13th April 2019
Transition from transaction taxes to land tax
This is a placeholder post, to assemble some notes on this topic.
In general, land tax is one of the more efficient taxes. We will significantly strengthen the land tax system, to be used mainly by the States, union territories and local governments, helping them reduce their dependency on central taxes. [SBP manifesto]
POLITICAL PROBLEMS FACED WHILE TRANSITIONING
This article summarises well: Why Economists Love Property Taxes and You Don’t
OPTIONS to transition
The ACT model is an excellent way to transition.
SUMMARY OF A SIMPLE TRANSITIONAL OPTION
Source: “state governments should commit to making a gradual transition to a broad-based recurrent property tax (i.e. a land tax using CIV). While described in greater detail in subsequent chapters, such a tax should have the following features:
- It should be a single, broad-based low rate tax based on the value (CIV + HB) of all residential property with the same tax-free threshold as the simplified transfer duty (outlined in Chapter 5) to ensure the annual tax burden is a low as possible and is progressive by property
- Collection and administration of the tax should be integrated with local government rates (as per existing emergency service levies).
- In the interests of simplicity and transparency the property tax should be applied to all dwellings (rather than existing owners being exempt or ‘grandfathered’), but introduced gradually to avoid excessive double
- Revenue from the broadened property taxation regime will be used to fund a reduction in transfer duty rates, and deferral provisions would be available to owners eligible under mitigating circumstances