Why the rate system is overdue for some progressive reform.
The government recently released a paper which identified the inherent problems in the rating system for rural areas. I fully agree with the reports recommended solutions.
The current system of collecting rates from properties as a wealth tax on the property’s value as the really only source of rural area council funds is fraught with difficulties and is unfair.
The government needs to change the system to assist rural councils but I want to focus on the current system and how it affects South Gippsland now. How can we can make our system more equitable under the current rules?
Firstly, after proposing a 15-year rate program at 2%, before rate capping was introduced, readers can be assured that council only raised the rates collected in the shire by 2% this year. This council does have a 2% rate going forward and no service cuts to achieve that target.
Why then have people received rates notices with, in some cases, rises of 20%?
It is all because of the now annual revaluations. Revaluations are made to account for property value increases, and properties that have increased in price more than another will end up with a higher proportion of the rates than the other property – therefore that property gets a rate rise higher than the 2% whilst the other gets a reduction.
One way to stop the large swings in rates bills would be to keep revaluations to the category they are in. At the moment, if residential properties increase in value more than other groups then residential pay rates that the other groups paid so the total rates paid by residential goes up heaps rather than just the 2% rise.
Under the current rates period, residential properties rose 4.2%. Rates paid above the 2% rise comes to over $400,000 that had previously been paid by the other groups – mainly industrial, commercial and vacant land groups.
The industrial and commercial groups received a rate reduction and they already pay less rates than residential ratepayers on average.
In most shires these two groups pay rates higher than residential groups. Dandenong for example has these groups differentials over 250% i.e. two and a half times residential rates. In our shire commercial properties on average pay 30% less than residential and industrial pay 12% less than residential.
Effectively residential and other groups are subsidizing these two groups when most shires have the commercial and industrial groups subsidizing the residential groups because these business groups usually earn much more than a single household earns and so should pay more rates.
My view is that to have an equitable rate strategy we need to reduce the farmers rates, increase the commercial and industrial rates and stop the annual revaluations from increasing property values in other categories. Farmers rates are currently around 2.5 times residential and data shows they actually do not have any more ability to pay than residential people. Everyone knows farmers are not millionaires and many must take second jobs just to make a living. How then is it justified to charge them nearly three times residential ratepayers?
The cost to the commercial and industrial groups under this proposal is not unreasonable and is not drastic. It would be equal to a cup of coffee per week for the average ratepayer in those categories. When people support the famers by not buying $1 milk surely commercial and industrial business can afford a cup of coffee per week to help redress the burden placed on farmers.
Currently, residential pay around $23 million, farmers pay around $10 million, commercial only pay $1.5 million and industrial only pay around $1.3 million. The small number of farmers are carrying a massive rate burden and the two business groups are heavily subsidized. A small change to these two groups is reasonable.
We need to have some progressive reform in this area to rebalance the rate burden and make a more equitable system and not bow to the few vocal individuals who distort the truth and appear to have no heart when it comes to what the farmers are going through financially and emotionally.
Cr Don Hill, Tarwin Valley