Are various state and territory property taxes on foreigners constitutionally unsafe?
Almost all states and territories need to urgently amend tax laws to expressly carve out treaty-protected persons from the scope of the tax, according to University of Melbourne senior lecturer and Victorian barrister Eu-Jin Teo.
In a new research publication, Teo cautions that any proposed changes to foreigner surcharge taxes may not be enough to make them constitutional. He says it is not clear their present operation does not come within the broad scope of section 10 of the federal Racial Discrimination Act.
He says the current situation puts the states and territories at unnecessary legal and financial risk, open to lawsuits for restitution of these taxes.
Earlier this year, Revenue NSW stated their state surcharge provisions are inconsistent with international tax treaties entered into by the Federal Government with New Zealand, Finland, Germany, and South Africa.
“Effective immediately, individuals that are citizens of the nations concerned purchasing residential-related property or land in their own capacity will no longer be required to pay surcharge purchaser duty or surcharge land tax,” declared their press release on February 21, 2023.
Teo says while this admission was made only in relation to treaty-protected nationals, the laws are, for this same reason, also unconstitutional where they pertain to foreign nationals without treaty protection.
“Those same provisions tax treaty-protected and non-treaty-protected persons alike, so the whole thing falls over, because the Parliaments concerned did not intend to tax these two groups differently.”
He is cautioning governments to amend these laws to make the tax in relation to non-treaty-protected persons valid, eliminating the ongoing risk to the revenue by ensuring that the tax can be collected going forward.
“Whether the amendment could be backdated, so as to retrospectively validate the taxes that, to this point, have been invalidly collected, is more uncertain, but governments might be willing to try this if they wish to stymie potential actions for recovery of these already-collected-but-presently-invalid taxes.”
Read Eu-Jin Teo’s Law Institute of Victoria article ‘Are various state and territory property taxes on foreigners constitutionally unsafe?’
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