A Fair Go? A Response to the Independent Local Government Review Panel's Assessment of Municipal Taxation in NSW

Abstract

The Independent Local Government Review Panel (ILGRP) recently handed down its final report on the financial sustainability of New South Wales (NSW) councils. The report identifies a number of problems in relation to local government rating practice and recommends that the NSW Government consider replacing the present rate‑pegging regime, changing the base from which council rates are levied for high‑density unit complexes and reducing the number of exemptions and concessions currently available. At the heart of the recommendations is an empirically untested contention that the current system of council rates in NSW is inherently inequitable in terms of both inter‑municipal equity and capacity to pay. We begin our assessment of the ILGRP claims by reviewing the theoretical foundations of council property taxes. We then provide a synoptic account of NSW municipal rating before empirically assessing equity under the current arrangements. Finally, we propose a set of public policy responses which address the equity problems identified in our analysis.