Consumption tax can capture land rents
From Prosper Australia's submission to the upcoming Tax Forum:
At this point it is appropriate to explain how a broad-based retail tax can avoid taxing the construction and supply of accommodation:
- All property sales (some of which are presently subject to GST) should be exempt.
- The assessment should be on the values of sites, excluding buildings and other artificial improvements.
- Commercial landlords, instead of paying income tax on received rents and collecting GST on received rents, should pay retail tax on the imputed rental values of their sites, regardless of whether the sites are developed or let to tenants; and any contractual provisions requiring tenants to pay the tax (or increments in the tax) should be void.
- Residential landlords, instead of paying income tax on rents and GST on inputs, should be treated like commercial landlords.
Unlike income tax, a consumption tax by nature is indifferent to whether consumption is financed out of production or economic rent. So it is not so easily rigged in favour of rent-takers....
Because income tax, of all taxes, is the one most obviously hostile to production, it is the one most riddled with concessions that reward rent-seeking while pretending to incentivize production, and therefore the one whose abolition would do most to eliminate inappropriate concessions.
Read the full submission (PDF).