Wednesday, 22 February 2023

Committees

Economy and Infrastructure Committee

Reference

Debate resumed.

Tom McINTOSH (Eastern Victoria) (12:47): A secure home is the foundation of a dignified life. A home is a buffer from the stormy seas of life, and I am committed to ensuring Victorians own or live in safe, secure and affordable housing. The home is where so much of a person’s and a family’s dignity stems from, and it also becomes a base of equity for generations to come, so I thank Mr Limbrick for bringing this motion to the Council for debate. I think this government has shown over the past eight years that reform, including tax reform, is something that we are willing to act on. This is a reform-minded government, and we are forever looking at ways to make the tax system fairer and more progressive.

The government provides many important services to the community – essential services. In fact housing is one of these absolutely fundamental services that the government must provide, including emergency accommodation. The government allocates more than $300 million annually to specialist homelessness services to support people experiencing homelessness across Victoria. This is used to fund more than 130 organisations to deliver homelessness services. There have been rental reforms, massive investment in public and social housing projects and affordable rent policies, and I will touch on more of these shortly.

This is the work of government directly impacting people’s lives for the better, and this must be contributed to by the population. Those with more pay more, and when it comes to taxation land tax is a good tax because it can be fairly applied. We tax land because the value of land is so fundamentally determined by the value of the public services and infrastructure that surround it. Areas with good roads, transport access, business districts, schools and hospitals attract higher value prices, and this costs the government money. It should therefore be contributed to more by those with property with higher values.

The government has a proud record of investment in housing. In 2017 we abolished stamp duty for first home buyers for purchases below $600,000. This is a policy that has helped hundreds of thousands of Victorians with their first home. There is a concession for properties of a higher value on a sliding scale. Of course there are also first home buyer grants, and last financial year alone we supported Victorians with over $1 billion of first home buyer grants and stamp duty relief. We are taxing property owners who leave extra houses vacant so that they have an incentive to get the house back on the market so that someone has a place to live. There should not be vacant properties in our state when so many experience housing stress. The Victorian Homebuyer Fund introduced by this government has been a key tool in getting Victorians into their first home. Eligible participants require only a 5 per cent deposit, and the government provides up to 25 per cent of the purchase price in exchange for an equivalent share in the property.

Aboriginal and Torres Strait Islander homebuyers can buy with a deposit of 3.5 per cent and receive a government contribution of up to 35 per cent. It has been so successful that it has even been adopted by the federal Labor government and the New South Wales government, and I, like the member for South-Eastern Metropolitan Region, take this as a strong endorsement or even flattery of the Victorian government.

Through the fund there is $1.6 billion to help more Victorians buy their first home. This is in addition to the stamp duty exemption and the first home buyer grant I mentioned earlier. The fund has already helped more than 2000 Victorians buy a home. This is a policy that is expected to open the door to home ownership for 10,000 Victorians. More than that, it is helping people who have been preapproved through the fund, meaning they too will pay a deposit of just 5 per cent and save thousands of dollars in lenders mortgage insurance when they make a successful offer for a home. Home owners can buy out the government share at market value over time, with payments reinvested to help other aspiring homebuyers get into the property market. In this, the government is taking on that role of lending money to people who need it to buy a home and who need that assistance to enter the property market.

Still there is a massive role for social and public housing, and the government has continued to invest in that. We are ensuring thousands more Victorians have a safe place to call home with the $5.3 billion Big Housing Build. This unprecedented investment in housing will result in more than 12,000 new social and affordable homes across Victoria. For example, in my electorate on the Mornington Peninsula there are 1437 social housing properties, and we are investing more than $10.5 million to build more homes for people who need them most, with 19 new homes completed and construction already underway on a further 12 and with more to come in the area. Across Victoria at least $2.8 billion has been spent so far, with 6300 houses finished or underway as of 22 July. In the Wellington shire, central Gippsland, there will be 65 new homes, with 34 now complete and 31 with construction underway, at a value of $21 million. In East Gippsland there will be 46 new homes – 23 are complete and 23 have construction underway – at a value of $15.5 million.

Last year I went to a social services forum in Bairnsdale held by Catholic Social Services. It was clear that housing has been a problem in the area, which is a perfect example of the impacts of tourism, natural bushfires and materials shortages. However, together we are working hard to get through this. I followed up with a visit to the local Vinnies, and I want to mention their great work in supporting people. Cath McMahon and the team at Bairnsdale Vinnies do a tremendous job, and I was pleased to see that Bairnsdale will be a site as part of the government’s investment in youth housing, because youth are being affected by this as well. The Big Housing Build will increase the state’s social housing stock by 10 per cent.

Stamp duty is of course a cost to Victorians when they make property transactions. This cannot be ignored. Like all taxes, someone has to pay them and they have to be tied to something meaningful. State governments are restricted in what they can tax. For me, and generally on this side of the chamber, taxation is about equality. Those with more chip in more to help those with less. It is redistribution, and it helps create a fair, equal and just society, a society with social cohesion and without the turmoil that can come out of environments where there are such stark differences between the haves and the have-nots. What this government has done is ensure that this cost is carried by those most able to do so.

The most important thing is that tax is shared evenly and fairly. That means making concessions for those with less or at more difficult times in the life cycle or those in unique circumstances. To account for this, stamp duty currently has the following exemptions and concessions. The first home buyer duty exemption or concession is a one-off duty exemption for a principal place of residence valued up to $600,000 or a concession for a PPR with a dutiable value of $601,000 to $750,000 if you enter into a contract post 1 July 2017. This means that Victorians buying their first home are exempt from paying stamp duty, helping families get into the property market earlier. Pensioner concessions are a one-off duty exception or concession for a new or established home valued up to $750,000. This means that those at retirement, within reason, are not hit with stamp duty and can move into a new home that is more appropriate to their needs. This looks after older Victorians, who have already given so much to our community, and takes into account their ability to pay. A principal place of residence concession is a duty concession for when a property you buy valued up to $550,000 is used as your primary home. This targets the tax towards properties of higher value and of course investment properties, giving concessions to those who are living in their home, in recognition of the fundamental basic need of a roof over your head.

Young farmers have a one-off duty exemption or concession for buying their first farmland property, and family farms have an exemption for the transfer of the family farm, depending on the class of the land, the nature of the transfer and the status of the parties involved in the transfer. Growing up on a farm, I know how hard it is for people to get into the business of farming, and this exemption gives young farmers a leg-up to get into their dream of running a farm, which not only supports Victorian farming families and our regions but also feeds Victoria, Australia and indeed the world.

For deceased estates there is an exemption on a transfer of land by the executor of a deceased person to a beneficiary. A transfer between a spouse or a partner also has an exemption, including transfers arising out of a breakdown of a relationship.

On this side of the chamber we know the vital role that government plays in supporting the community and the economy in creating jobs. These past few years have shown that more than ever. We on this side of the chamber consider land tax a contribution to how we pay for world-class schools, hospitals and transport infrastructure, and I am proud we have many of those investments in my region of Eastern Victoria. We know that investing in our people and the essential services they need is the best way to support those in need, create opportunities and create jobs – again, much like we are in Eastern Victoria. We know that we have to invest in public infrastructure and building the future to help our state grow and to help people to get to work and get home safely. We care about funding schools and hospitals – state-shaping, public-good infrastructure – and if last November is any guide, the good people of Victoria are supportive of these investments.

I do not subscribe to the doctrine that people should be left to fend for themselves, and I never will. This government is committed to making housing more accessible for all Victorians and carefully considers Victoria’s taxation mix to balance many competing priorities. Consistent with this approach, the government will continue to review policy settings and priorities, taking into account the government’s aims of enhancing the state’s productivity competitiveness and building a better future for all Victorians.

Sitting suspended 12:58 pm until 2:03 pm.

Matthew BACH (North-Eastern Metropolitan) (14:03): It is good to rise to make a contribution on this important motion from Mr Limbrick about tax. I note the earlier comments from Mr Galea and also Mr Davis in particular. I missed Mr McIntosh’s comments just before the break.

It seems to me that at the heart of this motion there really are two things: firstly, how we maintain a regime in Victoria that is fair and efficient, and secondly, how we make housing more accessible. It is important to acknowledge that home ownership really must be our goal in this broad space. The Premier has recently made some comments about that that I would be so bold as to disagree with. Home ownership gives people a buy-in to society, a stake in their community, as well as other benefits, like security of course. Home ownership gives people an asset that can and does grow over their lifetime. Data shows that home owners are far more likely to take risks like starting a small business or upskilling themselves because of this sense of security on the basis of their home ownership.

It was a great failure of Federation, one of a number, that left states not legally able to levy taxes. So states have to resort to and do resort to a whole series of crafty measures in order to get around this, instituting levies and fees and other charges. Because of this the Victorian government, despite the fact that it has ramped up all manner of different taxes and charges and fees, has become incredibly reliant on two of the least efficient and most harmful taxes that we have – namely, stamp duty and payroll tax. Where payroll tax is of course essentially a tax on employing people, a tax on jobs, stamp duty is really, I think, best understood as a tax on economic mobility. Stamp duty acts as a huge disincentive to moving to better opportunities, such as jobs and better schooling, and incentivises people to stay still. Particularly, I want to stress, for younger Victorians this is the case. They move far more often. They are prone to move and want to move far more often than older Victorians. High rates of stamp duty penalise them. Almost every economist, as Mr Davis said, argues that stamp duty is a bad tax. So many economists say that we should scrap stamp duty and move to a regime of land tax. I share the concerns, quite frankly, expressed by Mr Davis about what that may look like. Nonetheless I very much welcome this motion given the massive impact, especially on young people, of our very high rates of stamp duty here in Victoria.

There is an inquiry that has been referenced already in our debate that finished last March by our federal colleagues and was chaired by Jason Falinski. It made a whole series of recommendations about how we can better address this very significant challenge and ensure more young Victorians get into the housing market. There was in fact a recommendation to move to a regime of land tax. As Mr Davis said on a number of occasions, this is something that the boffins recommend. It is an important recommendation that of course merits consideration alongside a whole series of other important points that Mr Limbrick has listed in his motion, notwithstanding the justifiable scepticism of Mr Davis, especially given the way in which different arrangements have been entered into by other Australian jurisdictions.

The most important thing to those of us on this side of the house is the impact of stamp duty on housing affordability and also home ownership. I am particularly interested in the effect stamp duty has on the availability of housing stock, something that again has been addressed in this discussion – the need to open up more land for greater housing stock. For instance, it does this through disincentivising older home owners from downsizing, again to more appropriate residences for them. If downsizers were able to do what they wished to do, then that would free up larger housing stock for others, one of a number of reasons why so many economists are scathing about, to be fair, stamp duty regimes around the country and certainly Victoria’s stamp duty regime as well.

I note that we as a Liberal-National coalition took a measured policy that was not overly ambitious but nonetheless was important to the election in order to reduce stamp duty – indeed to axe stamp duty altogether – for first home buyers under a certain threshold: $1 million. That was important. However, I do agree with Mr Limbrick that we can fiddle around the edges, we can make time-limited changes, and Mr Galea has spoken about some of the changes to the regime that the government has sought to make from time to time as well, and they are welcome, but nonetheless really it is high time to have a more wideranging and thoroughgoing discussion about proper tax reform.

I think it should be incumbent on all of us as members of this chamber to do everything we can to improve rates of home ownership, given the many significant benefits for the community, and this inquiry will provide us with a series of important recommendations – I hope – as to how we can do it. That is the reason I support this motion.

Jacinta ERMACORA (Western Victoria) (14:09): I thank Mr Limbrick for bringing this motion to the house, and I welcome this debate on the importance and necessity of our state tax mechanisms. How we tax and who is most affected most definitely determines a large part of our revenue predictability and our efficiency of resources and how this affects our housing supply and development and the impacts on labour and capital mobility.

As already has been clearly stated by others in this place today, there is absolutely no doubt that over the last eight years the Andrews government has been committed to ensuring our tax system remains fair and competitive and, most importantly, continues to deliver for all Victorians. In fact this government has shown outstanding leadership in striking the right balance between taxing fairly and facilitating the market. This government believes in the principle that those who have the means should make a fair contribution to the investments needed to grow our state and ensure that those who can contribute their fair share.

Representing Western Victoria I can certainly attest to this government having a strong record of delivering tax relief for Victorians, and I am proud of this being especially true for regional Victorians. This government has increased growth and employment opportunities since July 2017 by applying a lower payroll tax to taxable wages paid by regional employers. In 2019, to further assist employers in regional areas affected by the bushfires, the tax rate was then lowered to 1.2125 per cent. This lower payroll tax was shown to be so well received and effective in increasing employment rates it was further extended in July 2021. The tax rate is simply based on the 85 per cent rule whereby to qualify as a regional employer you must pay at least 85 per cent of your Victorian taxable wages to your regional employees during a financial year for the purposes of your annual return. There is no doubt that the Andrews Labor government’s reductions in regional payroll tax have increased employment rates in regional Victoria.

Evidence clearly shows this intervention has encouraged innovation and expansion in regional Victoria. In September 2022 the Australian Financial Review reported that:

The average unemployment rates in Victoria’s Warrnambool and south-west region … over the three months to August were an extraordinarily low 1.1 per cent …

This is data from the Australian Bureau of Statistics that they quote. This demonstrates the success of the Andrews Labor government’s tax reductions in regional Victoria. It is a stunning example of just how considered and targeted this government’s financial strategy is. Instead of looking after particular interests, this government has intervened to make it cheaper to run a business in regional Victoria and in doing so has made it easier for businesses to employ the workers they need. As a result, we now have some of the lowest unemployment rates in regional Victoria in Warrnambool and in the south-west. If we were to look at the efficiency of the resource allocation, as mentioned in the motion, I would suggest that the economic, financial and taxation strategy of the Andrews Labor government is incredibly efficient. This is because the reductions in taxes for regional businesses have resulted in increased gross regional product, more jobs and healthier businesses. What is not to like about that?

There is no doubt that the huge demand on people to take up employment in the south-west has put pressure on our housing market. To that end the Andrews Labor government is also fully supporting housing affordability and construction jobs. In fact no government has done more to help Victorians trying to get into the property market. The government has introduced several schemes that can provide buyers with a concession or an exemption from land transfer duties, and from July 2017 to January 2023 no fewer than 223,845 transactions were processed for first home buyer exemptions to stamp duty or concessions granted, totalling $3.9 billion.

These schemes include the first home buyer exemption concession or reduction, the principal place of residence concession, the off-the-plan duty concession and the pensioner duty exemption or concession. In 2017 we abolished stamp duty for first home buyers for purchases below $600,000, as has been mentioned here already, helping thousands of Victorians find their first home as the Andrews Labor government tackles housing affordability head-on. Those buying a home valued between $600,000 and $750,000 will also be eligible for a concession applied on a sliding scale. The exemption and concession apply to both new and established homes. No government has done more than the Andrews Labor government to help Victorians trying to get into the property market.

We have also introduced the vacant residential property tax, which is levied at 1 per cent multiplied by the capital improved value of the taxable property. For example, if the property has a capital improved value of $500,000, the amount paid will be $5000. This is an example of this government using the tax system to support the efficient use of our housing stock and helping to make housing more affordable. This strategy is not uncommon in the water sector to encourage infill development in subdivisions where civil infrastructure is already in place. This particularly encourages housing construction in areas where water, sewer, roads, drainage and lighting investments have already been made.

The Victorian Homebuyer Fund introduced by this government has been a key tool in getting Victorians into their first home. It has been so successful it is being copied by the Albanese government and the New South Wales government. The Andrews Labor government is investing $1.6 billion to help more Victorians buy their own home. The fund has already helped more than 2000 Victorians buy a home. In addition to the Victorians who have settled on their property and moved in, more people again have been preapproved through the fund, meaning they too will pay a deposit of just 5 per cent and save thousands of dollars in lenders mortgage insurance. Eligible participants require only a 5 per cent deposit and the government provides 25 per cent of the purchase price. Home owners can buy out the government’s share of the market value over time, with payments invested to help other aspiring homebuyers get into the property market. Eligible participants can now purchase in any location right across the state. The value of the property cannot exceed $950,000. This is a brilliantly conceived scheme that has elements of self-sustainability within it, whilst at the same time supporting Victorians in their desire to own their own home.

These examples demonstrate that the Andrews Labor government is determined to support Victorians facing housing affordability challenges and also demonstrate it is precision focused on its economic strategy to ensure that the whole state benefits and that workers and businesses are lifted up together.

Samantha RATNAM (Northern Metropolitan) (14:19): I am pleased to speak on behalf of the Greens to support Mr Limbrick’s inquiry referral. It is timely that we are considering an inquiry into land transfer duty given it is a reform that is widely considered to be one of the solutions to our housing crisis. Our housing crisis continues to worsen as house prices and rents skyrocket, homelessness increases and our public housing system continues to be neglected.

For years governments have been tinkering around the edges of genuine housing reform. Instead of considering major reforms like capping rents, moving towards a universal housing model or significant tax reform like overhauling land transfer duty, we have had years of piecemeal reform and limited funding. Even the Big Housing Build is currently a four-year social housing plan with no successor after 2024, which will just scratch the surface of the need for public and affordable housing. This inquiry referral foreshadows one of the major housing reforms this government has so far refused to seriously consider: overhauling land transfer duty in favour of a fairer and more sustainable source of income, like land tax.

Land transfer duty – or stamp duty, as it is commonly known – is one of the most inefficient and inequitable taxes we have. It adds around $40,000 to the cost of buying a house in Melbourne, contributing to our housing affordability crisis. It can discourage people from moving closer to work or downsizing as well. It disproportionately affects young people, who are more likely to have to move more often or who are already struggling to save a deposit and afford their first home in a brutal housing market. It is unfair. It targets people who need to move more often – young families and first home buyers – and acts as a barrier to home ownership for older women. Almost every economist and policymaker agrees that stamp duty is quite simply a bad tax that should be abolished as soon as possible. Professor John Quiggin, an economist at the University of Queensland, said stamp duty is a:

… terrible tax that is already riddled with exemptions and concessions.

Prosper describes it as:

… a painful tax that hurts young, working families the most …

Economist Ken Henry labelled it as ‘a diabolical tax’. And in its review of the National Housing and Homelessness Agreement the Productivity Commission was highly critical of stamp duty concessions, noting that the money spent on concessions would be better spent supporting people who are homeless or at risk of homelessness.

Given the almost unanimous opposition to the tax, you have to wonder: why is the government so afraid of reform? The answer is: they depend on the billions of dollars raised through stamp duty each year. Land transfer duty is far and away the largest source of revenue for the government. Last financial year we raked in a massive $10 billion from stamp duty, about 34 per cent of the total tax revenue and almost 60 per cent more than the previous financial year. Without the billions in revenue from stamp duty each year, the budget would essentially collapse. This reliance on stamp duty revenue prevents the government from embarking on much-needed tax reform. The only reforms to stamp duty are a range of concessions and carve-outs to help first home owners; exemptions for first home buyers on properties below $600,000; and the government’s shared equity scheme, which reduces the deposit a first home owner needs to pay up-front.

The government’s reliance on stamp duty also means they fail to consider other ways to raise revenue to help address our housing crisis. The social and affordable housing contribution, for example, was a very sensible policy that would have seen property developers contribute a small part of their profits to fund more affordable housing, but it was abandoned after just five days. Increasing the vacancy tax would disincentivise owners from leaving properties vacant, returning them to the long-term rental market. And we could even look at raising revenue in a way that does not depend on the housing market, such as a levy on the big banks, which the Parliamentary Budget Office estimated would raise $4.7 billion over the next 10 years.

The other major reform this government has not considered is of course the most obvious: abolishing stamp duty and replacing it with a broad-based land tax. Land tax is a more sustainable source of revenue. Instead of being linked to fluctuating house prices, land tax is stable and predictable. It allows long-term planning and long-term investments. It is fairer, as it is levied on the value of the land, not on property transactions. And of course it will help make home ownership more achievable for more Victorians by removing the up-front financial barrier of stamp duty. Modelling by the Grattan Institute suggests that replacing stamp duty with land tax across the whole country would add up to $17 billion per year to our economy. It was recommended by the Productivity Commission, who said stamp duty reform needed to be much bigger than just tinkering with concessions and recommended it be fully or partially replaced with a land tax. The major 2010 Henry tax review also recommended discarding stamp duty and implementing a universal broad-based land tax.

Only the ACT has made progress on this reform. In 2012 the territory committed to progressively phasing out stamp duty by 2032. But New South Wales is not too far behind. Last month New South Wales’s land tax reforms came into effect, which allows first home buyers in New South Wales to choose between paying stamp duty on their purchase or an annual land tax of $400 plus 0.3 per cent of the property’s land value. The Greens would like to see Victoria follow in this direction and abandon stamp duty and instead introduce a fairer land tax that targets land value and housing wealth, not housing consumption. Shifting to land tax will take time – the ACT’s reform is a 20-year project, other reviews recommend 15 years – but we are hopeful that this inquiry will get the ball rolling in Victoria.

Of course there is much more for us to do as well. The sheer scale of the housing crisis means we need significant reforms to tackle housing unaffordability and rising rates of homelessness. And while abolishing stamp duty is an important part of the solution, it cannot be the only one. We need a big increase in public and affordable housing, caps on rent increases to stop skyrocketing rents and actual regulation of the booming short-stay industry to reduce the pressure on the rental market. But we are pleased to support Mr Limbrick’s referral and look forward to participating in this inquiry.

John BERGER (Southern Metropolitan) (14:26): I thank Mr Limbrick for bringing this motion to the house. I am particularly grateful that he brought this motion to the floor as it gives me an opportunity to talk about our government – a government of reform – and our goal to take on boldly, without fear or favour, reform opportunities, whether social or economic policy. I am proud of the work that we have done to reform our tax system. Too often the top end of town can rort the system and leave those without a good tax accountant to foot the bill. That is why I am proud of the work to deliver a progressive tax system that can deliver the essential services every Victorian relies on: good schools, good hospitals, good public transport, good water, good electricity and good government services. When I delivered my inaugural speech yesterday I said fairness was in my DNA, and that is why I am proud of this government. We believe in the principle that those with the means to contribute should make a fair contribution and should deliver to the state that has delivered so much to them – to grow our state for all of us.

Since the Andrews Labor government was elected we have cut or abolished taxes and fees – listen to this, and this is not a lie, I want everyone in the chamber to hear it – 57 times. That is right, we have cut or abolished taxes and fees 57 times since coming to government in 2014. We have cut the payroll tax threshold so that fewer small and medium businesses pay any payroll tax, and we have cut regional payroll tax to 1.2125 per cent. That is quite a mouthful, and it is just one quarter of the metro rate and the lowest in the nation. And here is another number: 2.8 per cent. That is not only the number of people in this room paying attention, particularly those opposite, but it is the rate of regional unemployment.

And here is another number for the record to note: 223,000 transactions that have been proposed for first home buyer exemptions to stamp duty from July 2017 to July 2023. That is a concession of $3.9 billion. Our support was more than $1 billion last financial year alone, but we are not alone there. Yet, Mr Limbrick, we are not done there. That is right, we have got a whole lot of reforms to talk about, and if you gave me an hour I would be able to list them all. But here is another concession. We provided a temporary stamp duty concession of up to 100 per cent for new residential properties with a dutiable value of up to $1 million in the City of Melbourne. I want to read out part of the motion, just for its holistic value, to really get to the crux of this:

(2) examining potential alternatives to land transfer duty, assessing models from interstate and international jurisdictions …

Well, we on this side of the chamber are proud of leading the nation. That is what reform is all about. We are innovating, delivering bold policy reform that is not only nation leading but world leading. We know how important the role of the government is in supporting the community. It creates jobs. You see it every day with the Big Build, the new schools, the hospitals, level crossing removals, roads, the Metro Tunnel and the Suburban Rail Loop. What else? Have I missed anything? It is endless.

Yesterday I received an email from principal Sally Lasslett of the Prahran campus of the Hester Hornbrook Academy. She invited me to visit their school and experience the special assistance school. Hester Hornbrook is an independent flexible school for young people. They wrap their arms around young people, offering wellbeing supports and services – not those in mainstream schools. You know, 50 years ago these schools would not have existed. You know the famous saying, ‘Imagine where humanity would be if everyone got a great education – if the playing fields were level.’ On this side of the chamber we recognise the role government plays in our lives, and it is these funds that support these programs. While I appreciate Mr Limbrick may have some quirky takes – yes, quirky might be a bit special – that are maybe even a bit out of the ordinary or he may consider taxation theft, we on this side of the chamber know that it is schools like Hornbrook Academy that can function because of them. It is the price we pay for a world-class education and the price we pay for leading the world in so many ways. I invite Mr Limbrick to join me on the visit to Hornbrook Academy, and I hope it will change his mind on the importance of public education.

Mr Limbrick, on the topic of resource allocation and on the topic of equality, which you mentioned in your speech, I refer to the constitution of Victoria, because you mentioned that you do not like taxes. Well, Mr Limbrick, part V, section 89 says that:

All taxes … shall form one Consolidated Revenue to be appropriated for the public service of Victoria …

It is in the constitution, ‘for the public service of Victoria’ – for the collection of good. Our payroll taxes saved Victorian businesses up to $1.7 billion up to 2021–22, and by the end of the forward estimates period they will have saved Victorian businesses about $4 billion. Make no mistake, we are appropriate and we are fair. We cut payroll taxes, and we have the record to prove it. But we will ensure people pay their fair share, and that goes to the heart of overall tax efficiency. That allows us to do the big things.

In conclusion, the runs are on the board, and we are getting on with what does matter. We are not ignoring the noise, we are getting on with the job. Our tax policy is clearly working. Victoria’s unemployment rate currently sits at 4 per cent, nearly 3 points lower than when we came into office. We have created over 340,000 jobs since September 2020. We need to invest in the infrastructure of the future – not later but now. So if those opposite are against that, shame on them. We are a government that is about doing things, not a government about not doing things.

Ryan BATCHELOR (Southern Metropolitan) (14:33): I am very pleased to contribute to the debate on Mr Limbrick’s motion in relation to land transfer duties, because it does give us the opportunity to have a broader conversation, both about taxation, as some of my colleagues have so eloquently described, and also about housing – two very important issues for us as members of this place to consider.

Obviously in relation to the first of these two topics we have had the discussions and the exhortations about the role that taxation plays. As Mr Limbrick described, it is the price of civilisation. I think to my mind, though, taxation is not so much the price of civilisation but really a foundation of the compact for a civilised and decent society, because without the revenue that our taxation base raises we cannot provide the necessary services that so many Victorians rely upon in all walks of life, particularly those who have less. Through our taxation system we are able to give them more. We are able to give them the basic services that they all rely on and they all expect: the schools, the health care – the list goes on.

So when we have in the chamber contributions demonising taxation – or bloviating against the evils of taxation is probably a more accurate description – what we do not hear from the critics are the lists of those services that they want to cut as well. You cannot come into a public debate about the evils of taxation and say that we should get rid of taxes without then having the courage to articulate the rest of that conversation, and that is what services you want to see cut as well. Without taxation we cannot offer services, and we on this side of the chamber believe that good public services are what Victorians rely upon.

Taxation, however, is also a tool. It can be used as a tool of policymakers to help shape those goals that we desire, which is why, as my colleagues have articulated, the government has taken a very active role in making concessions on the payment of certain taxes to encourage home ownership. We see this particularly in the record that the government has in tax reform: lowering taxes for first home buyers to encourage home ownership, abolishing stamp duty for purchases for first home buyers under $600,000 and offering concessional rates of stamp duty for those first home buyers with purchase prices between $600,000 and $750,000. So taxation can be an active tool that we use to encourage the things that we believe are important – in this case, home ownership.

Another point I want to make – and I think it is important to consider in the context of this debate – is that whilst we can talk about the evils of taxation we do have to understand and acknowledge the constrained environment that state governments work under when it comes to their tax base and the constraints that the vertical fiscal imbalance embedded in the terms of the Commonwealth constitution place on state governments’ abilities to raise taxes to fund the range of services that we desperately need. What we do not want is for Victoria’s social progress to be held back by a lowest common denominator approach to tax and tax policy, which is why I believe that we, in considering this motion and considering the issues that Mr Limbrick wants to raise, have to think about ensuring that our tax base is fair, efficient, progressive and most importantly sufficient to deliver the things that Victorians need.

Obviously one of those things is a roof over their heads. The goal of promoting home ownership at affordable levels and making sure that we can give every Victorian a place to call home and a roof over their heads is an incredibly important part of the product of that revenue that is raised through land transfer duties and other forms of taxation. That revenue is being applied to service those really important ends. There are a couple of initiatives that this government in particular has been focused on to promote home ownership and access to housing. We have obviously seen the very significant homebuyer fund that was recently given a $1.1 billion boost, taking it to $1.6 billion in total. This is a shared equity model, where government helps first home buyers to lower the cost of the borrowing they need to get into the housing market and to make sure that they have got the capacity to enter the housing market through this shared equity model, which is proving to be not only popular on an individual basis but also admired at a policy level and copied in other jurisdictions around the country, most noticeably recently at a federal level.

We also have, very importantly for a debate about housing, an investment of $5.3 billion in the Big Housing Build, which is delivering 12,000 new social housing dwellings across Victoria. That is the sort of active policy that you can do to help people into housing when you have got a robust, fair and sufficient tax base in order to deliver on those services. We are also, as colleagues have mentioned, willing to use and able to take an active stance using a taxation system to promote housing being made available to home owners to buy, by introducing a vacant property tax, which is a 1 per cent tax levied on the capital improved value of vacant properties in an attempt to get people who own properties but do not live in them to provide them to the open housing market. We believe that this range of policy actions that the government is taking demonstrates its commitment to the goal of achieving greater levels of home ownership in Victoria.

Mr Limbrick, Ms Ratnam and others have talked about the issues that economists clearly have with stamp duty – with land transfer duty – as a tax that has a whole well-described range of reasoned critiques that have been articulated in a lot of detail, and there have been many proposals put forward in the public policy debate in recent years about how to fix that. I certainly do not want to go through those in detail. I do want to just reflect on a word of warning that was in a policy brief written by the Australian Housing and Urban Research Institute about the move from stamp duty to land tax that is worth considering. That is that policymakers, they say, should exercise caution to ensure the beneficiaries of such a change and such policy proposals are current or prospective home purchasers who face the greatest difficulties in accessing markets, rather than those benefits accruing to those already well placed to access home ownership, because I think in the context of a debate about policy reform, tax and housing policy reform, the number one priority in considering that debate should be about improving access to home ownership.

The last point I wanted to make as my contribution to this debate is really just a contribution to reflect a little bit on the other thing we need to remember in debates about housing and taxation, because it is a debate dominated by economists. Some of my best friends are economists; I do not want to denigrate their contribution to public policy debate, but we need to think about housing as not just dwelling units that can be efficiently allocated at a resource level but that these are also people’s homes. In the public policy conversation that we have about housing and in the questions about the efficiency of our tax base and stamp duty, we need to understand that people living in their homes love their homes. They have great fondness for them, and we need to consider, understand and reflect on the human element of public policymaking and the behavioural aspects of considering these discussions and potential possible future changes, because not everyone, particularly in relation to their home, acts as the archetypal rational actor so beloved by economists and other forms of policymakers. It is an emotional topic; it is a topic that is close to people’s hearts and to their families, and it is one where I think we need to consider those elements as well as the other wider policy issues.

David LIMBRICK (South-Eastern Metropolitan) (14:43): Firstly, I would like to thank everyone for their contributions to this inquiry today. I am glad to note that no-one stood up and mounted a strident defence of stamp duty. I was sort of expecting that that would be the case.

I would like to just take up a few points. Mr Batchelor was talking just a moment ago about needing government services, and obviously we need to tax to provide those government services, but in the case of housing it seems that we have gotten ourselves into an absurd situation where we are taxing housing to provide housing. I do not think that anyone would see that that is a reasonable thing to do. I would also challenge the notion that services will not exist if the government does not provide them. I imagine that in countries where the government provides food their politicians probably say, ‘Well, without us you wouldn’t get food.’ Well, here people buy their own food. And what the Liberal Democrats support is a smaller government, a government that does less than what the government currently does – and in fact the government has grown to the size now where it intrudes into every aspect of our lives, and in fact as to what things we would cut we are quite happy to outline some of the things that we would cut, including the upcoming Suburban Rail Loop and many other expenses of the government.

I would also note that Mr Berger in his contribution spoke about the government providing electricity. They do not do that yet, but they may do that, although I might be breaching an anticipation rule there. I also do not take offence at being labelled quirky. Yes, people who are interested in taxes might be labelled quirky, but as everyone has pointed out, it is a really important issue.

Anything that we can do to make housing allocation more efficient and more accessible to more people I think everyone in this room agrees we need to do. Everyone with knowledge about how stamp duty works agrees that it is a very inefficient way of doing it. That is exactly what this inquiry is trying to do – look at some of the problems and look at some of the solutions and how we might get the ball rolling on tax reform. It sounds like everyone in here supports some form of tax reform. We might disagree on what the outcome is, but we do need to get moving on it, and that is what this inquiry is all about.

Motion agreed to.