An Airbnb tax should not be part of the solution to Victoria’s housing crisis because it could have implications for the state’s GST share and is open to a federal takeover, the Coalition has warned.
The Age revealed in May that Labor MPs were plotting a new levy on properties listed on short-term rental platforms to put downward pressure on rents in tourist areas such as the Mornington Peninsula.
Shadow treasurer Brad Rowswell says an Airbnb tax would be “another sure sign that Victoria is broke”.Credit: Gus McCubbing
The Labor Party’s state conference has since endorsed a resolution calling for greater regulation of short-stay accommodation. A Victoria-wide Airbnb levy remains on the table as part of the government’s upcoming housing package, according to Premier Daniel Andrews.
“Everything’s being looked at,” the premier said last week. “That’s what a thorough, proper, deliberative policy process is about.”
But shadow treasurer Brad Rowswell says an Airbnb tax would be “another sure sign that Victoria is broke”.
“When the GST was introduced in 2000, all states and territories – including Victoria – agreed to abolish a number of economically damaging taxes in exchange for the revenue that would flow from the GST,” Rowswell said.
“Nowadays, there are 11 taxes contained in the intergovernmental agreement on federal financial relations that Victoria has promised to abolish and never to bring back.
“One of those 11 taxes contained in the agreement is a bed tax. Yet, 23 years after the introduction of the GST, Daniel Andrews and [Treasurer] Tim Pallas want to bring them back from the dead.”
Economists consider a bed tax to be any fee collected by a local, state or federal government for each night someone rents a room in a hotel or any other kind of temporary lodging. Councils across Victoria are already heading down this path in response to noise complaints.
Airbnb has publicly backed a statewide short-stay tax on the basis it would provide greater consistency for customers compared to council-by-council levies, which can vary in cost.
But Rowswell said he could not think of a more damaging tax for Victoria’s tourism industry when it was still recovering from the coronavirus pandemic.
“Taxing hotel rooms or an Airbnb means less money spent at restaurants, sporting venues, art galleries and for our small businesses,” he said.
Monash Business School’s Dr Diane Kraal said the Australian Constitution allowed for states to legislate a levy on Airbnb stays. However, she said the federal government was also afforded the same right.
“A federal levy might be preferable for uniformity,” she said. “But the states have a better understanding of local conditions.”
Section 109 of the Constitution states that when a state law is inconsistent with a Commonwealth law, the latter should prevail.
A spokesperson for the Commonwealth Grants Commission, which provides advice to the federal government on GST distribution, declined to comment.
However, a commission employee – who spoke on the condition of anonymity because they were not authorised to speak publicly – said while an Airbnb tax would be unlikely to affect Victoria’s GST distribution in the short term, that would change in the long term if other populous states such as NSW followed suit.
“Then it might start to become relevant,” the source said.
Independent economist Saul Eslake agreed with this assessment.
“The grants process is meant to be neutral in regards to policy decisions by state governments,” he said.
However, Eslake said he would not be surprised if the federal government eventually took over state-based Airbnb levies.
“The Northern Territory used to have a bed tax prior to the introduction of the GST,” Eslake said. “That was abolished 20 years ago, as were state taxes on booze, cigarettes and petrol.”
A state Labor MP, also speaking on condition of anonymity, said members of the NSW Minns government had expressed interest in Victoria’s possible Airbnb crackdown back in May.
Treasurer Tim Pallas (left) and Premier Daniel Andrews are considering whether to implement an Airbnb tax in Victoria.Credit: Eddie Jim
The NSW government was contacted for comment.
A spokesman for Victorian Treasurer Tim Pallas declined to respond to questions about the potential GST or constitutional implications of a state Airbnb tax. However, the spokesman did nominate housing as the No.1 issue across Victoria.
“That’s why we’re working hard on a housing package and will have more to say in due course,” Pallas’ spokesman said.
The federal government declined to comment.
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