As part of the review into Australia’s Future Tax System (the Henry Tax Review), the Federal Government recently announced its intention to pursue tax reform in a gradual and considered manner.
The Government released the review report, along with its initial response in May – already having accepted and rejected a small number of the 138 recommendations made.
Overall, the report finds that there are fundamentally sound aspects of the current system, but that Australia has too many taxes and complicated ways of delivering multiple objectives through the tax system.
Of the 100 taxes that exist in Australia, only one of them – rates – is administered by Local Government.
Accordingly, while the report includes a separate chapter on Local Government, it contains only two recommendations about it, both regarding rates.
In recent years, council roles and responsibilities have grown dramatically in response to community wants and needs, but there has been little change to the way councils are funded.
Local Governments continue to rely predominantly on property tax or rates to meet the ever increasing demands of their communities.
This limited tax base is undoubtedly the motive behind the Henry Review’s recommendation that councils should not be constricted in setting and controlling their rating strategies.
This recommendation should be particularly pleasing to councils in New South Wales and the Northern Territory that are subject to ratecapping, as it will provide additional strength to their arguments against this limitation.
It could give them the flexibility they have been calling for years, and would enable them to better deliver the services their communities want and need.
The report states that Local Government has come to play an important role in the delivery of government services in Australia, and that given the expertise it has in the delivery of a range of services, councils can provide value for money for the other spheres of government.
It is time our taxation system delivered more sustainable funding to better enable councils to do just that into the future.
The Prime Minister has indicated that in the coming months, Local Government will have more to say on a number of other areas considered by the review.
As such, the Australian Local Government Association expects that a number of the recommendations will be announced/progressed as part of the Federal election campaign.
