New Zealand - land and property taxation

American Journal of Economics and Sociology, The,  Dec, 2000  by Robert D. Keall

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Rural land was already exempt (see below).

During 1989, there developed a justifiable concern about the tax because: [14]

a. Commercial land values in Wellington and Auckland mainly, rose sharply but soon after fell just as sharply.

b. The land values had been assessed, in the normal course, at or near the peak, but the tax was collected a year later in the circumstances precipitating the fall in values.

c. In these peculiar circumstances, this caused real hardship. Where the site was underdeveloped (partly because of the insignificant level of the land tax hitherto) there were too few occupiers to absorb the tax, directly or indirectly.

d. Just prior to the collapse of the land values, the Labour government of the day with Roger Douglas as minister of finance, moved to lower the rate of the tax and also the threshold at which it was payable. This would have increased the tax-take to 0.5 percent of the Budget and as a prelude to widening the tax base was generally accepted. The collapse in land values changed all that.

The tax became a political football. So to pre-empt a Conservative National Opposition promise to abolish the tax, the Labour government did just that. The previous National Party government under Muldoon had already abolished the land tax on rural land (so benefiting 1,300 of the richest people in New Zealand and those most able to pay) but had increased it on commercial land. In context it now seems that as a matter of political expediency, the Labour government, having adopted policies of the "New Right," used the opportunity to progress its agenda of shifting all charges off land values onto goods, services, and users.

In 1990-91, the New Labour Party (NLP), as a splinter group from the now rightward-leaning Labour Party, in its Alternative Budget proposed to re-instate and increase the land tax eightfold, levied at up to 4.5 percent of land value, but exempting home owners and small farmers on land values of less than $100,000. It would yield about 5.0 percent of the Budget and was the one ingredient that would make all other objectives attainable.

To generate some political clout, the NLP formed the Alliance with numerous small parties. The results of the general election of November, 1999, reflected widespread disenchantment with fifteen years of New Right policies, and represented a swing to the Center-Left. The new government is a Labour-Alliance coalition. The Alliance, headed by Jim Anderton, now deputy prime minister, is pledged to push land as a source of public revenue.

III

Local Authority Rates

THESE ARE THE property taxes levied to pay for certain local amenities. In New Zealand, police, education, social welfare, and such, are the responsibility of the central government.

A. Terms

Uniform Annual Charge is a flat charge applied to each rating assessment for a specific purpose, i.e., administration, water, sewerage, refuse, etc. There may be several such charges, but in total, they may not exceed 30 percent of the total rates. They tend to increase the rates on the lower valued properties and reduce the rates on the higher, even above or below the 30 percent limit in total.