The Press MONDAY, AUGUST 4, 1975. Differential rating

Press, Volume CXV, Issue 33912, 4 August 1975, Page 12

The Press MONDAY, AUGUST 4, 1975. Differential rating

An act which came into force this year allows municipal corporations to require owners of certain properties, for example those used to earn money, to pay a higher rate than that paid by home-owners. Next year, the Christchurch City Council may. when it strikes its rate, use this power. If it does, the individual home-owner will be spared some of the increase in the general rate which the City Council will have to make in order to meet rising costs. Any measure to relieve individual home-owners from the burden of footing most of the bill for local services is welcome, but this particular measure has some hidden pitfalls. The power to levy different rates on different types of buildings could be used to ensure that those who live in multi-unit residential buildings pay a higher share of the costs of providing civic services. But the council would be unwise to use the power to attempt to undo the effects of the recent revaluation of land This revaluation shifted some of the burden of rates to the suburbs, where land values rose faster than in the central city. But if, through the use of a differential rating system, businesses are required to pay a higher proportion of rates, the cost, eventually, will have to be passed on What is given to individual home-owners in the form of lower increases in their rates will be taken from them as consumers Home-owners will secure a little benefit. Not all consumers are home-owners. The increases in the prices for goods and services will be spread more widely through the community than an increase in the rates on houses and flats would be. But the benefit would be small. If a heavier burden of rates is placed on businesses in the central city, these businesses may be induced to seek sites where rates are lower The result could be the slow decay of the city centre which Christchurch has so far managed to avoid The alternative to differential rating as a way of shifting the burden of rates from the shoulders of the individual home-owner — striking the rate on capital instead of unimproved value — is equally unattractive for similar reasons. This change, too, would bring minor benefits, but again the disadvantages are great. The argument that owners of commercial and industrial properties or flats can afford to pay higher rates because they can claim them as a deduction for income tax purposes does not alter the fact that increasing the costs of businesses .by imposing higher rates on them will have undesirable social and economic consequences. If it were likelv that under a differential rating system each property owner would make a contribution to local body revenues which matched the use made or benefit derived trom local body services, the system might be acceptable. But no system of rating on property, it seems, can both soread the burden of providing local services fairly through the community and provide local bodies with an income adequate to discharge the duties nowimposed on them. The difficulties and uncertainties about levying different rates on different sorts of property are further proof of this. Only block grants from the central government, or local bodies’ having the power to levy other kinds of taxes, will provide an adequate solution to the problem of financing the widening activities of local government.