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Missed Opportunity to Reform the Victorian Local Government Rating System

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The Victorian Government’s response to the Local Rating System Review has only gone some of the way to providing much-needed taxation reform, the Municipal Association of Victoria (MAV) declared today.

While the MAV has agreed with the government’s assessment that the “rating system is not broken” and welcomed the broad support provided for rates as a legitimate form of taxation, it also argues more work could have been be done in line with the Ministerial Panel’s recommendations.

The Panel, which was appointed in 2019, made 56 recommendations on the local government rating system to the government in March this year. Of these, the government will support 36 of the Panel’s recommendations in full, in-principle or in part but does not support the remaining 18.

The COVID-19 pandemic was given as the part of the reason for the State Government’s change of heart on rating system reform.

Interim MAV President, Cr Josh Gilligan said councils needed to be able to raise sufficient taxes to enable them to meet the needs of community and businesses through the delivery of services and infrastructure.

“Fair and equitable rates are a hallmark of good governance. It is fundamental to ensuring the whole community has access to the services and infrastructure they want and need; we simply have to give councils the best tools for decision-making in regard to rates,” Cr Gilligan said.

“There is no doubt circumstances have changed since the Ministerial Panel was set up. All levels of government are working towards the recovery from the pandemic and the rebuild of Victoria.

“We appreciate the wider economic context on the Government’s response, and we are pleased our advice to retain differential rating options has been heeded.

“However, some of these issues simply won’t go away. There are now several rating provisions that are outdated and are no longer appropriate for today’s communities.

“It also needs to be remembered that councils receive roughly only 3.5 cents in every dollar of taxation and yet are increasingly depended upon to deliver vital community services, which was emphasised during the COVID pandemic and the tragedy of the bushfires last summer.

Cr Gilligan said the government’s decision not to support all of the Panel’s recommendations means rate payers will continue to subsidise a range of private, commercial organisations under State legislation.

“Under the current rating system, a range of businesses operate with rate exemptions and compete with local businesses who pay rates.  Examples include some RSLs on Crown land and private schools leasing out their facilities on a commercial basis” Cr Gilligan said.

“Even enterprises like electricity generators, solar and wind farms, and mining land are also exempt.

“Yet, Mum and Dad home-owners and small businesses continue to pay their council rates. It would have been fairer to see private and commercial activities paying an equitable share of rates.

“Another example is the Cultural and Recreational Lands Act 1963 provision applied to golf clubs is arguably vague, difficult to consistently apply and needs review.

“Additionally, it should be remembered that fairness and equity across local governments cannot be achieved through the rating system alone.

“Urgent State Government action is required to address the regressive nature of smaller rural and regional local government authority ratings.

“In the wake of this response, the State Government also needs to reassure local governments and their ratepayers that the income of councils will not be further eroded via other policy and regulatory changes.

“No system of taxation is perfect but the fairness and equity of Victoria’s rating system could have been improved for the benefit of all ratepayers. This is a missed opportunity.”

For further information, contact the MAV Communications Unit on (03) 9667 5590.