The state government has recently issued a draft report into the rating bases in use in Tasmania; so recent that there isn’t yet a copy online.
I’m awaiting a copy myself, but in the meantime reports are that the state government is recommending that councils move from AAV to CIV, and not to SVR.
So.. a lot of acronyms and statistical hocus pocus in there. What does it mean to you? Surprisingly, even if you don’t own property, the differences matter. So lets have a look at what they are, what they should be, and what preferences you should express to your local councillors.
AAV – Assessed Annual Value – important because this is the current system of assessing rates in 28 of the 29 councils in Tasmania. Basically, every five years or so, the state government gets someone to wet their finger, stick it in the air, and pull a number out that represents how much your property would rent for. In between times, this magic is performed without the wet finger; largely why people get a rude shock when rerating occurs.
CIV – Capital Improved Value – similar in many ways, but this time instead of representing how much your property would rent for, they hold it up a bit longer and have a stab at how much your property would sell for.
SVR – Site Value Rating – in this case, they wet two fingers and note the difference. This is used to figure out how much your land would sell for if someone bulldozed the place and left it ready to build.
Actually, the people who do this have done it a lot, and are reportedly quite good at reading which way the wind blows. Still, in many ways, how the magic happens is not particularly relevant.
So lets bring this back to a principled basis. What do we want out of a rating system? What do we not want? Should rates be charged at all? What’s the difference between rates and land tax?
I’ll summarise my answers here, and go into more detail over the next few days.
A rating system should:
- impose the greatest costs on those who receive the greatest benefits;
- provide a financial signal to council regarding how beneficial their decisions have been;
- fully fund local government;
- impose a natural limit on the expenditure of local government.
It should not:
- seek to provide welfare;
- tax wealth;
- advantage any group over another;
- allow individual advantage at the cost of the community.
Rates and land tax are both levies on the same resource. Rates currently largely fund local government, and land tax currently funds a small fraction of state government. The current variable imposition of land tax distorts the signals and impact of local government rates, and this distorting effect should be eliminated.