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Govt Might Take $1.1B Hit To Return GST On Rates To Councils

New analysis from Infometrics shows that returning the GST charged on rates to local councils would cost the government at least $1.1 billion.

Analysis by infometrics shows central government collected about that amount in GST from rates in 2022.

Infometrics chief executive and principal economist Brad Olsen said the amounts collected in 2022 ranged from as high as $317 million in Auckland, to just $100,000 on the rates charged on Chatham Islands.

"In total, 29 of the 78 councils across New Zealand would receive more than $10m if GST on rates was returned to councils," Olsen said.

That money would then be available for local councils to help fund the services and investments being made around the country.



In March, Auckland's mayor Wayne Brown called on the government to return GST on council rates to help fund the region's infrastructure.

Olsen supported GST being charged on rates, as councils were providing goods and services for local residents, ratepayers, and others.

"But given constant discussion about the need to fund local government differently, perhaps GST on rates should be collected and then returned to local councils."

He pointed out that central government finances were under pressure too, but the value of GST collected on rates was worth 0.9 percent of total government revenue in 2022.

Local Government New Zealand (LGNZ) president Sam Broughton said that despite councils' ever-increasing responsibilities, local government's share of overall tax revenue has remained at 2 percent of GDP for the last 50 years.

"It's no secret that the funding system for local government is broken. Relying so heavily on rates is unsustainable," Broughton said.

"We need a range of levers to address the funding and financing challenges in front of us. Returning GST on rates would be an excellent place to start.

"We've also put an accommodation levy, GST sharing on new builds, mineral royalties, and congestion charging on the table."

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