Federated Farmers: LGNZ coffers under review

As a tax mechanism, rates are easy to collect.

A review of local government revenue and its many challenges was released by LGNZ in February.

It gets into a wide range of issues relating to the financial sustainability of councils.

The review cuts some new territory in the debate about property value rates and the capacity of rating systems to meet the modern demands of infrastructure, climate change and swiftly changing demographics. The discussion paper asks some hard questions of present arrangements, particularly whether rates -- as the principal means of funding local services -- are holding communities back from getting what they need.

Federated Farmers has, for a very long time, been a major critic of the property value rates system that nourishes council coffers, arguing it relies on too much from too few.

As a way of funding government services, of any kind, a tax based on land or capital value will demand a lot of revenue from land-intensive businesses such as farming. That is the experience of New Zealand's farmers.

From a wider perspective, property value rates are no respecter of income, debt, profit or loss.

Rates are imposed as direct cash cost only on land and home owners, and are assessed according to the theoretical value of that particular asset.

For local government, huge problems with public confidence and perception revolve around the way rates are allocated. As a tax mechanism, rates are easy to collect, but that's the only easy thing about them.

So Federated Farmers welcomes any review of local funding that includes property value rates, as the path to change is a long one. It is heartening in this instance that local government has stepped up to the plate, and sought the input of a range of experts and groups in the process.

Inevitably, there has been criticism that local government simply wants more money and isn't trying hard enough with what they have, but this is a bit deeper than that.

The questions in this paper more relate to the quality of revenue mechanisms that may simply not be fit for purpose in the way they were 100 years ago.

But what to do with a system so ingrained in the local sector? Terminating rates and replacing them with, say, a local GST is highly unlikely in present circumstances. But this is about getting started -- finding new ways to share costs from a broader base and having the courage to implement them.

Federated Farmers is supporting this effort and making the case for change on the basis of the often extraordinary amount of rates levied on individual farmers.

Amalgamations, tweaks and adjustments won't ever solve the core funding problem, that's going to take a big combined effort from all of us.