Two of Australia’s biggest property and development lobby groups are at loggerheads about how governments should go about replacing stamp duty.

Lobby groups Urban Taskforce and the Property Council of Australia are in agreement when it comes to saying stamp duty should be scrapped; however the two groups disagree on the viability of replacing it with a broad land tax.

Urban Taskforce chief executive officer Chris Johnson accused state governments of complacency when it comes to stamp duty, claiming they would prefer to pull in the revenue it generates rather than address the impact it has on the nation’s real estate market.

“State governments have become comfortable with the large income they get from stamp duty on the purchase of homes but they must look at better, more efficient ways to raise funds,” Johnson said.

“Sydney’s housing is among the most expensive in the world and this is partly driven by the various taxes and levies required by governments,” he said.

Johnson argues that current stamp duty levies should be replaced by a broad based land tax, which he claims is both a more equitable form of raising revenue and would promote more sustainable development.

“A broad based land tax would spread the income base across all land owners rather than only focussing on the sale of homes,” he said.

“This tax encourages a more environmentally sustainable urban form.”

Ken Morrison, Property Council of Australia chief executive, backed Johnson’s call for stamp duty to go; however he warned a land tax may not be feasible in the current political environment.

By scrapping stamp duty and replacing it with efficient taxes we could boost Australia’s GDP by $3.3 billion and increase real consumption by $9.7 billion,” Morrison said.

“Stamp duty is an inefficient tax that costs jobs, hurts the economy, makes our cities less efficient and is an unpredictable tax base for state governments,” he said.

“In putting the case for reform, we also have to look at what is politically feasible.”

Morrison said replacing stamp duty with a land tax would likely have an adverse impact on businesses, while households are unlikely to react positively to a new levy.

“The reality is that businesses already pay very high levels of land tax and there is a political limit to what homeowners are likely to accept,” he said.

“Adding a new $16 billion annual land tax on the family home is not likely to pass the pub test.  

“There are very strong reasons for abolishing stamp duty, but we have to be realists in this debate – replacing stamp duty with a new broad based land tax on every family home is unlikely to be politically palatable.

“As well, the commercial sector already pays significant land taxes and we question if businesses across the economy can absorb a higher land tax. A shift to higher land taxes will simply increase this burden – and significantly reduce the economic benefits of moving away from stamp duty.”

Morrison said removing stamp duty needs to part of a "holistic reform" to taxation, rather than just swapping one levy for another.