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Legislative Council - Fifty-First Parliament, Third Session (51-3)
2009-12-02 Daily Xml
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SELECT COMMITTEE ON COLLECTION OF PROPERTY TAXES BY STATE AND LOCAL GOVERNMENT, INCLUDING SEWERAGE CHARGES BY SA WATER

The Hon. I.K. HUNTER (16:12): I move:

That the interim report of the select committee be noted.

This committee was set up by the Legislative Council in July 2005 and was re-established by the council on 31 May 2006. The committee has met on 20 occasions in this parliament, received 59 submissions and heard evidence from 25 witnesses. The committee decided to table its evidence, which we did yesterday, and to produce an interim report for the council, given the volume of evidence we received. We have determined that, in the absence of a final report, we would bring up the interim report and it will then be up to the next parliament to determine whether the committee should be brought back and re-established to finalise a report.

Much evidence was led about property taxes, which is no surprise to any member. Some advocated their reduction or abolition; some argued that they be broadened to spread the burden all round. However, when I asked witnesses if that meant they supported extending land tax to the family home, which is the only avenue for spreading the burden, they quickly backed away—and well they should. It is all too easy to advocate a tax cut for oneself, as much of the evidence to this inquiry can be portrayed, but it is far harder then to propose a more equitable tax regime. We are yet to see whether that will be the outcome of our report.

The Hon. R.I. LUCAS (16:13): I rise to speak to this motion, and in so doing I thank all members who have served on the committee over the years—a number of different members and I will not list them all—and the staff who assisted the committee during that period. The evidence given to the select committee, certainly from the viewpoint of any member of parliament or political party that is prepared to have an open mind about how the system might be improved, was very useful and informative. We took evidence from a range of interest groups and individuals, as well as government bodies and agencies such as the state Taxation Commissioner and Valuer-General, who provided important information to the committee on how the current system operates. We also heard from a number of councils because it is not just the state government that is reliant on the valuation system for the imposition of property-based taxes and charges, but also local government.

Those of us who were not intimately aware (and I put myself in that category) of all the details of how the rating and concession system operated in councils in South Australia, were informed, and the committee took evidence from a small number of councils and their experts in the area of rating and how the concession policy might be applied.

From the viewpoint of the Liberal Party, being in opposition, we would hope that government members listened intently to some of the concerns that were expressed but, clearly, the brief contribution from the Hon. Mr Hunter would indicate that, unless people were prepared to indicate how to fund any particular change, his ears and the ears of the government would appear to be closed on the importance of tax reform. We think that is unfortunate.

The information that our party has garnered through the operations of this committee have informed and will inform, in the future, our tax reform policy. We have already announced a significant first step in terms of land tax reform. The Liberal leader, Isobel Redmond, has not only committed to a significant first step but has also said, in terms of a goal for an alternative government, that we should be aiming for a target of being competitive with the other states and, in particular, our major competitors in the eastern states, and being competitive on a national basis in terms of the imposition of property based taxes such as land tax.

With the property boom it is easy to sit back and accept all of the largesse that that property boom will deliver into the state tax coffers. One can at least say that, with some local councils, they adjust the rate in the dollar of their rates back to try to pitch it at generating a publicly announced increase in the total revenue base for that particular council. That is, if they sat pat with their existing rate in the dollar, because of the property value increase, they may well see very significant increases in revenue of 20 per cent or 30 per cent in some years. However, they adjust back the rate in the dollar. Even though there still might be criticism because maybe they collect a five per cent or 10 per cent increase in revenue, nevertheless, they adjust it.

State governments of both persuasions in the past have not done that. That particular option has been raised with us. We have not done it in relation to land tax. I note that the former government with the establishment of the Emergency Services Levy did, in general terms, implement that particular principle. That is, that the rate in the dollar for the Emergency Services Levy is adjusted to try to achieve a particular income target. The state, in the past, has demonstrated with some state tax bases that it is possible to use that principle. Local government has certainly used that principle, but state governments of both persuasions, in the past, have not used that principle in relation to the land tax base.

I do not think there is any doubt, from the evidence we received, that whilst clearly there needs to be some adjustments in relation to land tax thresholds, again, the Liberal leader, Isobel Redmond, in her visionary policy (which was recently released) has announced that first step. In terms of being competitive, the evidence indicates that, at the rate of $1 million plus in South Australia, the land tax imposition is uncompetitive compared to most other states. That is, once a property or an aggregation of properties reaches that $1 million level or threshold, we are taxing at a significantly higher rate than virtually all other states and territories.

When that occurred however many years ago—20, 30 or 40 years ago; I do not know when that particular rate was first struck, but it has been there for a long time—$1 million of aggregation in property was obviously seen as a significant amount of property. If a particular property was worth $1 million, someone was seen to be extraordinarily wealthy.

Given the boom in property values in recent years, the median value of prices is now in excess of $350,000 for what in the past would have been seen as a modest property in the metropolitan area and on the seashore around the state. When we look at some shacks, they are extremely modest looking, but the value, because of the boom in recent times, has seen them shoot above $1 million. Of course, it is at that particular level that, as I said, our land tax base is so much more punitive than it is for other states.

The question is: so what; why bother? A range of reasons was given in evidence to the committee. There is evidence already that, in some cases, people with money to invest are choosing to invest in other states where there is a more competitive land tax base. People may then say, 'So what?' The answer is that unless we can attract businesses and investment then we will not be able to provide the sorts of jobs that we want to provide for young people in the population over the coming decades. If we want to do that, we have to be competitive. We do not have to be the lowest in the nation but at least we certainly have to be competitive when it comes to the imposition of property based taxes.

We also took evidence in relation to stamp duty. Again, concerns were expressed in relation to the uncompetitive nature of our stamp duty base compared to some other states—certainly not all other states but certainly compared to some other states. If we want to encourage people to purchase their own homes and if we want to encourage investment, again, our stamp duty regime needs to be competitive.

We also have the issue of the property base of the sewerage charge. I think it is a common error or misunderstanding for many in the community who believe that our whole water and sewerage rating system is based on property valuation. The water charging system is not, but the sewerage charging system is based on an element of property valuation.

The committee took some interesting evidence at the last meeting—which I think was probably the only meeting I was unable to attend—from Professor Mike Young, who gave his view (which is a view shared by others) as to how that system ought to be changed. I understand that he has also given similar evidence to the SA Water select committee and to my good friend the Hon. Mr Parnell from the Blue Green Alliance, which is an alliance that we have been steadfastly forging not only in South Australia but, as I understand it, at the national level in recent days—voting together. But I will not be diverted by discussions of a Blue Green Alliance at the national level, as represented in a significant vote in Canberra today. As I understand it, the Hon. Mr Parnell, as chair, will mention that in his report of the SA Water committee.

I have only read the evidence, and I have an open mind in relation to that. That is not currently our party's position. The one thing that I have learned from my period in government is that sometimes things look amazingly simple when first suggested but become extraordinarily complicated and difficult when one seeks to implement that change, with potentially unforeseen ramifications for some people in the community.

Certainly my party is prepared to have a serious look at something as significant as the change that Professor Young is suggesting. I am not sure that we will have concluded our views prior to March next year on that particular aspect but, nevertheless, it is food for thought. It is a further demonstration of the value of select committees, such as the SA Water one as well as the property tax one and challenging ideas for policy change, which certainly will not be accepted by this government and might not, in the end, be accepted by the alternative government. Nevertheless challenging ideas for policy change are raised, and I would hope that members—Labor, Liberal and crossbenchers—will have a look at that particular evidence from the committee and ponder whether or not we could apply them in the future.

A significant part of this committee's work was, of course, the foundation of all property based taxes, or most of them, involving the valuation system. We were indeed fortunate for a time to have a former valuer-general in our colleague the Hon. Mr Darley. It was a challenging task for the current Valuer-General to give evidence on an area which was perhaps technical and not well understood by most members of parliament and to actually find that there was someone sitting on the parliamentary committee who knew as much as—and probably more than—the current Valuer-General may know about the valuation system and the issues involved.

Certainly, from a committee member's viewpoint, we were informed by listening to the debate and the evidence, and we have seen some flow-on benefit from that already in terms of some of the legislation that the Hon. Mr Darley has introduced. These were issues that were questioned in the property tax committee. There was discussion about it and, certainly, I had discussions with the Hon. Mr Darley, and I indicated general sympathy and support. He has introduced that legislation in the parliament. Again, as I said, I think that is a further indication of the value of select committees. If you are prepared to go into them with an open mind, some good policy ideas and changes may well come from that.

The simple reality is that the property tax committee was never likely to get a unanimous report from committee members. The government of the day will obviously never admit that there is something wrong with the current tax system. The government of the day is never going to acknowledge that there needs to be reductions in taxation and, more often than not, an opposition will be more than prepared to try to highlight the fact that there are problems with the current tax system and that there ought to be changes and tax reform. That has certainly been the case over recent years with this particular committee.

I think the fact that it was never going to be possible to reach a united view on property taxes should not indicate that this committee, its work and its findings have had no value. That is far from being the case. As I have said, it has already informed some of the legislative changes that the Hon. Mr Darley has moved in this parliament. It has certainly informed the current policy position proposals of the Liberal Party in terms of land tax reform, as well as potentially other elements of tax reform leading into the 2010 election. It has also raised, as I have said, some other worthy ideas for consideration in the valuation area and also in the area of charging for sewerage services through SA Water.

With that, I again thank the other members of the committee who have served over the years. I also thank a number of staff members who assisted the committee in its deliberations over the years. I hope that, while we have already seen some value from the report, over the coming years we will continue to see some value in the work and activity undertaken by this committee.

Debate adjourned on motion of Hon. J.M. Gazzola.

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