THE LAND Values Research Group is working towards jettisoning all of Australia's direct and indirect tax in favour a single land and resource rent.By Tony O'Brien
THE LAND Values Research Group is working towards jettisoning all of Australia's direct and indirect tax in favour a single land and resource rent. The Group, funded by the Henry George Foundation of Australia, has engaged prominent Canberra-based economists Dwyer Partners to undertake a feasibility study. They will test the social and economic impact of replacing all the existing direct and indirect taxes with a single “tax. The immediate aim is to estimate the potential tax base of the unimproved value of Australia's land and other natural resources.
LVRG research suggests that a cost saving of at least 30per cent in administrative and compliance costs without any shortfall in services is attainable. This would reduce the current tax demand to around $A135 billion. A land and resource rent or economic rent, applied on capital unimproved values would deliver revenue in excess of $A150 billion.
This economic rent currently goes into private pockets and is not recognised by the Australian government as foregone revenue. That blind spot forces the government to look elsewhere to fund infrastructure; taxing on production and exchange. So, on the one hand land holders tax the unimproved value of sites and resources, in the form of rents, land price and mortgages while on the other the Government extracts an equivalent or lesser amount in taxes, fines and tariffs, to cover maintenance of the physical and social infrastructure.
The tax model being investigated is built on a framework of equity and social justice, the most immediate benefit is expected to be felt in an increase in disposable incomes, and a consequent increase in consumer demand and job growth.
Implementing such a revenue system could see the current miasma of taxes and accompanying administration, replaced by a single charge on households and businesses.
Australians are currently paying these site and resource rents twice over: once to the private sector reflecting the value of infrastructure, and again to the state. There are also dead weight administrative costs to cover. The current tax and compliance bill for the average household is $A22,000, which could be replaced by an average site rent payment of $A9,000.
With compliance costs of next to zero, this policy allows the removal of taxes on income and production . Under this policy producers would retain the full return on their efforts. None could gain by monopolising, and ransoming to the highest bidder the country's land and resources.
The researchers intend to produce a static economic model, one in which economic rent revenues would be compared with current tax revenues. Explaining the background to and rationale of the project Dr Terry Dwyer, founder of Dwyer Partners said: “It is of critical importance to re-examine the potential tax base represented by land and natural resources as compared to income or consumption taxes.
’Valuation of land has to recognise that there are interactions between the value of different classes of land rights. If water rights for example are stripped from land titles, land values will be depreciated. The value will not have disappeared but will be incorporated in the value of water rights. Similarly if public utilities are allowed Ëœ to include the value of easements in their assets [then] land values may be depreciated but the lost land value would be incorporated in the easement values.
’The measurement of the taxable capacity of Australian land and resources will alter with the tax system. If increased land taxes are used to lower taxes on company and investment income, there will be an increased flow of capital seeking to invest in Australia. This will affect the value of Australian land, just as Hong Kong's low 15% tax rate has attracted business headquarters and business investment which has underpinned high land values.
To learn more about the project contact Tony O'Brien at
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or Bryan Kavanagh at
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