“An increase in Capital Gains Tax on housing is a tax transfer of State Government revenue to the Federal Government, making state governments are amongst the biggest losers from the initiative,” stated Tim Reardon, HIA’s Principal Economist.
“Work undertaken by the CIE, for the HIA, looked at difference changes to CGT and Negative Gearing and found that an increase in CGT (a Federal Tax) would increase housing costs to renters and first home buyers, reduce economic activity and reduce household consumption.
“The analysis shows that increasing CGT would generate a revenue gain for the Federal Government of around half a billion dollars a year which would be dwarfed by a fall in stamp duty revenue to that states of over $1bn per year.
“Overall, total taxes collected in the economy are likely to be significantly lower as a result of the policy change. This is driven by lower taxes collected on income, lower GST revenue and lower property taxes (Stamp Duty) revenue for the state governments.
“The reason revenue will decrease, is that the changes to the tax will cause a reduction in supply of new housing which is taxed and used as a form of state revenue.
“It was thought one of the advantages of reducing the rebate was that there would be more revenue created to pay for additional infrastructure to ease congestion, but the CIE modelling does not support that assertion.
“Add to this that we have already seen a significant reduction in investor activity in the market - due to a range of state and federal government interventions in the housing market – if there is ever a good time to impose a new tax on housing, then this is not that time.
“We cannot tax our way out of the housing affordability problem. The solution is less tax on housing and less government distortions on the market, not more,” concluded Mr Reardon