Stamping out Stamp Duty: Property or Consumption Taxes?

53 Pages Posted: 6 Jan 2021

See all articles by Yunho Cho

Yunho Cho

Institute for Economic and Social Research, Jinan University

Shuyun May Li

University of Melbourne

Lawrence Uren

University of Melbourne

Date Written: January 6, 2021

Abstract

Property transaction taxes - also known as stamp duty - are widely viewed as an inefficient form of taxation. In this paper, we examine the welfare implications of removing stamp duty in a general equilibrium overlapping generation model with heterogeneous agents. Our model features an idiosyncratic shock to housing preferences which may create mismatch or induce household to move. When examining steady states we find that newborn households prefer entering an economy with a recurring property tax rather than one with stamp duty. In contrast, when examining transition dynamics we find that existing households prefer replacing stamp duty with a consumption tax.

Keywords: Property transaction taxes, OLG model, Heterogeneous agents, Welfare

JEL Classification: E21, H24, R13, R2

Suggested Citation

Cho, Yunho and Li, Shuyun May and Uren, Lawrence, Stamping out Stamp Duty: Property or Consumption Taxes? (January 6, 2021). CAMA Working Paper No. 1/2021, Available at SSRN: https://ssrn.com/abstract=3760893 or http://dx.doi.org/10.2139/ssrn.3760893

Yunho Cho

Institute for Economic and Social Research, Jinan University ( email )

Huang Pu Da Dao Xi 601, Tian He District
Guangzhou, Guangdong 510632
China

Shuyun May Li (Contact Author)

University of Melbourne ( email )

Melbourne, 3010
Australia

Lawrence Uren

University of Melbourne ( email )

Melbourne, 3010
Australia
03 83447915 (Phone)

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