Speeches

20
Jun

State Taxation Acts Amendment Bill 2017

Speeches
Debate resumed from 25 May; motion of Ms MIKAKOS (Minister for Families and Children).

Mr RICH-PHILLIPS (South Eastern Metropolitan) — If you reflect back on the election of 2014, we saw lots of interesting things, one of which was — —

Mr Barber — A lot of Greens got elected.

Mr RICH-PHILLIPS — It is not surprising Mr Barber starts with Greens being elected. There were a few perverse outcomes in 2014, and that may well have been one of them, but that was not the one I was referring to. I was contemplating the creation, the development of Daniel 'Call me Dan' Andrews, dare I say, 2.0 — the focus-group-tested Leader of the Opposition. We had the focus-group-tested new blue suit. We had the focus-group-tested haircut —

Mr Finn — The open-neck shirt; don't forget the open-neck shirt.

Mr RICH-PHILLIPS — the focus-group-tested open-neck shirt and no doubt the focus-group-tested opinions and values.

Honourable members interjecting.

Mr RICH-PHILLIPS — We had this focus group model of Daniel Andrews, Daniel 'Call me Dan', designed to reflect what the focus groups told the Labor Party the community wanted. On election eve we saw 'Call me Dan' Andrews on Channel 7 with — —

Ms Mikakos — On a point of order, Acting President, the member is taking a very interesting line on what is a taxation bill, but I do ask him to refer to the Premier in a respectful way. We do have a practice in this house of not referring to members by their first names.

Mr Finn — On the point of order, Acting President, it is very, very clear that Mr Rich-Phillips is building a case. He is taking his time to establish a few facts on which he can build that case. He has only had 2 minutes. I mean, fair suck of the sauce bottle.

The ACTING PRESIDENT (Ms Patten) — Order! Thank you, Mr Finn. I agree that Mr Rich-Phillips is just starting, but I ask him to refer to the Premier as the Premier.

Mr RICH-PHILLIPS — I am very happy to refer to the Premier as the Premier. I make the point that this was his branding as 'Dan Andrews' in opposition — his self-imposed new branding, focus group tested. This is who he wanted to be; this is how he wanted to present himself.

On election eve the then Leader of the Opposition, now the Premier, fronted Channel 7, and he was there with his focus-group-tested fake sincerity talking about what he would do if he formed government. Peter Mitchell, a Channel 7 newsreader, asked a very direct question:

… do you promise Victorians … tonight that you will not increase taxes or introduce any new taxes?

A very straightforward question. And the then Leader of the Opposition — —

Ms Symes — I am going to hear that 11 times today.

Mr RICH-PHILLIPS — At least. The then Leader of the Opposition stood there in front of the Channel 7 camera, he mustered all his focus-group-designed fake sincerity and he looked down the camera and said:

I make that promise, Peter, to every single Victorian.

He might have even been rehearsing it, standing in front of the mirror enunciating the words to get that line out, and it is something that has resonated because to this day you can still see that clip doing the rounds on social media. In fact I saw it come up in a feed last night, and no doubt over the next 18 months we will see that clip come forward time and time again.

Ms Symes interjected.

Mr RICH-PHILLIPS — I am sure, to take up the interjection from the Government Whip, the government does not want to resile from that, does not want to walk away from those comments made by the now Premier when he made that promise to every single Victorian not to increase taxes or introduce new taxes, but the bill we have before the house confirms that Victorians were lied to on the eve of the last election because we have seen since that election the government break that promise not once, not twice, not three times but on 11 separate occasions.

We have seen the government, despite the now Premier's commitment not to increase taxes or introduce any new taxes, introduce a $252 million energy tax on coal royalties in last year's budget. We are seeing the taxi and Uber tax, which this house will deal with later in this week. We saw the land tax surcharge introduced for absentee landowners, initially introduced at the rate of half a per cent and then subsequently increased to 1.5 per cent. We saw the stamp duty surcharge for foreign buyers introduced, initially at a rate of 3 per cent and then increased to 7 per cent. We saw increases in the fire services property levy. We are seeing an increase in stamp duty on new car purchases. We are seeing new stamp duties on off-the-plan property purchases. We are seeing new stamp duties on the transfer of property between spouses. We are seeing an increase in tax revenue flow from the proposed annual valuation of properties and the consequential flow-on effects through land tax and council rates. We are seeing the new vacant residence land tax, which is one of the subjects of this bill, and we have seen the point of consumption wagering tax.

So despite that commitment from the now Premier on the eve of the last election — —

Mr Barber — 'Read my lips: no new taxes'.

Mr RICH-PHILLIPS — 'Read my lips: no new taxes'. Absolutely. 'Do you promise Victorians tonight that you will not increase taxes or introduce any new taxes?'; 'I make that promise, Peter, to every single Victorian'. Despite that commitment on the eve of the last election, we have now seen 11 new or increased taxes put in place by this government. We are seeing with this bill today the latest raft of tax increases that the government is proposing.

Before I get to the detail of this bill I would like to refer to a press release which was issued by the Treasurer's office this morning at 8.56 a.m. — just before 9 o'clock.

Mr Barber — Early riser.

Mr RICH-PHILLIPS — Early riser. It is titled 'Liberals blocking tax cuts and home ownership support'. It waffles on about what the government is doing in this budget and then goes on to say:

It's time for the Liberal Party to stop playing politics and pass the bill, which will put the dream of home ownership in the grasp of more Victorians and save local businesses thousands of dollars a year.

It goes on to actually quote the Treasurer; it ties the Treasurer into this:

The Liberal Party need to stop playing politics and pass these reforms — which are good for business, good for our economy and good for Victorians wherever they live.

Until today — until 9 minutes ago — the government had not even brought the bill on in this place. This thing has been bouncing around in Parliament since the budget, and the government has not been able to get its act together and even get it into this place. So to be putting out press releases this morning at 4 minutes to 9 saying the Parliament should pass this bill when the government does not even know what it wants to do with this bill is just ridiculous.

There is a story that appeared in the Herald Sun online this morning at about 10.40 a.m., so a couple of hours ago. The title of the story is in relation to the fire services bill, and just for the record the title from the online story is, 'MFB restructure: Democratic Labour Party MP Rachel Carling-Jenkins concerned about fire services bill'. The story is largely about that, but when you get three-quarters down this story about the Country Fire Authority bill there are a couple of paragraphs about today's state tax bill. The story says:

The government is also hoping to pass a taxation bill that effectively sets its budget, which includes stamp duty concessions for first home buyers and payroll tax relief for businesses in regional Victoria.

Mr Pallas said there would be a number of amendments moved by the government as a result of negotiations with the Greens around the 'centralised valuation issues' on a new land tax.

'Just to make it a little bit clearer how we will deal with those matters', Mr Pallas said.

So according to this story in the Herald Sun this morning, Mr Barber has done a deal with the government — because the Herald Sun says so this morning — about some amendments which we have not seen. To go on from this story, which reports the Treasurer announcing that there are a number of government amendments which have been agreed with Mr Barber to satisfy Mr Barber's interest in this matter — —

Mr Barber — Do you want to borrow my copy?

Mr RICH-PHILLIPS — I note Mr Barber offers to lend me his copy of the government's amendments. Following this story appearing in the Herald Sun this morning my office was in contact with the Treasurer's office about the government amendments and about getting a copy of the government's amendments, and the government — no more than an hour ago — said it was not sure if it was proceeding with those amendments. It does not know if it is introducing its own house amendments. So we have got a press release from the Treasurer this morning telling the Parliament to get on with it and we have a government that does not even know if it is amending its own bill. What an absolute sham this Treasurer is.

We have seen time and time again when we have Treasury matters come to this house, be it the port of Melbourne sale 18 months ago or be it I think the first state taxation bill this government introduced back in 2015, a completely botched handling of the process by the Treasurer and his office. I suspect yet again we will see by the end of the day the Leader of the Government having to come in and step into this process and hold the Treasurer's hand to try and get an outcome, because we have a Treasurer who is completely inept and out of his depth in dealing with legislation through this place. We are seeing it yet again today, with the government not even knowing if it is going to proceed with its own amendments at the same time as putting out a press release telling the house to get on with it. That is the sort of approach we have come to expect from this Treasurer and this government.

I say to the Treasurer and his office today: if he expects this house to pass this legislation to deal with his amendments when this bill progresses to committee, he had better make damn sure he knows what they are about, because this house and the Victorian community have a number of concerns about this bill. I do not think I have seen a state tax bill which has generated as much angst in the community as this particular bill has around a number of the provisions — in very large measure around the change of valuation provisions. So if the Treasurer is intending for this bill to advance today, he and his advisers and his office had better be in a position to answer this house's questions about those provisions and how they are going to work. Otherwise it is going to be a long day and this bill will not progress very far at all. A starting point for that would be to understand whether the government intends to bring forward these amendments it has foreshadowed to the Herald Sun this morning. This is a typical debacle from Treasurer Pallas and his office, which I anticipate the Leader of the Government will be in here later today cleaning up, as we have seen time and time again over the last three years.

One of the interesting things which emerged from the Public Accounts and Estimates Committee hearing process this year was a discussion with the secretary of the Treasury, Mr Martine, and coalition committee members around the level of state debt and the fact that in the pre-election budget update (PEBU) the forecast for net state debt as a proportion of gross state product for the then financial year, 2014–15, was at the time of the PEBU 5.9 per cent. Subsequently we saw the budget, which reported outcomes from the 2014–15 financial year, and it showed net state debt at 6.2 per cent of gross state product. Not surprisingly the government's rhetoric in the budget around state debt was that under the previous government it had been, in the 2014–15 financial year, 6.2 per cent, which was simply untrue. PEBU set down where net debt was going to be under the previous government. That was the marker across the change of government. That was the secretary of the Treasury's independent view on the level of debt for the 2014–15 financial year at the time of the change of government.

Yet we had a figure being bandied around by the government in the Public Accounts and Estimates Committee (PAEC) hearing process suggesting that state debt for that change of government year was actually 6.2 per cent, not the 5.9 per cent that had been reported in PEBU. That was significant, because one of the thresholds we talk about with state debt at the moment is 6 per cent of gross state product. The fact that it had been under, as reported in PEBU, but now suddenly a figure appeared suggesting it was over, generated considerable interest among the committee. When asked about that discrepancy and the inconsistency between the PEBU prepared by the Secretary of the Department of Treasury and Finance and the budget, the secretary, Mr Martine, was quite diplomatic in his response. Mr Smith asked:

So why does this budget say something different, to 6.2 per cent? That is not correct. That is rubbish.

In his response, Mr Martine said:

The best way to answer that question is this essentially, as you will note on the front page, is a government budget.

Essentially what Mr Martine was saying is the budget papers are a document of the government, and they put in whatever they like. They make it up however convenient. We see the Treasurer's speech is accepted as a political document. Three quarters of it is the rhetoric of the government of the day. That is the practice; that is accepted. Everyone recognises that is what it is.

Until now we have actually expected a degree of integrity in the budget papers, that they can be relied upon for their accuracy. Yes, the wording around them may reflect the priorities of the government. The government may choose to exclude numbers they do not like and include numbers they do like, but they do not make the numbers up. Yet in his testimony to PAEC David Martine is essentially saying that with respect to the state debt figures, the government made them up. It is a government document, and it made up a number — 6.2 per cent — because it was convenient for its narrative. That is notwithstanding the fact that the Treasury estimate was actually 5.9 per cent — under 6 per cent. That calls into question the integrity of the entire budget documents, documents that this house will consider later this week in terms of the consideration of the two appropriation bills and indeed of this tax bill, where estimates are included with respect to the measures that the house is dealing with today.

Coming on the back of what we have seen from the Treasurer's office with this bill and that disclosure from the secretary of the Treasury, it really calls into question how this Treasurer is operating — and frankly calls into question what the Treasury is allowing him to get away with. But it really calls into question the integrity of the measure that is coming before this house today and what degree of confidence this house can have in the numbers that we are being asked to look at. We place the Treasurer and his office on notice. When this bill goes into committee, given the public statements from the Treasurer about passing this bill today, notwithstanding he does not know himself what he wants to do with his amendments, we would expect the Treasurer and his representatives here to actually be able to answer the questions about how this bill is going to operate with respect to the measures it is seeking to introduce.

I now turn to those measures which are included in this state tax bill. There are a number of measures. There are some minor reductions in some levies and duties. There is a substantial one with respect to stamp duty for first home buyers. There are also a number of significant increases in taxation. The tax measures which are included in this year's budget include the abolition of insurance duty on agricultural products. That is something that was called out in the Treasurer's press release this morning, which says:

Farmers won't miss out either with the removal of insurance duty on agricultural products, making it cheaper for farmers to insure against crop, livestock and equipment damage.

That is a welcome measure, but it is only $4 million a year. It is not a massive reduction in duty imposed on the agricultural sector. The next line item in the revenue measures in this year's budget is described as aligning motor vehicle duty rates, which is in fact increasing motor vehicle duty rates for new motor vehicle purchases. Against the $4 million cut on duty for agricultural products we see a $94 million increase in duty arising from the purchase of new motor vehicles. Over the four years of the forward estimates that is $391 million in revenue that is generated.

Again something that was trumpeted in the Treasurer's press release this morning — I might add that the increase in motor vehicle duty was not called out in that press release — is bringing forward the increase in the payroll tax-free threshold. That is highlighted as an initiative in the budget, which is $24 million a year over two years because it has been brought forward from a previously announced initiative. That is something that is welcome, as is the reduction in payroll tax rate applicable to regional businesses, which is $41 million in the budget year and increasing to $46 million over the forward estimates.

I will go on to deal with stamp duty on first home buyers. The government is proposing through this bill to abolish stamp duty for first home purchases valued up to $600 000 and to apply a tapered concession for purchases between $600 000 and $750 000. The cost of that is $150 million for the first year, rising to $250 million in the fourth year of the forward estimates. That is a measure the coalition is happy to support. It builds on a reduction and a halving in stamp duty for first home buyers which was introduced under the coalition government. The benefit of that is an interesting one. I am sure Mr Barber will comment on the value of that stamp duty cut on first home buyers actually improving affordability of housing for first home buyers. What it does clearly is provide a relative advantage to people who are not first home buyers operating in the same market. As to whether it provides an advantage to first home buyers relative to other first home buyers, of course it does not; it is only a relative advantage compared to people who are not first home buyers in that particular market.

The real challenge on housing affordability is addressing the supply issues, be they red tape issues or be they planning restrictions on land availability. Addressing the issue of supply and demand is what will address the issue of housing affordability. Simply making more money available into the pool will not of itself increase affordability, even if it does change the relativities between people who are first home buyers and those who are not.

The other measures on a taxation front that the bill seeks to introduce are some very substantial increases in taxation. We have got the $391 million arising from increasing stamp duty on new motor vehicle purchases. We have the decision of government to remove the duty exemption in respect of transfer of certain properties between spouses, which is estimated to raise $20 million a year flat for each of the four years of the forward estimates period. We have the introduction of a new vacant residential property tax, which has been somehow promoted as a measure of housing affordability — I will be fascinated when this bill gets into committee to understand the government's rationale for believing that this will drive housing affordability, quite apart from the mechanics of how the government thinks it is going to work — which will raise $80 million over the forward estimates, starting at $10 million, doubling to $20 million and then $25 million in the subsequent years.

Of course we have the single largest measure in this bill which is described as a retarget of the off-the-plan stamp duty concession, which in reality is a removal of the off-the-plan stamp duty concession on certain residential developments. It will raise $51 million in the first year, rising to $156 million, $260 million and subsequently $372 million in the fourth year of the forward estimates period. So we have a number of relatively modest tax cuts which the coalition is quite happy to support, and we have those well and truly outweighed by a number of tax increases, with no justification given by the government as to why those tax increases are required.

The other element of the bill which I will come back to in more detail later is in relation to part 9 of the bill, which is not directly a tax measure but relates to the government's decision to centralise the valuation process for council rates which has flowthrough to land tax assessments. The intention of those provisions in part 9 of the bill — which is where the government may or may not have amendments if it sorts out what it is trying to do — is essentially to require valuations to be undertaken on an annual basis rather than on a two-yearly basis and for those valuations not to be undertaken by councils and their contracted valuers but to be undertaken by the valuer-general, or under contract by the valuer-general.

So the government is seeking to centralise the way in which valuations are undertaken — to take it away from councils, take it away from local valuers working with local government and put it in the hands of the valuer-general, which of course is an agency of government — and require valuations to be undertaken annually. Why would the government require them to be undertaken annually? Because of course for 18 of the last 20 years we have had a rising property market, and if you can have an annual valuation, an annual uplift, you can get an increase in land tax revenue. It is interesting that the government has not reflected that in the revenue initiatives in this budget, and it will be fascinating to see what impacts the government or the Treasury believe that measure will actually have once we get to consider that in detail in committee.

The question needs to be asked: why do we have this bill before the house today? Why do we have measures which are raising $841 million in the case of cutting the off-the-plan stamp duty concession, $80 million in the case of the new vacant residential property tax, $80 million in the case of removing the exemption on stamp duty transfers of property between spouses and $390 million on increasing motor vehicle duty on new motor vehicle purchases? Why is this necessary? What is the government's justification for coming forward with tax increases of more than $1 billion over the forward estimates period? The Victorian budget does not have a revenue problem. We are not short of revenue in the state of Victoria. In fact we have seen over the life of this government record revenues flow through to the Treasury, compared to what had been forecast in the pre-election budget update. We have seen some $12 billion of revenue flow from the
2014–15 financial year — the first half year of this government's term — through to the 2017–18 financial year that is currently under consideration. That amount is above that which had been forecast in the pre-election budget update.

So the Treasurer has not been in an environment where revenues have been soft; he has not been in an environment where he has had to adjust to falling GST revenues, falling stamp duty revenues, falling payroll or falling land tax revenues. He has been in an environment where each and every year, each and every six months with a budget update, he has had more revenue in hundreds of millions of dollars — in total, billions of dollars over the three years — than was forecast when he became Treasurer, yet we still have a bill coming into the house today that seeks to impose tax increases of more than a billion dollars. The question has to be asked: why? Indeed the government needs to answer why. Could it be because in the same period of time that we have had $12 billion in unbudgeted revenue we have also seen $16 billion in overbudget expenditure, above and beyond that which had been forecast in the pre-election budget update back in November 2014?

In that period we have seen expenditure on the public service increase from some $18.5 billion to $23 billion in the current financial year. This is a massive increase in the cost of running the public service — and in the volume and size of the public service — in Victoria. It is increasing at an unsustainable rate.

We have seen in the financial year we are about to conclude — the 2016–17 financial year — expenditure forecast to grow by just under 10 per cent compared to the previous financial year. With a 10 per cent growth in expenditure in one financial year, is it any wonder that at a time of record windfall revenue the government is coming forward asking for more than $1 billion in additional taxation?

We have seen very substantial unbudgeted taxation receipts compared to the pre-election budget update and the actualities which have been recorded since. In the 2017–18 financial year — the new budget year — we will see some $21.8 billion in tax revenue flow through to the general government sector. When we look back to 2014–15 and compare the pre-election budget update for that year with the two subsequent financial years, where the Treasury forecast in the PEBU what the tax revenue would be, and with the current budget year that we are considering this week with a number of bills, we see that tax revenue is $5.5 billion higher than the secretary of the Treasury said it would be back in November 2014. The Treasurer will be the beneficiary of $5.5 billion in additional tax revenue that both he and the Treasury did not expect on the day he became Treasurer, yet here we are with a bill seeking to increase a number of taxes that are already on the books and to impose a number of new taxes.

If we compare this year's estimates with last year's estimates, we see an increase in a number of individual taxation line items. We see payroll tax in this year's budget estimated at $5.89 billion — an increase of some $170 million compared to the financial year about to be completed. We see land tax increase to $2.366 billion. We see the fire services property levy — and I will come to that in a bit more detail shortly — increase to $674 million. We see stamp duty on property transactions now forecast at $6.164 billion — an increase in 12 months of $144 million. We see stamp duty on motor vehicle purchases, both new and used, of $925 million, which is an increase of $118 million in just 12 months. We see stamp duty on insurance contracts forecast this year at $1.289 billion — an increase of more than $73 million in just one budget year. We see a number of increases in virtually all of the major tax line estimates in this year's budget. What we do not see is a justification from the government as to why it needs the tax measures that it is seeking to introduce in this bill today.

One thing we do not see in this budget — to move on to my next area — is tax reform.

Business interrupted pursuant to sessional orders.

Debate resumed.

Mr RICH-PHILLIPS (South Eastern Metropolitan) — Before we broke for question time I started to talk about the issue of tax reform. Of course allied to that is the issue of tax competitiveness, and one of the things that became evident during the presentation of this year's budget and the consideration of Victoria's tax competitiveness was that Victoria under this government has been falling in competitiveness over the last three years. Victoria is now at the bottom of the states on tax competitiveness.

What do we mean by tax competitiveness? It is looking across the states and comparing the tax revenue of the states as a share of their gross state product to get a comparative measure. Comparing that across the states, Victoria now ranks the worst of the states in Australia. This is something that a state that is seeking to attract investment from interstate and a state that is seeking to attract investment from overseas to create investment and employment should be aspiring to avoid. We should be seeking to make the level of Victorian taxation as competitive as possible relative to states like New South Wales and Queensland.

There will always be challenges with some other states — for example, Western Australia and Tasmania, which have very different economies, very different tax bases and very different distributions of commonwealth grants — but for states which are comparable to Victoria, such as New South Wales in particular and Queensland, Victoria needs to be equally as competitive, if not more competitive, and the budget settings we are seeing under this government fail to deliver that competitiveness. As at the date of the budget last month Victoria was in the lowest position on competitiveness, with no sign of that improving. We have seen from the New South Wales government today a budget which is apparently going to deliver a substantially greater surplus than New South Wales forecast and with that, I suspect, every prospect of tax cuts, which will put Victoria even further behind in a relative sense on tax competitiveness.

These are the sorts of issues the government should be addressing. It has had $5.5 billion of windfall tax revenue over its life to date and into the budget year under consideration and it has had $12 billion overall in unbudgeted revenue, both tax and grant revenue, from the commonwealth, with the GST distribution coming in very positively for the state ahead of what was forecast in the PEBU back in November 2014, so with this upcycle in revenue the opportunity has been there for the government to embark on tax reform. The time to undertake tax reform is when you have an upcycle in revenue — something that the previous government did not have at all over its four years in government.

Mr Mulino — Excuses.

Mr RICH-PHILLIPS — I would happily take that from Mr Mulino if his government was actually doing something other than raising taxes. The previous government actually did initiate reform in the fire services property levy, which was instructive as to the complexity of tax reform in making a fundamental shift in the case of the funding of fire services, shifting the base of that levy from insurance policies, which was a restricted cohort of people, to property owners via municipal rates, which obviously covered all properties. Seeking to avoid inequitable outcomes and seeking to ensure fairness in the way in which that levy was spread across the community required some complex policy decisions. Indeed for the previous government the policy decision was taken by cabinet, but that change from the fire services insurance levy to the fire services property levy would actually be at a cost to the budget, because the model created by the coalition did not seek to recoup the GST which was forgone in that levy coming off insurance. It also put in place concession mechanisms comparable with the concession mechanisms which were available on municipal rates. So implementing that tax reform was actually at a cost to the budget. It was a conscious decision of government not to seek to recoup the GST and to provide what I think was $100 million in concessions relative to the introduction of that levy. That was done in an environment of contracting revenue, a contracting tax base and certainly a contracting grant space from the commonwealth.

What we have had with this government is $5.5 billion of unbudgeted tax revenue — a total of $12 billion of unbudgeted revenue above and beyond PEBU when you include grants revenue. What we have not seen is any tax reform. We have seen some tinkering with some tax rates and reductions, as we are seeing in this bill. We have seen some substantial increases, as we are seeing in this bill. What we have not seen is structural reform in tax. We have not seen structural reform.

Mr Mulino interjected.

Mr RICH-PHILLIPS — I take it from Mr Mulino's interjection that at least he knows what he is talking about. There is nothing this government has done that is changing the structural basis of tax in this state. Yes, the government has tinkered with rates and put rates up, as we are seeing with the more than $1 billion in extra tax revenue in this year's budget, and there has been some reduction in rates, as I outlined earlier. What we have not seen is structural changes to deliver meaningful tax reform and more efficient tax reform for this state in an opportunity and in an environment where the government has had substantial tax revenue above and beyond that which it expected to receive when it came to government. So on reform it is a missed opportunity. This is merely a grab bag of tax increases with no justification as to why the government is making them.

It is the coalition's intention when this bill moves to the committee stage to seek to introduce amendments. I can be quite definitive: the coalition has foreshadowed amendments and will bring those amendments in. The government does not seem to know what it is doing with amendments: whether it is going to bring them forward, not bring them forward or give them to Mr Barber and talk about them in the Herald Sun and then not proceed with them.

Mr Mulino interjected.

Mr RICH-PHILLIPS — Mr Mulino suggests he knows. I suspect he does not because I doubt the Treasurer knows; he usually does not. Mr Jennings might tell him what he is doing, but we will see in due course whether the government proceeds with the amendments that it has drafted apparently for Mr Barber's benefit, although Mr Barber might have something to say about that. We can be very clear: the coalition has a number of amendments to this bill which it will be seeking to proceed with when the bill gets into the committee stage, and the essence of these amendments is to omit the tax increases in this bill.

There is the increase in stamp duty on new motor vehicles which I spoke about earlier, which is a revenue measure in the order of $400 million over the forward estimates period. What has not been made clear with this increase in stamp duty revenue is what the government expects the impact of that to be on the number of new motor vehicles that are purchased and how that reconciles with the government's Towards Zero policy in respect of road deaths and the policy position of encouraging the purchasing of new motor vehicles to replace older motor vehicles on the basis that new vehicles have higher safety ratings.

We have a tax measure which removes the relative incentive for new vehicles over old and will certainly increase the overall price of new vehicles. It is a measure that has been condemned by the Victorian Automobile Chamber of Commerce as placing Victorian motor vehicle retailers at a relative competitive disadvantage with other states. It is also being introduced as a measure which will impact people who have already made commitments to buy motor vehicles but will have them delivered after 1 July. This increase in tax is something that may have an impact on people who have already made buying and financing decisions. We believe that is an inappropriate step, and we will be seeking to have it omitted when the bill is debated in committee.

Perhaps one of the most extraordinary measures in this bill is the new vacant residence land tax, which has been pitched as some type of housing affordability measure. It tells some property owners in some areas what they should do with their properties — that is, they should be making them available to the rental market — by imposing a disincentive not to. The bill imposes a land tax of 1 per cent on residential properties in what have been termed inner-Melbourne or middle-Melbourne suburbs which are not occupied for six months in a calendar year, with a whole range of convoluted criteria around that. We will be expecting, given the government is ready to proceed with this bill today, that the government can provide some answers about how that is going to work.

We have this mechanism that is being imposed ostensibly as a housing affordability measure to basically direct behaviour around the use of certain residential properties by imposing a 1 per cent stamp duty on them where they are not being used in the way that the government believes they should be used. Because this is to be applied to inner-Melbourne and middle-Melbourne suburbs as defined, it raises issues of equity. A person that lives in inner Melbourne but owns vacant property in regional Victoria or in the outer suburbs is apparently not affected, but somebody who might live in a regional area and own a flat in Melbourne is affected. We will be looking for some clear indication from the government as to how it sees those measures working both mechanically and also from a policy perspective. However, that is something we believe there is no justification for in this bill and we will be seeking by amendment to have it omitted.

Likewise we see the new constraint on duty exemptions on the transfer of some property between spouses and partners as unjustified. Again this is something which has come out of the blue. It has come as a revenue-raising measure with no policy rationale behind it, and the unintended consequences of this, the impact this could have on established arrangements within families, could be significant. Again we will be seeking from the government an understanding of the policy rationale and the mechanics of how this will work, but it is our view that, given the budget settings that are evident in this year's budget, the case has not been made for this revenue initiative, and it will be opposed by the coalition in committee.

Likewise the removal of the planned stamp duty concession for the purchase of properties other than by owner-occupiers. This is the single largest revenue item in this bill — it accounts for $840 million over the forward estimates period — and it is one which will have a significant impact on the apartment development market in this state. It is a fact that I would hope the government is now aware of, because it would have been lobbied by every significant high-rise property developer in Melbourne and every peak body representing the development industry in Melbourne about the fact that the need for certainty around development, the need for presales in high-rise developments and the need to be able to provide the incentive of off-the-plan stamp duty concessions as a reason for people to buy off the plan and therefore precommit to the purchase of an apartment in a building that is not yet constructed is very real and is very significant.

Some developers have indicated that in the order of 60 to 70 per cent of a building may need to be precommitted through off-the-plan sales from people who are seeking to benefit from stamp duty concessions before financing is made available. Yes, it is a nice $840 million kick into the Consolidated Fund, but the implications the removal of this exemption will have by removing the incentive for people to buy properties off the plan and therefore removing the capacity for developers to have the presales necessary to get finance are potentially going to be devastating to the construction industry. If people are not buying off the plan and committing prior to construction and finance is not available, these constructions will not take place. The impact that would have on the construction sector in Victoria would be enormous, and frankly far bigger than the $800 million the Consolidated Fund is going to benefit from over a four-year period.

In many respects that is like the step we saw with the coal royalty. In the budget last year, or the year before, the government thought it would be a nice lurk to impose a new coal royalty — it clipped the ticket on the way through the Latrobe Valley — and what did we see? We have seen one of the major electricity generators in the valley shut down. That is now having a significant impact on the electricity market on the east coast of Australia far beyond the revenue benefit that the state was ever going to generate from that increase in coal royalties. We had in that example a short-term ill-considered decision to increase revenue — to clip the ticket on coal royalties — which has had a significant impact on generators and a significant downstream effect on the electricity market on the east coast of Australia. We can see the measure of the off-the-plan stamp duty having a similar impact on high-rise construction in Victoria. For that reason the coalition will oppose it, and we will have amendments to reflect that when the bill gets to committee.

The other matter that I will touch on briefly in the time available is not a direct tax matter, but it relates to the decision by the government to centralise property valuations. This is something which we believe the government has undertaken in order to benefit from a rising property market. It is mandating that property valuations not be undertaken by local government and local government-contracted valuers but rather be undertaken by the valuer-general and done on an annual basis rather than every second year. Every year we have seen an increase in property values, and data suggests that in 18 of the last 20 years we have seen increases in annual values rather than decreases. So the Treasury will get the benefit of an annual increase, and therefore an annual increment from land tax, rather than having to wait for the two-year revaluation, which is the current practice. It is a cynical grab for revenue by the Treasurer. It is interesting the government has not reflected this revenue measure in the budget, but there is no doubt around the intent of that policy position.

I have to say this has been one of the measures that has been most strongly opposed. The fact that this has been so contentious highlights the government's mishandling of this legislation. We are here in the last sitting week of the autumn session with the Treasurer running around putting out stupid press releases calling on the Parliament to pass a bill he had not even brought on until today and not even being able to give an indication to this house of whether he is going to proceed with amendments to fix the mess he created, particularly related to the concerns that we have seen from local government since he first brought the bill in back in May.

Since this blew up on him post budget we have seen the Treasurer trying to do a deal with the Municipal Association of Victoria (MAV) around principles to address the concerns which have been set out by many local councils. Extraordinarily, I would have to say because I do not know that I have seen this to this extent before, the Treasurer has done a deal with the MAV around principles for these valuation changes, but we are actually seeing individual members of the MAV, individual municipalities, walking away from that MAV position. The number of councils that have independently approached the coalition saying they do not support the principles that have been put together between the Treasurer and the MAV, and putting in some detail the rationale for that, has been extraordinary.

The most recent one landed on my desk on Friday. It is from Hume City Council, and it goes through in detail — and we will get to that in committee — the council's reasons for rejecting the principles which were laid down between the MAV and the Treasurer. An earlier email, which I will quote from briefly, is from Southern Grampians Shire Council. It came in on 7 June from the mayor, Mary-Ann Brown, and it also goes through the principles. Without getting into the detail, the relevant paragraph is, and I quote:

You may have received a copy of correspondence sent from the Treasurer Tim Pallas to Rob Spence, CEO of the Municipal Association of Victoria (MAV).

MAV circulated a copy of the letter to councils late yesterday seeking feedback. This was the first time we were aware of the draft principles agreement as we had not been consulted before the release of it. Whilst we appreciate the work of MAV, these proposed principles do not address the serious concerns that our council has regarding part 9 —

which is the valuation changes.

In summary, our council doesn't believe that the proposed principles agreement will cover all the costs associated with the move to annual valuations.

In addition, there is absolutely no benefit to our council of moving to an annual valuation cycle. In all likelihood, it will impose an additional cost burden on our council and on our ratepayers.

We strongly support the position of Rural Councils Victoria who support a four-year valuation cycle.

Back at the beginning of June Southern Grampians Shire Council walked away from the MAV position, the agreement on principles between the Treasurer and the MAV, and since then we have seen council after council come forward saying they do not support the principles and they do not support whatever position has been reached between the MAV and the government. That is something we will no doubt tease out in some detail in committee.

We have also had representations from valuers. I received an email from a valuer, Steven Bailey of Gippsland, who I understand is a long-time and well-respected valuer in the Gippsland region working for local government and also working on private sector valuations. He made a number of comments, but the relevant summary is:

I make some obvious comments that may not necessarily flow but hopefully will give you a better understanding and add to the debate:

there seems to be some sort of unnecessary rush to get this through without calling for consultation from all interested parties or referring it to daresay I don't like to use the words, a committee;

a commitment from the Treasurer that local government will not be financially worse off. All well and good, but this is going to be a relatively costly exercise and when you say local government you actually mean to a large extent the ratepayer which Tim Pallas is replacing with the state taxpayer who are essentially one and the same;

when put into context this whole thing appears to be about revenue raising via land tax.

I think Mr Bailey has hit the nail on the head.

We have had the Treasurer trying to reach agreement with the MAV, and we have had councils jumping ship at a rate I do not think I have ever seen before from an MAV position, and this letter from Hume, which I will refer to later, is just one example of dozens and dozens. We have had the private sector valuers also expressing their concern.

The coalition does not oppose the measures in this bill which provide tax relief, but we certainly do oppose the tax increases that are being proposed. There is no justification for them, given the budgetary position this government inherited and the direction it has taken it. There is no justification for the revenue measures that have been proposed and the level at which they have been set, and there is no justification for the centralised valuation system which is undermining local government and independent valuers and is simply designed to underpin the government's land tax base. The revenue measures will be opposed by the coalition by way of amendment and the valuation provisions will be opposed by the coalition by way of amendment. Unlike the government I can actually confirm to the committee that we will proceed with our amendments, and I hope at some point today we will have clarity as to what the government thinks it is doing.

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