Fed: Howard defends states holding stamp duty revenue

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Fed: Howard defends states holding stamp duty revenue

SYDNEY, Aug 4 AAP - Prime Minister John Howard today became an unlikely defender ofstate governments' right to hold on to extra stamp duty revenue.

Despite labelling stamp duty "a real killer" for home affordability, Mr Howard acknowledgedthat governments could not be expected to hand back any unexpected revenues in tax breaks.

"I have to say to be objective that from time to time all governments will budget ona certain amount of revenue from a source and it will either come in or go over and it'snot the invariable practice to hand it back to the particular source," he told radio 2GB.

"But having acknowledged that in an objective way, it doesn't alter the force of theargument that stamp duty is a real killer."

State governments have attacked the federal government's proposed Productivity Commissioninquiry into the rising cost of home ownership, saying it will ignore the effect of theGST on house prices.

But Mr Howard defended the inflationary impact of GST on house prices, saying it hadbeen offset by the first home buyers grant.

He was also forced to defend the upward pressure the grant had put on house costs,saying it was needed at the time to kick start the industry.

"It kept the economy going," he said.

The prime minister said part of the reason for rising house costs was the low interestrate environment that enabled people to borrow more.

But Mr Howard ruled out differential tax rates for people in different areas of Australiaas a solution to spiralling house prices.

He said aside from constitutional problems with such a move, it would be impracticable.

"I think trying to have differential tax rates, quite apart from constitutional barriers,is fraught with danger," he said.

While city housing was much more expensive than that in country areas, Mr Howard saidother factors - such as transport costs - came in to play, making the idea impracticable.

"What is a reason for a tax break in one area, you'll find a different reason for atax break in another area."

AAP jh/hn/ldj/de

KEYWORD: HOUSING HOWARD