26th August 2013

Local Income Tax to replace council rates?
Mayor supports reform

This month sees the 10th Anniversary of the Ratepayers Rebellion against the Auckland Regional Council rates in which 140,000 ratepayers withheld all or part of their rates for up to a year.

Since that event the pressure for rates reform has rolled on, with a rates Capping Bill in Parliament stymied by Winston Peters in 2006, an Independent Rates inquiry in 2007, and the Royal Commission on Auckland Governance in 2009.

All these events were, for the most part, about funding reforms for local government, and the growing awareness that simply putting up council rates every year was not a sustainable option.

In April this year, in a submission on Auckland’s Annual Plan, I urged the Mayor and Council to set up an inquiry to explore options to the present unfair system which totally ignores the individual ratepayer’s ability to pay and is seen by many as lacking in value for money.

My submission was that Auckland Council now has one third of the country’s ratepayers within its boundaries and if this, the largest council in Australasia, could come up with an alternative funding package it would be an enormously strong advocate for change – and would undoubtedly receive the support of other councils which all face the rates issue every year.

A South Island rates reform group of Concerned Citizens recently proposed that a 2.74% Income Tax Increase across the country would allow all council rates to be abolished, and the new tax income would be allocated on an agreed formula around population and infrastructure needs.

My suggestions to Auckland included a local income tax and/ or sales tax, a visitor levy, road tolls – in fact a review of all the alternatives considered by the 2007 Rates Inquiry but largely ignored or put into the ‘to hard basket’.

Last Friday Mayor Brown publicly responded to the call for rates reform when he told a North Shore Grey Power meeting that, if re-elected, he would be setting up an investigation into alternatives to rates. He was supported by some of the other Mayoral candidates who wanted a rates alternative that was based on income and ability to pay.

After years of being rebuffed by local councils who were unwilling to look at reforms I welcome this move to look again at the one issue which affects all ratepayers.

But the Mayor, whoever it may be, will need to move quickly as pressure on rates in rising quickly to boiling point.

The Auckland Council pre-Election Report showed the increasing debt will lead to sharply higher rates demand simply to meet the cost of interest payments – $25 in every $100 of rates will be needed within the life of the next council term.

ENDS

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