State Taxation Acts Amendment Bill 2015


Mr BARBER (Northern Metropolitan) — I would like to give the house the story so far. The government announced this special tax on foreigners, and the rationale it gave was that foreigners are not paying enough tax elsewhere because they do not live here, therefore it is going to charge them more via this tax. The Treasurer said:

If you own a property in Victoria, then you should contribute accordingly and the surcharge goes some way to redressing that balance …

Then, however, the Property Council of Australia came out and said, 'Hang on, it's not just foreign people. We have companies that are foreign owned, foreign controlled or with a significant foreign ownership component'. They turned out to be all the big names in Victorian property development, from Mirvac to Australand and the rest of them. The Treasurer said he did not mean that he was going to tax foreign-owned corporations. Who could ever suggest that foreign-owned corporations should, in the Treasurer's own words, 'contribute accordingly', and that the surcharge could go some way to redressing the balance?

A deal was worked out. By the way, Mr Rich-Phillips should feel free to intervene at any point if I have got the story wrong. Those opposite said, 'No, it wasn't meant to be you guys. You're our friends. In fact, we remember all those donations you gave us at the last election very well'. Not that they have been disclosed to the Victorian voter yet, but we will read about that one of these days. The Treasurer put out some guidelines saying that it was not meant to apply to the aforementioned developers.

The Property Council of Australia then boasted that this was a great victory. It was so boastful about it that it led to an article being published in the Age of 25 May under the headline 'Andrews' property tax watered down for developers'. The article says:

The Property Council and the Urban Development Institute of Australia have declared a 'major win' after lobbying the Andrews government to introduce case-by-case exemptions from a 3 per cent stamp duty surcharge on foreign property buyers and a 0.5 per cent land tax increase for absentee landlords.

If the property council had such a major win within days of even starting its campaign, one can only wonder about the future major wins when various property groups come to the Treasurer and say, 'Under your new-found powers to basically decide who does and does not pay tax in Victoria, we would like a free kick, please'. It really did not develop too much further from there, except that now Mr Rich-Phillips has proposed an amendment to say that the guidelines the Treasurer will issue must be tabled in Parliament.

We had one development along the way that made it even more fruitful — an inquiry by an upper house committee, the first under this new system. In the style of Australian Senate committees, the Standing Committee on the Economy and Infrastructure conducted an inquiry into the bill, calling for witnesses, holding hearings and reporting back to Parliament, which it did just a few hours ago. I just spent a couple of hours reading the report. Evidence was given at public hearings by the Law Institute of Victoria, the Department of Treasury and Finance, the State Revenue Office, the Property Council of Australia, the Urban Development Institute and Pitcher Partners.

A surprising amount of the discussion during the committee hearings was about the impact this legislation might have on affordability. The answer to the question seemed to be that nobody really knows what impact it will have on affordability. In fact no-one ever really argued that this was about housing affordability. As the Treasurer himself said, it was about making sure that foreigners, or certain groups of foreigners anyway, pay their fair share. They all went round in circles for a while, including the lawyers from the law institute, trying to surmise the impact this might have on affordability, and the answer was that nobody really knows.

We know that stamp duty by itself is an incredibly regressive tax; it is a bad tax. It is bad because it taxes property transactions, so in order to avoid paying the tax, people avoid the thing; they avoid the transaction. If you are collecting large amounts of tax from a particular source, over time that starts to distort the economy. One of the distortions is that once you have bought a house you really do not want to sell it. You do not want to downsize when the kids leave home. You do not want to sell it and buy another one on the other side of the state if you are forced to move there — for example, because you want to continue knocking down trees for a living and you have to move from East Gippsland, where the industry is highly subsidised, to western Victoria, which is crying out for more timber workers — because you will have to pay stamp duty every time you move house, or at least sell one. There is a whole range of inefficiencies around our state tax mix, and it is at this time of the year, every year, that I point out that the tweaking of stamp duty rates does not address the question. Fiddling around with a bad tax is not going to make the tax better.

Interestingly, the other part of the Liberal Party's amendments is to require the public exposure of anybody who receives an exemption — that is, their name and the value of the exemption. The big winners from the property council who had the ear, apparently, of the Treasurer have already said the exemption will save them millions. But from here on in we will see who is exempted — first of all, who qualifies for the exemption under the bill and then who is exempted from its provisions.

I would like to know a lot more about some of the tax exemptions and concessions that have been made so far. For example, if you go to budget paper 5, chapter 5, 'Tax expenditures and concessions', you will see that typically there are around $2.2 billion of exemptions from land tax, $952 million of exemptions from payroll tax, $89 million of exemptions from gambling tax and $218 million of exemptions from — and this is not including thresholds, by the way; this is just people who, by their class, are exempt from the act — other duties, which is principally stamp duty. I think that latter number is going to start getting bigger.

Further off in the budget papers you get a much longer list of who has been exempted from various taxes, why and so on and so forth. But now for the first time, if Mr Rich-Phillips's amendment is successful — and the Greens will be supporting it — and if the government then decides to accept this amendment to its bill, we will be reading the actual names of the people who are getting these exemptions.

The problem with exemptions is that the Parliament makes the decision once and then the exemption carries on for many, many years with a loss to the public revenue; it is a set-and-forget mechanism. As I have just outlined, there are billions of dollars of such exemptions in the act. This one is the opposite of a set-and-forget mechanism. In fact the Treasurer will keep on making decisions constantly in relation to the individual circumstances of particular property buyers. I think that is a recipe for — I am choosing my words carefully — unreasonable influence to be exerted by property developers, who we already know are very powerful because they got the guidelines they wanted and then they boasted about it to the Age.

In some states property developers have been banned from making donations to political parties. In New South Wales that is the case. Both Labor and Liberal, and certainly the Greens, have supported bans on property developers making donations. We have tried to ask the Premier whether he would ever support such an exemption, and we are not getting a very positive response at the moment. In the meantime some of those self-same donors to political parties could be the same ones as foreign-owned land development corporations, or foreign-controlled land development corporations could be lining up asking for special circumstances to be exempted. Apart from making it public, Mr Rich-Phillips's amendment does not really do anything at all.

I refer to the transcript of the hearing of the Standing Committee on the Economy and Infrastructure held on 15 June. Mr Morris is the chair of that committee. The Victorian division of the Property Council of Australia and the Department of Treasury and Finance seem to admit that the guidelines have no legal weight. The property council's great victory is not looking so great at this point. Mr Rich-Phillips's amendment, which proposes to have these legally useless guidelines tabled in Parliament, will not exactly be the highlight of my day when they are tabled. However, it will be a highlight to see which property group has been exempted from having to pay the special stamp duty and to play connect the dots with their various webs of influence in and across state, federal and local government.

In the view of the Greens, the entire clause that is seeking to be amended should not exist. The Treasurer should not be given this level of open-ended exemption and discretion, so when that clause comes up the Greens will vote against it. It seems that the procedure will be that the opposition will get to move its amendment to the clause. I have flagged that the Greens will support the amendment, and my guess is that no-one is going to support the Greens' move to take away this discretion that the Treasurer wants to grant himself.

Even the Law Institute of Victoria — topically quoting Magna Carta — said it is a fairly big principle that the Parliament decides the laws and the laws include who pays tax. We do not have a member of the executive government — the Treasurer in this case — making random decisions about who does and does not pay tax. They are random because they apply nothing more than what is in the act. We seem to have agreed on that point. The guidelines are of no legal import; it is only what is in the act that limits it.

The law institute has certainly expressed what I would say is a very strong and fundamental concern about that principle being breached. In the evidence that I read from the inquiry, which I have managed to have a look at in the last 2 hours, I did not see any other description of a substantively similar power being granted to a Treasurer. Yes, there are various lines of inquiry that certain bodies, including the State Revenue Office, have to undertake in looking at particular types of transactions and structures, but I would say that this is a gaping, wide-open discretion. It is for that reason that the Greens will not support the particular clause being incorporated into the bill.