Better Democracy NZ is a non-partisan, non-profit organisation.

Our mission is to foster the improvement of New Zealand's democratic system and encourage the use of direct democracy through the

Veto, Citizens' Initiated and Recall referendum.


Monday, 9 November 2009

Council Rates

Let's face it, getting your Council rates bill in the post isn't as exciting as seeing one of the many attractive woman walking down the main street,

but it certainly does make your heart jump! US President Franklin D. Roosevelt once said, “Taxes, are the dues that we pay for the privileges of membership in an organized society.” Rates certainly aren't cheap, the average ratepayer pays around fifty dollars a week as their contribution to the millions that Councils collect. Basing a tax on the gestimated value of a property is iniquitous. For example, Granny may have owned her home for a very long time so its not her fault the value has increased exponentially, but she still has to pay rates based on the value of the property. Neither does it seem fair that a household of five who use far more services than a single dweller, can end up paying less.

There are other options that could be considered. Poll taxes (tax per head) or Community Tax as it was known in the UK under Prime Minister Margaret Thatcher are one option. However, they were very unpopular and inefficient to collect. A Service Tax, or a local income tax that operates separately from the national tax system has often been suggested, although this would create significant costs to collect. Perhaps a more equitable and simpler way to fund Council services would be through central government taxation which already funds a large amount of Council spending. This would simply mean raising national tax levels slightly, and spreading the load throughout society. If Council services were to become funded in this way, a specific formula would need to be designed to ensure Council funding did not become a deep black hole money is thrown at.

Regardless of how Councils are funded, another important consideration is how
Councils allocate budgets. One option becoming ever more popular throughout the world, and promoted locally in New Zealand by the Wanganui City Council, are referendums. This allows ratepayers to prioritize Council spending. Referendums in Wanganui have included decisions on gang insignia, water softening, recycling options and the Splash Centre (pool) extension. They were also given various options on rate increases. These referendums have proved very popular with referendum voting actually higher than the Council elections themselves. An empirical study by Professor John Matsusaka from the University of California has also shown that those American States that have the referendum system, spend up to 19% less than those who do not. That would be music to the ears of most ratepayers.

The current rating system is held in the same regard as the old TV licensing fee,
everyone hates it and its just not fair. Council rates are a regressive tax because they are not linked to the income of the individual or household. Neither do they adhere to the principle of user pays. Therefore they are inherently unfair and should be replaced.

First published 6 November, 2009 in the Cambridge News.

Steve Baron is an author, Founder of Better Democracy NZ, and a regular contributor to publications throughout New Zealand.



Anonymous said...

Every NZer pays tax so it is not too hard to collect rates via P.A.Y.E etc. The benefits are lower collection costs, less duplication of collection staff/resources freeing up people to do productive work and income being distributed on a per capita basis according to address>IRD already collect multiple taxes so the basic infrastucture is already in place.

Billy Mckee said...

Hi Billy Mckee here.
An easy way to collect taxes would be to tax money as it is withdrawn from a bank account.
This would mean that the more money people spend the more tax they pay.
It would be easy to implement as the banks would actually become tax collectors which they already are to a certain extent.
This is actually a very efficient way of revenue gathering.
A percentage of this would go to local govt and the rest to central govt.

Shane Pleasance said...

I would prefer the option of being able to select the services I wish to purchase from the council (or the state), via my tax take. Perhaps tick boxes for health, welfare, education etc which I can choose not to tick, making me ineligible for those state provided services.

I may not want to use them, or may go for a different provider. My experience in state funded services is gross inefficiency.

Until I have the option to buy or not to buy, to use or not to use, I consider every dollar I unwillingly pay as theft.