Setting rates is one of the most critical responsibilities of local government in New Zealand and Australia. Rates fund essential services and infrastructure, from roads and waste management to libraries and recreational facilities. Designing a rating system that is fair, efficient, and sustainable requires balancing multiple principles that often intersect and sometimes conflict.
Equity, or fairness, ensures that ratepayers with similar property values and characteristics share the tax burden equally. For example, two properties of the same value, the same use, and the same access to services in a council area should pay identical rates. This principle fosters trust and consistency, reassuring the public that the system is just.
The benefit principle considers whether ratepayers gain advantages from the services funded by their rates. While rates aren’t fee-for-service, they support community-wide benefits such as parks, public transport, and emergency services. Subsidisation often balances this principle with equity, ensuring universal access to vital resources.
Capacity to pay reflects a ratepayer’s ability to contribute, typically based on property value. This principle recognises financial differences among ratepayers, but councils must address outliers, such as retirees with high-value properties but limited income. Rebates or payment plans help maintain fairness.
Simplicity and transparency are vital to ensure the rating system is easy to understand and administer. Valuation systems such as Quotable Value (QV) in New Zealand and state frameworks in Australia help establish a precise and reliable rate basis. Transparency about how rates are calculated and spent builds trust and reduces disputes.
Sustainability and resilience ensure the system remains stable and adaptable. Councils must plan for economic fluctuations, natural disasters, and demographic shifts while ensuring reliable revenue to support community services.
Economic efficiency ensures rates encourage desired behaviours without unintended consequences. For example, environmental levies designed to reduce waste are efficient when they achieve behavioural change without adding undue complexity.
Social equity and inclusion consider the unique needs of diverse ratepayers, such as low-income households or rural communities. Measures like targeted concessions ensure the rating system does not exacerbate inequality.
Finally, councils must manage exceptions, such as school, university, and government property exemptions. While these exemptions shift costs to other ratepayers, they also reflect these properties’ broader benefits, such as education and public health.
Balancing these principles ensures that rating systems are equitable, sustainable, and aligned with community needs. This balance is crucial for maintaining public trust and ensuring councils can deliver essential services and infrastructure.
If your council needs expert guidance in developing or refining its rating policy, contact Ibis Information Systems today. Our expertise in rates modelling and strategic planning ensures your policies are fair, transparent, and tailored to serve your community effectively.
