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Council spending - not GST - still the Issue

23 July 2004

Council spending - not GST - still the Issue

United Future's work on GST on rates is aimed at the right outcome - cutting excessive rates - but its wording is causing confusion, says the Local Government Forum. Chairman Simon Carlaw says the term 'exclusion of rates' in its GST Exclusion of Rates Amendment Bill implies exemption rather than zero rating of rates for GST purposes.

"Zero rating of GST on rates, however, would still tackle only a symptom, not the cause. Businesses not only pay the majority of all rates revenue but also a large proportion of Council service fees and charges. GST would continue to apply to these while Councils would gain a tax advantage - through services funded from rates - over those businesses with which they compete, either directly or indirectly, since services funded from rates would not be subject to GST whereas businesses would be required to charge GST on competing services.

"Rather than making GST more complicated, we should be focusing on what the real issue is here - which is higher and higher rates being charged by local government.

"The best interests of all ratepayers would be served by targeting Councils' spending, not their tax bills."

The Local Government Forum comprises farming, forestry and business organisations affected by local government decisions: Business NZ, Federated Farmers of NZ, NZ Business Roundtable, NZ Forest Owners Association, NZ Retailers Association. The Local Government Forum administers the 'Hot Councils' Awards, honouring councils that keep spending under control and promote local democracy.

ENDS

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