De-Siloing and defining recurrent land tax revenue in Australia.
Mangioni, Vince
1. INTRODUCTION
The emphasis of this paper is on the fast emerging need for tax
reform in Australia and the contribution land tax should make as part of
the tax reform agenda, it positions land tax within the broader tax
system. This brings forward the need to consider the framework in which
land tax operates and opens the debate for de-siloing of the tax system
at the sub-national government level. While vertical fiscal imbalance is
put forward as one of the key planks for reform, the overriding emphasis
is that as a low tax country, Australia must improve its overall tax
effort of which recurrent land taxation is one of the key taxes that
must contribute to this reform.
In addressing tax effort, the key objective of this paper is to
demonstrate that land tax reform is limited while this tax is being
collected and administered by two tiers of sub-national government. It
is asserted that the current arrangement impacts the functionality,
efficiency, equity and acceptability of the tax by the taxpaying public
and in their current form, impacts the principles of 'good tax
design' that are to be addressed in bringing this tax into the 21st
Century in Australia.
While debate builds over individual taxes which must contribute to
broader tax reform, including the Goods and Services Tax, a tax on
consumption, the taxation of capital and in its least distortive form,
land must also contribute to the reform agenda. As a sub-national (state
and local) government tax, Australia has significant room to improve
revenue from this source in bringing this tax in line with other
advanced Organisation for Economic Co-operation and Development (OECD)
countries. Rather than all the heavy lifting of tax reform incumbent on
the Commonwealth, sub-national government has capacity to contribute to
tax reform from the bottom up through modernising recurrent taxation of
land.
The reform of land tax would encourage the reorganisation and
reform the administration of this tax across state and local government
in Australia. While debate has recently centred on constitutional
recognition of local government, the greater imperative is managing the
limitations that the states impose on local government revenue raising
capacity from land tax. At present the States are unable to evolve and
reform their own recurrent land tax due to its salience, while revenue
from this source at the local government level varies significantly
across Australia and in particular across capital cities.
As set out in Table 1, in addition to the overall tax collected in
Australia being below the OECD average, the tax mix varies across the
broad tax categories. In summary, consumption taxes are well below the
OECD average as a percentage of Gross Domestic Product (GDP), while
income taxes are above the average. This brings to the fore, the need to
reform the tax mix as well as the overall tax effort in Australia of
which we now focus on recurrent land taxation.
2. DEFINING THE BASIS OF VALUE AND PRINCIPLES OF TAXING LAND
Recurrent land tax is defined as a tax on capital and in Australia
is divisible into two broad categories of state land tax and local
government rating, of which a distinction between these is elaborated on
in the next section of this paper. This section focuses on the basis of
value used to assess recurrent land tax in Australia and defines some of
the limitations and challenges confronting the determination of the
basis of value used to assess this tax. It first commences by
distinguishing the use of the term land and property tax for the
purposes of articulating its application as a recurrent tax, it then
introduces the various bases of value on which the tax may be assessed.
Recurrent land taxation exists in contrast to other forms of taxes
levied on property that are imposed on transactions in the form of
conveyance stamp duty by the States. Conveyance stamp duty is defined by
Mangioni (2016) as a mobility tax which impacts the efficient use and
occupation of property and in particular housing. It is further noted
that the revenue from conveyance stamp duty progressively increased
during the 1970s to replace revenue from death duties which was
progressively phased out. It is further noted that while transfer stamp
duty was being increased, it is not applied to intergenerational
transfers of property, further adding to the burden of those paying this
transfer tax (ibid).
In contrast to other OECD countries which impose recurrent land tax
at the local government level, Australia levies land tax at both state
and local government levels. Australia is one of the few OECD countries
which predominantly levies this tax on land in contrast to other bases
of value including assessed annual income and capital improved value.
When land tax was introduced in Australia it was assessed on the
unimproved capital value (UCV) of land, meaning the value of land in its
en-globo or original un-touched state (Mangioni, 2006). Through the
progression of time, as more land became urbanized and was the subject
of clearing, excavation, leveling and retention, UCV became less
relevant and by 1990, five States had moved to either Land Value (LV) or
Site Value (SV) as the base of state land tax. In 2010 Queensland was
the last state to move from UCV to SV for the assessment of state land
tax as per Table 2.
While land/site value is the dominant basis of value, at the local
government level, options exist for recurrent land tax to be assessed on
a number of different bases in some states. In the states of South
Australia and Victoria rates are predominantly determined on Capital
Improved Value. As set out in Table 2, the labels and bases of value
vary from state to state in the imposition of this tax. Despite some
states having the same label of value, i.e. site value is used in
Victoria and Queensland, however, different statutory definitions of
value within Valuation of Land legislation exist in each of these
States.
While the term value is assumed to mean market value as it appears
in each of the definitions referred to in this section, it is
highlighted in McCluskey et al. (2010) that the base on which the
capital improved value (CIV) is assessed, is not always theoretical
market value and that practical application in the study conducted by
McCluskey et al. may depart from the theoretical maximum. This is
further highlighted by Mangioni (2013) that the value used in the
determination of land and site value, may also depart from market value
where highest and best use does not underpin the basis of value. Suffice
to say, that the various bases of value used to assess recurrent land
tax across Australia are not without issue and impact the economic
efficiency of this tax within and across rating and taxing jurisdictions
(Mangioni, cited in Australia's Future Tax System (AFTS), 2010).
It has been long asserted that taxing land is the optimal base on
which to assess a recurrent tax on property. Among the canons of
taxation, Blaug (1999) espoused economic efficiency and equity as key
principles of taxation to be addressed in the design of taxing land.
Economically, land is accepted to be the most efficient base on which to
assess a tax, as its value is largely determined by virtue of its
location and land value cannot be distorted by improvements that are not
the highest and best use of the land.
Mangioni and Warren (2014) define the economic efficiency of a
recurrent tax as being attributed to the use of land, and in highly
urbanized locations, this use is defined by reference to the
improvements on the land where they have been determined to be of
highest and best use. Their argument is sustained on the basis that
improvements on land that either represent highest and best use or are
assessed on improvements that reflect highest and best use, will result
in an economically efficient tax. The second principle of taxation
underpinning land as the basis of value is that of equity. As the price
paid for land reflects its value, the alignment between price and value
of which location is the main attribute of value, establishes land value
is the best arbiter for the assessment of an equitable tax.
In its economic application while land is the optimal base, equity
in taxation is sub-divisible into vertical and horizontal spheres and
these spheres are often interchanged. In the review of land value, the
relevant sphere of equity is horizontal equity as the principles are
applied to land value and its determination in a consistent and
transparent manner. Horizontal equity does not take into account the
variable circumstances of the individual taxpayer (Mangioni, 2011).
These two principles are again visited briefly under the review of
capacity-to-pay and benefits-received aspects of equity in the impost of
this tax in the next section.
3. THE EVOLVING RATIONALE OF RECURRENT LAND TAX IN AUSTRALIA
This section addresses the evolution of land tax in Australia and
the diverging rationale between its impost as a capacity-to-pay versus a
benefits-received tax. It further explains the fiscal relationship
between state and local government and the impact on revenues from land
tax across sub-national government. It defines the challenges
confronting two tiers of government that collect revenue from the same
tax base and demonstrates that under the current dual imposition of this
tax, it is more accepted by taxpayers when imposed by local government.
This is in contrast to its imposition by state government, a rationale
that has progressively evolved since federation.
Australia has a federated structure of government, comprising
commonwealth, state, and local government. Land value taxation was first
introduced in Australia in the colony of Victoria in 1877, followed by
Tasmania in 1880, South Australia in 1884, New South Wales in 1895,
Western Australia in 1907, and Queensland in 1915 (Herps, 1988). Soon
after Australia's federation in 1901, this tax was imposed by all
three levels of government across Australia and was progressively
vacated by the states from 1906, strengthening local government's
opportunity to collect this tax in conjunction with the Commonwealth
(Simpson and Figgis, 1998).
In 1942 the Commonwealth removed the states' powers to collect
income taxes and in 1952 ceased imposing land tax, allowing the states
to resume collection of this tax in conjunction with local government
(Smith, 2005). A dual state and local government recurrent land tax
system exists today across the six states of Australia. The Northern
Territory imposes council rates but does not impose a territory land
tax. Mangioni (2016) highlights that this dual impost is outdated, with
recurrent land tax divested to local government as the sole collector
and administrator in the United States, Canada and New Zealand.
Table 3 sets out the evolution of government, the evolving uses and
taxation of land which facilitates its development. The last column of
this table sets out the perceived rationale, being the least defined but
often most controversial aspect of the tax. The top half of Table 3
shows that between 1788 and the late 1880s, land tax was administered by
the States, formerly referred to as colonies, which was the initial
single tier of government. This was a simple structure in which land tax
was established as a means of providing revenue for services and the
settlement and expansion of Australia's colonies (Daly, 1982).
Land tax was introduced to fund the establishment of towns and
associated infrastructure, including roads and community facilities and
at this point its understanding as a tax for services was established
(Brennan, 1971). During the pre-federation colonisation of Australia,
there was little debate on the rationale for the payment of land tax, as
the importance of bringing land into production was the initial purpose
for alienating land from the Crown and was well accepted by settlers. In
the mid-1800s legislative provisions were enacted in each colony for
local government to be formed and in the late 1800s local government was
given powers to levy land tax in conjunction with the States. Local
government rationalised the imposition of rates for the maintenance of
roads, street lighting and rubbish collection, services that were
informally managed by the colonies (Pearson, 1994).
As the states progressively reintroduced land tax after the
Commonwealth took over the collection of income taxes in 1942, a subtle
divergence emerged in the rationalisation and acceptance of land tax by
taxpayer's pre and post federation periods across Australia. This
is traced back to the initial alienation of land which was achieved
through grant, sale or leasehold interests in land. With each of these
options, the State retained the right to collect a rent, impose tax,
regulate the use of land and retain the first option to purchase the
land back from landholders (Allen, 2000). In the initial period of
alienation it was apparent that increases in the value of land were
attributed directly to services provided which increased the value of
land, in conjunction with the produce generated from the land.
As land traded among settlers a market developed, the price for
land was progressively determined by free-settlers. As land traded
several times, the nexus between the increases in value resulting from
the provision of infrastructure became more disparate and the rationale
for the payment of land tax moved to a tax for the use and maintenance
of services (Mangioni, 2016). As the value from infrastructure and
services progressively became capitalised into the value of land, the
link between land tax and the cost of funding its initial provision
raised questions in the minds of taxpayers, who no longer made the link
between the tax and its initial purpose for the capital funding of
infrastructure.
The second part of Table 3 highlights the purpose and rationale for
the property tax across the tiers of local and state government post
federation. While local government had built a rapport with the tax
paying public as the provider of local services, the re-entry of state
government in the imposition of land tax during the 1950s resulted in
the perception of the tax being a consolidated revenue tax, with little
or no connection to services. For local government more definition
exists in the imposition of rates, which may comprise general rates,
special rates and separate recurrent charges for garbage collection,
water and sewer services. Special rates are mainly used for the
provision of infrastructure that facilitate these services, which may be
imposed within specific locations of residents that directly benefit
from the relevant services.
Mangioni (2016) defines this as a critical turning point in the
impost of recurrent land taxes in Australia. While other countries began
divesting this tax, Australia introduced competition for the same tax
base when the states resumed their impost when it was surrendered by the
Commonwealth. To date, much debate surrounds the rationale for the
impost of recurrent land tax at both the state and to a lesser degree
local government levels across Australia. Mangioni (2016) defines what
ultimately drives the debate of whether recurrent land tax constitutes
an earmarked benefits-received tax or a capacity-to-pay consolidated
revenue tax, which rests in the perception of the taxpayer. Buchanan
(1993:70-71) makes an important point in the perception of the
benefits-received principle, which suggests that embracing choice based
on distributional features for general interests of the community is
doomed to failure. This is attributed to the strict limitations of
earmarking of tax revenue by government. While tax earmarking is favored
by politicians to sell new taxes, it is frowned upon by tax economists
charged with managing the diverse and evolving needs of a modern
economy.
Mangioni (2013) defines that the perceived level of
micro-application of the benefits-received principle is broader in its
adoption by taxpayers, until a local service fails or is not delivered,
which impacts the tax/ratepayer directly. It is further added that as
most property owners are Pay-As-You-Earn-Employees PAYEE, they are not
accustomed to paying tax and hence the salience of land tax and in
particular local government rates is highly visible and scrutinized,
particularly in its application to the principle place of residence.
This has brought into question the tax principles of equity and
efficiency in the impost of land taxes and in particular tax foregone on
the principal place of residence. This is primarily due to the exemption
from state land tax of the home across Australia, while the states
increasingly impose rate capping and pegging on increases in local
government rates (Mangioni, 2016).
While 20 per cent of state land tax revenue is generated from
residential property in Australia, non-domestic property carries the
dominant contributory burden of state land tax, which impacts the
principle of equity in its imposition across the various land use
categories. It is well founded that some level of oversight is needed in
the impost of recurrent land tax over residential property, particularly
of the place of residence. However, Mangioni (2016) highlights that in
Australia the relativity between local government rates and household
income is low among the advanced OECD countries. This opens the question
as to which tier of government, state or local are best positioned to
define the level of tax to be applied to property and in particular
residential property. While the recommendation of AFTS (2010) is to
raise more tax revenue from recurrent land tax in Australia, the door
remains open as to how this recommendation is to be applied.
It is further noted from an economic and operational efficiency
perspective that:
"There are three key benefits of assigning the collection and
administration of land tax to local government in contrast to the
current two-tier system. Local government issues a rate notice for each
property within its area; hence the operational efficiency of a single
tier collecting the tax is simple.... The data matching between owner
details, property description and built attributes is far more accurate
at the local government level. While state land tax is taxpayer focused,
with resources allocated to the management of exemptions, concessions
and allowances, local government rates are property focused and are far
more tolerantly accepted by taxpayers than state land tax."
(Mangioni, 2016:346)
4. DEFINING THE IMPOST AND IMPROVING TAX EFFORT FROM LAND IN
AUSTRALIA
This section of the paper summarizes the calls for the case to
increase revenue from recurrent land tax and provides an international
summary of Australia's current tax effort. It commences with the
reasons for the current limitations impacting the collection of revenue
from this source by state government.
In contrast to state land tax, which expends revenue through
exemption of the principle place of residence, primary production land
and provides a threshold for investors in each State, Mangioni (2016)
highlights that council rates are imposed on all property with very few
exceptions. This factor further strengthens the argument that local
government rating ranks higher under the principles of equity and
economic efficiency through the limitations on exemptions granted by
local government. While it may be argued that differential rating can be
used to distort the impost of rates across the various land uses within
a local government area, further elaboration of this is the subject of
further research.
Despite the imposition of dual recurrent land tax in Australia, the
tax revenue collected from both state and local government is low in
contrast to other OECD countries including New Zealand, United States,
Canada and United Kingdom, (OECD, 2010) as shown in Table 4. The fiscal
benchmarks for measuring tax effort, is tax revenue as a percentage of
GDP and tax revenue as a percentage of total tax collected. In line with
earlier reviews into housing (Productivity Commission, 2004), the
Australia's Future Tax System (AFTS, 2010) also known as the Henry
Review, suggests that recurrent property tax has scope for further
expansion in Australia with a reduction in inefficient taxes such as
stamp duty transfers. Table 4 sets out the relativity of revenue from
recurrent land taxes as a percentage of total tax collected within
Australia, which represents 5.5 per cent of the total tax revenue
collected, which is an amalgam of state land tax and local government
rating as at 2009/10 (ABS, 2011-12).
Australia in contrast to the United States, United Kingdom, New
Zealand and Canada has capacity to increase tax revenue from recurrent
land tax. This capacity was further identified by AFTS (2010), though it
was not stated as to which level of government (state or local) the
revenue should be assigned. It is suggested that the States broaden
their base of state land tax by including the principle place of
residence, currently exempt from land tax in each state of Australia
(ibid).
The states however, have been reluctant and have lacked direction
as to how to best collect additional recurrent land tax revenue from
property and in particular the principal place of residence. The impact
on revenue from the exemption of the principal place of residence and
the land tax threshold by state government, while imposing rate capping
and pegging on local government rating, is stated by Mangioni (2016) to
be the most regressive impediment to the reform of recurrent land tax in
Australia.
5. RESEARCH METHOD
A qualitative research methodology comprising grounded theory and
phenomenological research is used in undertaking the review of tax
revenue collection from state land tax and local government rating.
Kumar (1996:10) defines the application of qualitative research where
"the purpose of the study is to describe a situation, phenomenon,
problem or event." Creswell (2003:15) elaborates on the use of
phenomenology to develop patterns and identify the relationship of
meanings. Further, grounded theory is used for constant comparison of
data with the objectives of maximising similarities and differences in
information. The analytical construct of the grounded theory used in
this paper as defined by Strauss and Corbin (1990:61) is the development
of a theoretical construct for the reform of recurrent land tax revenues
deduced from the grouping and analysis of similar tax revenues collected
by two tiers of government in Australia.
In this paper we review a 12 year span of land tax revenues across
Australia imposed by local and state government and have included
revenue from conveyance stamp duty to illuminate the volatility between
these revenue sources. In monitoring trends in tax revenue collected by
state and local government across Australia over the past decade, data
has been sourced from the revenue statistics compiled by the Australian
Bureau of Statistics between 2001 and 2012 inclusive. The three sources
of tax revenues examined are state land tax, local government rates and
conveyance stamp duty. These are compared over twelve years from 2001 to
2012 with the percentage change in revenue measured at 2006 and 2011.
These results are set out in Table 5, with each States revenue from
these three taxes. Table 5 is further supplemented by graphs of each
source of land tax revenue and stamp duty on a state by state basis.
The objective of this comparison and analysis is to first identify
the apportionment of recurrent land tax revenues to each the State and
local government at the beginning of the study period of 2001. Secondly,
to monitor any change in trends of this revenue between these two tiers
of government over the following 12 year period to 2012.
6. OBSERVATIONS AND COMMENTARY
The overall trend across Australia shows stamp duty is an important
source of revenue for state government and in the main with the
exception of South Australia, is the dominant source of tax revenue
derived from property. Further noted from trends in stamp duty is the
volatility of revenue from this tax compared with revenues from local
rates and land tax across each of the States. As the volume of revenue
generated from stamp duty is significant, it is not replaceable with
revenue from the recurrent land taxes in the short term, and will
require a progressive phase in phase out over a significant period of 10
to 20 years.
State land tax produces the lowest total revenue from all three
sources, however, it is the narrowest in its application applying to
less than 15 per cent of property owners in Australia. The narrow
application of the tax is attributable to the exemption of the principle
place of residence and the investment threshold applied in each of the
states. The total state land tax revenue derived from residential
property is approximately 20 per cent of the tax revenue collected from
this source across Australia. Despite being the lowest tax revenue
generated of the three taxes, the revenue is closely aligned to
movements in land or site values of non-residential property of which
land/site values are reassessed annually or bi-annually by the States.
Local government rates in contrast to land tax are paid by over 98
per cent of all property owners in Australia, it has the broadest base
and lowest tax exemption. Revenues from council rates are the least
volatile of the three revenue sources, while tied to value they are also
impacted by rate pegging in New South Wales and increasingly will be
impacted by rate pegging in Victoria into the future (Rural Councils
Victoria, 2015). As operational arms of the states, the rates applied to
land by local government, whether site or improved value across local
government areas, may be varied annually to ensure rate revenues remain
steady or in most cases does not exceed taxpayer's ability-to-pay.
However further research is required to more concisely define what the
tax limitation should be and more importantly how this is to be
determined.
A further level of contrast is now made between state land tax and
local government rates across the States. Table 5 sets out the relative
changes in revenue between state land tax and local rates at the
beginning 2001, middle 2006 and end 2012 of the 12 year period examined.
It is noted that over this period, in each state with the exception of
Western Australia, state land tax has increased as a percentage of
revenue collected compared with local government rates. Between 2001 and
2006 this trend was noted across all states with the exception of
Western Australia and Victoria. The largest increases in revenue from
land tax as a percentage of local rates across the 12 years were noted
in the states of South Australia and New South Wales. Western Australia
in contrast showed a steady similar revenue trend between State land tax
and local rates across the 12 year period.
It is apparent from this analysis that increases in revenue from
recurrent land taxation across Australia over the past twelve years,
have been in favour of state land tax over local government rates with
the exception of Western Australia. This trend will likely continue over
the next decade in States where increases in local government rates are
either pegged or capped and in particular New South Wales and
increasingly Victoria which remain pegged. This trend is likely to
increase further in favour of the States if hypothecated ad hoc taxes
are applied by the states through local government rating, a factor
which has yet to impact trends in these two taxes.
While the trend from Table 5 shows that state land tax revenue is
increasing at a faster rate than local government rate revenue and in
particular this trend is noted between 2006 and 2012, the question is
whether this trend is sustainable in favour of state land tax revenue.
The complexity of this question is further compounded by the fact that
the States, while expected to reduce inefficient conveyance stamp duty
revenue, are to replace this revenue with recurrent land tax as
suggested by AFTS (2010). In contrast, while local government rates have
some level of semblance with local services, the option remains as to
whether additional land tax revenue may be collected by local government
as agents for the States.
7. CONCLUSION
It was highlighted that recurrent land tax revenue in Australia is
low in contrast to the advanced OECD economies and that Australia has
scope to increase revenue from this tax while reducing inefficient taxes
on conveyance stamp duty as recommended by AFTS (2010). It is proffered
that increases in recurrent land tax revenue will need to largely be
funded from the principle place of residence and removal of the investor
land tax threshold. While some contribution could be made from removing
the land tax threshold, such a move would need to be applied by each
State to avoid tax competition which may impact on investment on the
residential investment market.
It is further stated that under Australia's highly centralised
tax system the States have the highest vertical fiscal imbalance and
that increases in own source revenue are viewed as important by the
state. The impact of reform for the states is further complicated by the
need to reduce revenue from conveyance stamp duty while increasing
revenue from land tax. It is highly unlikely that broadening the
existing State land tax net to include the principle place of residence
will be understood or acceptable to property owners under the rationale
as a consolidated revenue tax.
As a result under the emerging taxing arrangements it is likely
that increases in land tax revenue will further expand if hypothecated
taxes are imposed by local government and collected on behalf of the
States. This will particularly be the case, if additional revenue is to
be derived from the principle place of residence. A hypothecated state
land tax collected by local government as a fire service levy is one
option. However, given the level of revenue required for infrastructure
projects needed in each state, the opportunity to improve recurrent land
tax revenue could be better coordinated nationally with revenue
increases from land tax earmarked to infrastructure, if hypothecation
was adopted.
If local government is not encouraged to maximise opportunities to
broaden its revenue from land taxation, it may have little choice but to
allow the states to broaden their revenue streams further from this
source. The salience of this tax does not provide a compelling case for
the states to embark on this option, with more scope for this to be
achieved by local government. As the Commonwealth Grants Commission have
equalized revenue collected by central government across the states, the
State Grants Commissions have a similar opportunity to equalize
increased revenues collected across local government in Australia,
should fiscal reform of land tax be achieved by de-siloing this tax.
In essence, local government may become self-funding once revenue
capacities are determined within and across local governments
collectively. To this end, the revenues granted to local government
could be better directed to the states, while local government is
potentially self-funded. This reform again largely hinges on the
de-siloing of recurrent land tax and is the subject of further research
in defining the acceptable fiscal tolerances in the expansion of land
tax to include the principal place of residence.
In summary, the current two tier land tax system operating across
Australia engenders tax competition between the tiers of sub-national
government in Australia. It has been shown that state land tax revenues
have begun to outstrip revenue from local government rates, of which the
former are collected from a narrow percentage of property across
Australia. The economic and operational inefficiencies of the states
which manage the vast range of exemptions, concessions and allowances,
while expanding rate capping and pegging on local government does not
embrace the core principles of good tax design needed to contribute to
fiscal reform in Australia.
Appendix 1. Land Tax Revenue State Comparative Figures Australia
(NSW, Vic, Qld, SA & WA Combined) 2001 to 2012.
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Parliamentary Library Research Service.
Strauss, A. and Corbin, J. (1990). Basics of Qualitative Research:
Techniques and Theories for Developing Grounded Theory. 2nd Ed Sage,
London.
Vince Mangioni
Associate Professor, School of Built Environment and Associate,
Institute for Public Policy and Governance, University of Technology
Sydney, NSW, 2007 Australia. Email: Vincent.mangioni@uts.edu.au.
Table 1. Australia's Tax Mix as a Percentage of GDP.
2012 Income tax GST/VAT Recurrent Overall tax
land tax effort
Australia 5th 15.9% 29th 7.7% 9th 1.4% 29th 27.3%
OECD average 11.4% 10.8% 1.0% 33.7%
Source: OECD Tax statistics 2012.
Table 2. Bases and Premise of Value Used to Assess Recurrent
Land Taxes.
Stamp Duty (Transfer Tax)
Basis of value Application of the tax
Market value or Tax imposed by each State in Australia
transfer price of which applies to the purchase of
the property, property. It is a consolidated revenue
whichever is the tax and not earmarked to any service
higher. or purpose.
Land Tax (Recurrent Tax)
State State Govt Land Tax Local Govt Council
Rates
New South Wales Land Value Land Value
Queensland Site Value Site Value
Victoria Site Value Capital Improved,
Site, Annual
Value.
South Australia Site Value Capital Improved,
Site, Annual
Value.
Western Australia Site/Unimproved Gross Rental
Value Value *
Tasmania Land Value Gross Rental
Value *
Northern Territory N/a Unimproved Capital
Value
ACT Unimproved Value Unimproved Value
Perceived General purpose or Quid pro quo tax
objective/purpose consolidated for local
revenue tax services provided
Value premise Market value of the land which includes
land improvements as defined within
various state valuation of land statutes,
i.e. excavation, retention, filling and
servicing of land.
Valuation Method Direct comparison where vacant land sales
exist. Paired sales analysis and cost
method with the use of improved sales.
Note: * Denotes the option of assessing council rates on
more than one basis across different LGA's.
Sources: State Valuation of Land legislation across
Australia.
Table 3. Evolution and Structure of Government and Land Tax.
Govt Period Purpose
State (1788-1850) Promote initial
Dispossession from development/
Indigenous owners, subdivision and
initial use and break-up of large
development estates
(1850-late 1800s) Finance provisions
Stable settlement for existing and
new services
Commonwealth 1884 Local Gov't Redevelop and
State Formed under changes in land
Local municipalities Act use patterns
1884
(1901-Present)
Federation
Redevelopment/
re-urbanization
and expanding city
Stable Settlement Finance Provisions
for existing & new
services
Govt Mechanism/Base Rationale
State Planning laws Neutral
permitting facilitation of
development land use change
Taxation mechanism Encouragement of
(Land Value Tax) development and
Reflects potential land use
highest and best
use)
Benefits tax Earmarked to
services
Commonwealth Planning laws Neutral
State permitting changes facilitation
Local in use and
re-development Transition
Taxation mechanism Distorted force
(Land Value land use change
Taxation Highest
and best use)
Benefits Tax Earmarked to
(Council/Special services
Rates)
Source: the Author.
Table 4. Recurrent Property Tax as a Percentage of
Total Tax and of GDP.
Percentage of total tax
1965 2010 % change
Denmark 4.9 2.9 -41%
Australia 6.8 5.5 -18.5%
Iceland 1.7 5.2 212%
New Zealand 8.3 6.6 -20.9%
Japan 5.2 7.7 49.3
Israel -- 7.2 ...
France 1.9 5.7 200%
United States 13.7 12.2 -11%
Canada 11.9 10.1 -15.5%
United Kingdom 11.2 9.8 -13%
Unweighted
average
OECD-Total 3.8 3.25 -15.4%
Percentage of GDP
1965 2010 % change Rank of
OECD
countries
Denmark 1.5 1.4 -6.2% 10
Australia 1.4 1.42 1.1% 9
Iceland 0.4 1.9 320% 8
New Zealand 2.0 2.1 4.4% 7
Japan 0.9 2.1 131.6% 6
Israel -- 2.3 ... 5
France 0.7 2.5 268% 4
United States 3.4 3.0 -10.4% 3
Canada 3.0 3.1 2.1% 2
United Kingdom 3.4 3.4 -0.4% 1
Unweighted
average
OECD-Total 0.95 1.05 9.9% Ranking
Source: OECD Tax Figures 1965-2010. Note: Australia's
figures are combined State land tax and local government
rates.
Table 5. Percentage Change in Land Tax Revenue as a
Percentage of Local Government Rate Revenue across
Australia 2001-2012.
2001 2002 2003 2004 2005 2006
Qld stamp 700 1 056 1 382 1 863 1 728 1 949
duty ($m)
Qld Land 230 231 279 313 419 404
taxes ($m)
Qld Municipal 1 210 1 281 1 369 1 461 1 559 1 736
rates ($m)
% change Base 19% 23.3%
in revenue
Vic stamp 1 284 1 885 2 116 2 446 2 337 2 671
duty ($m)
Vic Land 525 515 655 837 848 780
taxes ($m)
Vic Municipal 1 543 1 676 1 827 2 001 2 170 2 294
rates ($m)
% change Base 34% 34%
in revenue
NSW Stamp 2 267 3 119 3 677 3 918 3 282 3 237
duty ($m)
NSW Land 929 1 001 1 136 1 355 1 646 1 717
taxes ($m)
NSW Municipal 2 168 2 236 2 347 2 424 2 521 2 638
rates ($m)
% change in Base 43% 65.1%
revenue
WA Stamp 624 647 833 1 207 1 218 1 906
duty ($m)
WA Land tax 221 226 260 280 315 313
($m)
WA Municipal 669 705 754 801 869 928
rates ($m)
% change in Base 33% 33.8%
revenue
SA Stamp 295 354 428 578 561 600
duty ($m)
SA Land tax 140 140 157 198 256 291
($m)
SA Municipal 545 589 641 683 738 785
rates ($m)
% change in Base 26% 37.1%
revenue
Aust Stamp 5 340 7 283 8 745 10 388 9 472 10 788
Duties ($m)
Aust Land 2 103 2 172 2 553 3 059 3 583 3 613
taxes ($m)
Aust 6 441 6 808 7 276 7 726 8 237 8 788
Municipal
rates ($m)
% change Base 32.7% 41%
in revenue
2007 2008 2009 2010 2011 2012
Qld stamp 2 542 2 912 1 806 1 978 1 933 2 023
duty ($m)
Qld Land 485 610 838 1 033 1 042 1 013
taxes ($m)
Qld Municipal 1 925 2 096 2 285 2 438 2 666 2 805
rates ($m)
% change 36%
in revenue
Vic stamp 2 961 3 706 2 801 3 604 3 910 3 379
duty ($m)
Vic Land 989 865 1 238 1 178 1 398 1 401
taxes ($m)
Vic Municipal 2 500 2 724 2 927 3 159 3 416 3 656
rates ($m)
% change 38.3%
in revenue
NSW Stamp 4 166 3 938 2 736 3 739 4 045 3 764
duty ($m)
NSW Land 2 036 1 937 2 252 2 296 2 289 2 350
taxes ($m)
NSW Municipal 2 776 2 935 3 030 3 166 3 303 3 445
rates ($m)
% change in 68.2%
revenue
WA Stamp 2 037 2 243 1 008 1 615 1 039 1 340
duty ($m)
WA Land tax 386 415 562 519 516 548
($m)
WA Municipal 1 001 1 088 1 220 1 317 1 454 1 581
rates ($m)
% change in 34.6%
revenue
SA Stamp 721 909 721 787 784 683
duty ($m)
SA Land tax 332 375 510 553 576 588
($m)
SA Municipal 834 886 958 1 019 1 086 1 161
rates ($m)
% change in 50.6%
revenue
Aust Stamp 12 923 14 289 9 526 12 294 12 229 11 657
Duties ($m)
Aust Land 4 358 4 346 5 565 5 767 6 005 6 103
taxes ($m)
Aust 9 476 10 194 10 938 11 645 12 506 13 265
Municipal
rates ($m)
% change 46%
in revenue
Source: ABS Taxation Statistics 2001-2012.
