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Local body tax idea ‘a bit rich’, says Key

Prime Minister John Key made it clear he is no fan of a push by the local government lobby to be allowed to raise local taxes other than through property rates, saying the proposal is "a bit rich".

Local Government New Zealand proposed a new approach to funding local body infrastructure last week, arguing that property rates were becoming an anachronism and could put undue pressure on an ageing population who may have reduced income despite owning valuable rateable properties.

At his post-Cabinet press conference yesterday, Key said that "generally speaking, we're opposed to that."

"Our view is that it's the purview of central government to be able to raise revenue in those forms.

"My concern would be if you started seeing ad hoc bed taxes and sales taxes and all sorts of other things being applied by local government, then they would naturally add cost to the economy and make us less competitive.

"We'd need to see really good justification for why they need so much extra revenue that they can't currently raise through the rating base," Key said.

He described as "a bit rich" the argument that there would be more "asset rich, cash poor" elderly home owners with an ageing population, who might struggle to pay rates based on property values.

"There are plenty of mechanisms for dealing with that," said Key. "They can have a lien against property, they can defer taking their rates, they can have reverse mortgages. There are plenty of ways they could extract their pound of flesh but take it at a time when cashflow isn't such a problem."

(BusinessDesk)

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Comments and questions
21

Local body rates are already out of control. What is the central Government doing to fix that ?

This request is to fund Lens run away spending. Cheaper and more efficient to make Councils live within their incomes.

Sadly rates going thru the roof in Auckland because of JK's head-in-sand attitude to Chinese buyups, causing price rises and consequently rates rises for all.

I believe if you live in the same house for over 10 years, Councils should give you a 10% discount the same as some other companies do; except banks & power companies who naturaly charge new customers less or give a $150 bonus. That discount would help pensioners be able to afford soaring rates which could be reduced by another council tax.

In Australia with three tiers of Federal Govt, State Govt & Councils they gave States a growth tax of payroll tax to help them. Only two tiers here so maybe a 2% payroll tax paid to councils??? Then dramatically cut council rates.

Councils are already far more eager to carry out their revenue raising functions (parking/permitting/etc.) than they are to carry out their non-revenue ones. This would just further push them in that direction. And I somehow doubt that being permitted to raise alternative revenue would result in any reduction of existing property rates.

So "hell no". Do your core jobs and do them competently and efficiently before whining about a possible lack of revenue

Poll tax! Bring Back Mrs Thatcher.

Rates based on property value is a total fraud - property is both an inaccurate measure and itself consumes nothing - people do that. A poll tax or similar by a different name charged on all is the only way to go if fairness is desired, collection via the IRD and remitted to the local authority of the residential address would be a cheaper way of collection and would spread the tax base much wider as i doubt few people have no income outside of those in prison or mental institutions. Releasing the army of local govt rates collection staff would greatly improve our ability to have clean streets and public toilets! Without binding Referenda on local authorities I do not see a legal method of ensuring councils efficiently run their core responsibilities and reduce their expenditure to a level local taxation is affordable and fair.

Subsidies and grants: In financial year 2011/12, about 15% of the total revenue of all councils came from central government subsidies or grants. This translated to $1.15 billion, an increase from $1.05 billion in 2010/11. Most of councils' spending is on roading and transportation systems (29% of all operating expenditure). http://www.localcouncils.govt.nz/lgip.nsf/wpgurl/About-Local-Government-Local-Government-In-New-Zealand-Council-funding .

Maybe they should look internally to reduce costs
There is probably about 35% of discretionary spending

You misunderstand "the problem". The problem is Len wants to spend more money on him and his mates hobbies ie the arts. He isnt interested in keeping the rates bill low, or reducing costs (how many people are there in his public relations office now?).

He doesn't know how to say, "no, the council wont fund that" . He missed his true calling as santa claus, and is now trying to make up for lost time using ratepayers money.

Spot on, the solution to every problem only requires one to look in the mirror. Len Brown and his bureaucrat army need to cut their cloth to suit, reduce head count (especially the over $100k brigade, and anyone on $400k or above is gone by lunch time), get rid of the Iwi Tax being levied on consent applicants, concentrate on restructuring their own house before they try to tax ours.

First law of business: Reduce Costs and Head Count to bring budget into line. Growing revenue by expanding tax is not an option.

Cancel all non-core infrastructure spending immediately. Arts can be self funding, user pays.

So Key doesn't like that idea.
What does he propose to fix the inequity of property based taxes?
paleo

Property based taxes are obviously inequitable.
It's just not good enough for our prime minister to flick the new proposal away without good reason.
His government has responsibility to monitor the rating activities of local bodies;so what does he suggest? If anything?
liberte

Dismissing the socialist council and replacing them with a commissioner tasked with focussing on core council responsibilities is a cheaper/easier way of solving the problem of this spendthrift council.

Ah, so because you think the council is too left-leaning it should be replaced by an appointed dictatorship?
If it was the left advocating that there would be screams of Stalinism.

Having all decision-making positions be miniature dictatorships is undoubtedly more efficient, and may produce better outcomes in many situations, but there are good reasons why we moved away from that model.

We have already written to the government on this matter only to be soundly rebuffed by David Carter acting as Local Government Minister at the time (last year)

We need some sensible suggestions from central government,not just the usual rubbishing of an idea without good reason.
but we're not holding our breath!
WG

Firstly, council should reduce wastage. Then think of rates rise. There is so much duplication of duties, govt has to audit council. Hiring security guards to protect mayor...legal costs to defend themselves for making dubious decisions. Govt should crack down council on this. Lot of monkeys working for council who have no idea what they are doing there. Elections coming we need to petition MPs to have a closer look at how this Auckland council is run

Noted the other night that the meter parking people that work evenings each have a security guard with them.
Wow

Wellington City Council will certainly be starters to pay for the so called "living wage" of $19 per hour paid to most of their under age twenty employees.They now have realised they have jumped the gun,and will try to right the fast shrinking surplus, levied on the long suffering rate payers.Seems all led by the Green Party Mayor who enjoys a massive income,the thinking will be, whats another little tax levy from your "friendly" council, we are here to please.