THE Victorian Premier, John Brumby, recently announced that there will be no tax relief in the upcoming state budget. The Premier revealed that throughout this financial year state revenue has declined by about $2billion, primarily because of the global financial crisis.
Mr Brumby has announced that as a result of declining revenue there is no capacity for a cut to state taxes. REIV analysis of the property sector reveals that there has been a sharp decline in property transactions this financial year, with transactions down by about 25per cent.
The State Government is heavily reliant on stamp duty revenue and the global financial downturn has highlighted that relying on a volatile tax base can lead to a dramatic downturn in state revenue.
One of the recommendations that the REIV has presented as part of its pre-budget submission is that the State Government should examine how it can broaden the state’s tax base. The Federal Government has announced the Henry Review. It’s now an opportune time for the State Government to also undertake a review to ascertain what options are available to reduce the Government’s reliance on stamp duty and ensure the state is well placed so that the impact of a volatile economic environment is minimised
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