Land tax vs stamp duty

The Herald reports:

A top New Zealand property expert opposes a and says a is a far better option.

Dean Humphries, a national hotel broker and a former Auckland University lecturer, was responding to PM John Key talking of a land tax and said that would not resolve the issues around foreign buyers purchasing houses here.

“Stamp duty is a no-brainer and could bring in tens of millions of dollars annually. Land tax is the most draconian thing I’ve ever heard of. Where does the Government get their advice from? Stamp duty is so easy because you pay up front at the time of purchase and just a percentage of what you’re paying. It’s just the easiest thing to do and the tax can be used for a multitude of things,” Humphries said.

Key is threatening to apply a land tax to foreign-based house buyers if there is evidence they are pushing up New Zealand house prices – and it could also apply to Kiwis abroad.

Actually a land tax is better, in my opinion (and that of Tax Working Group).

A stamp duty can be avoided by having a trust purchase the land, and then just changing the trustees. Also stamp duty would encourage people to never sell their properties, while a land tax encourages people to use their properties (not land bank them).

However this is all premature. The Government has said that IF the data shows there is a high proportion of foreign buyers, then a land tax is the best option.   The data may show that relatively few buyers are non-residents.

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