The City of Melbourne has warned the Federal Government to keep its fingers out of the property-based taxation pie.
The Federal Government has announced an intention to raise $200 million annually from foreign property investors.
But the council says such a tax would be counterproductive and would lead to diminished new property supply and, therefore, higher prices.
Council’s finance chair, Cr Stephen Mayne, told last month’s Future Melbourne Committee the proposed tax would fail on multiple fronts.
“If you introduce a new tax which targets a particular category of buyer, you will have higher prices because you have fewer buyers and less supply,” Cr Mayne said.
“This would hit supply, which is the biggest factor in making Melbourne housing more affordable.”
“It sends a signal against foreign investment and Melbourne, in particular, has been a very big beneficiary of inward foreign investment in our property sector.”
“I think the strongest argument against it is the incursion of the Federal Government into the property tax game,” Cr Mayne said.
“We are a property franchise and councils traditionally rely on property-based rates to collect our revenue. We’ve had the State Government move into this area in a big way in recent years with land tax and congestion tax and fire services levies and now we have the third level of government also getting into the property tax game.”
“Melbourne currently has more than 40 per cent of all new apartments and a lot of that is inward foreign property investment.”
“This is an excessive new tax targeted at one class of investor which sends signals which are negative or contrary to the ‘open for business’, ‘engagement with the region’ support for inward investment which has been a key part of our prosperity and success in recent years,” Cr Mayne said.
All councillors, except Greens councillors Rohan Leppert and Cathy Oke, supported Cr Mayne’s motion to tell the Federal Government to drop the proposed tax.
Lord Mayor Robert Doyle agreed, saying: “People might ask ‘why is it that a local government authority is commenting on a Federal Government taxation policy?’ And for me, (the answer is because) this is primarily about us.”
“Last year at the City of Melbourne, we issued building permits which were worth $3.4 billion, the vast majority of which was in new housing stock. So we’re undergoing a residential boom and there’s no signs in the next few years of that abating.”
“The City of Melbourne has the lion’s share of the residential boom which is about to be taxed. Leave the existing system alone. It’s working pretty well and achieving what we want.”
“While I would support the Foreign Investment Review Board having the resources to do its job, I’m not sure that the way to do that is by imposing another federal tax,” Cr Doyle said.
Cr Ken Ong said: “There is a lot of talk about auctions being won by foreigners because they see a lot on non-white faces. I’m going to be blunt here. I think this is pretty much along the lines of xenophobia.”
“If there was a problem with foreigners buying existing properties, we would have seen thousands picked up for breaking the rules but, so far, there has only been one,” Cr Ong said.