Logout

Wednesday, April 17, 2024
18.9 C
Masterton

ADVERTISE WITH US

My Account

- Advertisement -

The extremely taxing subject of rates

When we get our next rates instalment, most of us will find out that our rates have increased. Over the past year, the amount of taxes we will have paid has also increased. We will almost certainly find that the complaints about rate increases will far outweigh complaints about tax increases.

An obvious explanation for this might be that rates increases have risen more than taxes. Let us see if this is the case. As an indication of what happens, let’s look at the largest territorial authority in the region, Masterton. In 2011-12 it raised about $22 million in rates. In 2019-20 the rates revenue had grown to $31m, a 41 per cent increase.

In 2012 the government’s revenue was $57 billion. In 2020 its revenue was $88b – an increase of 54 per cent.

These figures are very ‘rough and ready’ and do not account for things like population growth. So, let’s go to the experts. In 2019 the Productivity Commission produced a report called “Scope and funding of local government: an international comparison”.

The study shows that New Zealand councils are reliant on land taxes, or rates. But the most interesting finding is shown in the graph.

Local government taxation [principally property rates] has remained around 2 per cent of GDP over the last 70 years. In contrast, central government taxation [increasingly derived from personal and business income taxes] expanded dramatically from the beginning of WWI, reaching a peak at around 35 per cent of GDP in 1990. And though the graph shows that Government taxation has since fallen, if the graph was to extend into the 2020s, I think we will see that it is back to around 35 per cent because of covid and weather events.

Why do people express more concern about rates rises than taxation increases? I think there is one main reason, rates increases are always signalled in advance, people know about a possible rate increase long before it happens. And then people get an invoice. Councils are very “open” about the amounts they charge, and rate increases are ‘big bang’ events.

The same cannot be said about government revenue gathering. In July, those of us who enjoy a beer or a wine will find that the price increases. Most of us will not be aware that this is a result of a central government increase in the alcohol excise duty.

According to the Household Economic Survey, the average weekly expenditure for a two-adult, two-child family in New Zealand was approximately $1200 at the beginning of 2020. The same family would now need to spend $1400 to purchase the same amount of goods and services. Of that increase of $200 per week, $30 is a [GST] tax rise, which most of us never gave a single thought to. Unlike rate rises, many of us are unaware of tax increases that happen subtly throughout the year.

A final observation. More people come asking for more money to be spent than ever come asking for less.

1 COMMENT

  1. There are to many PC projects and consultants getting paid by government and councils. Get back to basics and let fundraising for PC projects and stop ✋ consultants they are used as political tools, use the departments that tax and rate payers pay for. To many politicians and councilors have their own agendas, Get back to basics.

Comments are closed.

Related Articles

- Advertisement -
Trending
Masterton
overcast clouds
18.9 ° C
18.9 °
16.1 °
70 %
1.5kmh
88 %
Wed
19 °
Thu
18 °
Fri
17 °
Sat
14 °
Sun
18 °