREASURER:

Well I think it is realistic. My point is this, that we have lived through

a very rapid real estate boom, and a median house which you used to buy

for, let’s go back to 1998, five years ago, the median house, the average

house, you would pay $6000, that same house, that same median house you

now pay $16,000 in stamp duty here in Victoria. That’s in five years

the tax burden has increased by more that 300 percent, let’s say 60 per

cent per annum. Because it is not just a price rise, it is the fact that

as the prices have risen, the have kicked you into higher rates – what

used to be called bracket creep. Now, if incomes were going up at 30

percent per annum, believe me, the Commonwealth Government would be forced

to index its thresholds for Australians.

In fact we have arguments about tax cuts and we only gave the last one

on 1 July, in a situation where wages are going up what, 3 percent per

annum, and we lifted thresholds. You have had median values, not because

anything has been done on the house necessarily, because of the property

boom, going up 30 percent, and there has been no movement of thresholds

and there has been no changes in rates. Now from the Commonwealth point

of view, we have another point which we would like to make to you, and

that is this. One of the reasons why the housing market has been strong,

is, we introduced the First Home Owners Grant of $7000. Anyone who hasn’t

got a home and is buying their first home will get $7000. We pointed

out this though, that a consequence of this would be that more people

would come into the market, prices would go up, if they didn’t adjust

their thresholds, they would collect millions. So we are giving out a

$7000 grant to a first home buyer, who is now paying what, $9000 more

in stamp duty on the median house. $7000 grant, $9000 increase in stamp

duty. Do you see what is happening here? It has been captured not for

the benefit of the buyer, but to the benefit of the State Revenue Authority.

Now, the States would say, oh well we can’t afford to cut taxes, alright,

let them argue that case. But it is a question of budgeting, it is a

question of budgeting. I saw the suggestion, well you asked a political

question, so you are going to get a political answer. I saw one of the

State Treasurers saying last night on the TV, the Federal Treasurer should

abolish stamp duty. You know, he should have abolished it as part of

his GST package. Let me make this point. No State asked for stamp duty

to be abolished as part of the GST. In fact, they didn’t want it abolished

because they wanted to hang on to the revenue base, and you can see why.

Second, if you are going to be a Government, you have got to manage a

tax and an expenditure position. They are Governments for heaven’s sake.

The idea that every revenue decision could be fobbed off to somebody

else, is not consistent with the idea of sovereign government. Sovereign

government has to manage a tax system and an expenditure system. Now

they might want to manage a high taxation regime, in which case they

should defend their high tax regime, not say it is somebody else’s responsibility

to fix their problem. This is their revenue base. They want this revenue

base, it is a very profitable revenue base. If the public is worried

about this revenue base, they should either justify it, or they should

adjust it. But don’t say that every single problem that arises is a responsibility

for Canberra. We will look after the important economic issues for which

we are responsible, a national budgetary policy, monetary policy, structural

policy, income tax policy. We will look after all of those, and national

defence, response to terrorism, all those sorts of things. But for goodness

sakes, I do think the States can take responsibility for their own revenue

base. Just an idea. Thank you very much.