The ACT government is facing an unexpected hole in its finances just weeks out from the ACT budget, with new data revealing one of its most controversial taxes is failing to deliver.
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New figures reveal that the lease variation tax – widely despised by much of the property sector – has brought in just $4.4 million so far this financial year, dramatically under target. The charge, imposed when a property is converted for increased profit, has been the subject of intense disagreement between the government, developers and the ACT Opposition, which has called for a halt to the charge.
Chief Minister Andrew Barr has labelled calls for a halt to the tax as preferential treatment for wealthy property owners.
The figures paint a bleak picture of the success of the tax, which has not only failed to meet the government's estimates every single year, but appears to be on a downward trajectory.
The government consistently and repeatedly overestimates the amount it will raise from the tax, which is charged when developers change a lease, including to build extra units on a block or to increase floor space.
In the 2015-16 budget, the government says it will raise $16.3 million. With three-quarters of the year gone, it has raise just $4.4 million. It had planned to have raised $8 million more than that by this point in the financial year.
Liberals treasury spokesman Brendan Smyth said the tax was stifling higher density residential development in the town centres.
"It's a bad tax, an inefficient tax and a tax on the cost of living," he said.
The Liberals have promised a four-year moratorium on the tax in the town centres and the city.
The tax replaced the "change of use" charge in 2011, and has never raised the amount predicted.
Over four years to June 2015, the tax raised $35 million, well under half the $79 million forecast in budget papers. But the highly optimistic forecasts continue year in year out, the last two years forecasting $4 million more than raised each time.
The amount raised has fallen steadily since 2012-13, when $16 million was collected from lease variations. The next year raised $14 million, then $11 million. This year looks set to raise less than ever, unless revenue picks up dramatically in the final three months.
The budget forecasts $17.6 million for the next financial year and more than $18 million in each of the following two years.
The government released the March quarter budget update last week. On June 7, Chief Minister and Treasurer Andrew Barr will bring down his election-year budget, including a new five-year tax plan. The last five-year tax plan launched the switch from stamp duty on property sales to rates, resulting in an average 42 per cent, or $540, increase in rates over four years.
Despite the gradual cuts to stamp duty, the March quarter update shows stamp duty raised $41.5 million more than expected in the first nine months of the financial year and is on track to raise $232 million for the full year, $16 million more than the year before.
