Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

I rise to intervene in a debate which is happening around the ACT at the present time, a debate which I am sure members of the Senate could not be unaware of. It is a debate about an issue in the ACT election, the extent to which under a re-elected Labor government there will be an increase in residential rates. Today a former Treasurer of the ACT, Mr Ted Quinlan, was behind an article that appeared in the Canberra Times headed 'Quinlan: Tax reform won't mean rates slug', in which he argued—or appeared at least to be arguing; perhaps it was the author of the newspaper report itself—that the tax reforms proposed by the local Labor government will not translate into a tripling of the rates. I am also a former Treasurer of the ACT and I would like to indicate my views about the issues that have been raised by Mr Quinlan.

The ACT government announced tax reform in this year's budget. It issued a fact sheet at the time of the budget in which it announced that it is going to abolish a range of six different taxes and duties, including conveyance duty and insurance taxes, and, according to this fact sheet, is going to replace that revenue through increasing general rates and adjusting utilities network facilities tax. I will put aside the utilities network facilities tax for the moment because it raises just $3 million a year, so clearly it is irrelevant for this particular exercise. General rates are obviously what are principally proposed to be increased in order to pay for the government's abolition of this range of taxes.

What is the value of the taxes which the ACT government is proposing to abolish? In last year's budget, the 2011-12 budget, the last budget before 'tax reform' began, conveyancing duty accounted for $294 million approximately; duties on insurance, another $44 million; duties on life insurance, another $2.3 million; and the payroll tax proportion that is to be abolished under the proposals put forward by the government with their tax reform is another $6.8 million, making a grand total of $347,424,000. That, plus the rates being collected at the moment, about $173 million a year, leads to a total of what will need to be collected from rates in the future of over half a billion dollars per annum in 2011-12 figures—$521,148,000.

What will that mean for rates in the territory? Again, we have an answer to that question. The ACT government commissioned a rates review written or at least led by none other than Mr Quinlan, the former Treasurer of the ACT. In that review, the papers that were tabled clearly indicate, on page 148, that increases in household rates over a period of 10 years will provide for the replacement of the lost revenue that arises from the abolition of the said taxes.

That takes, for example, the average rates paid by a person in the first quintile, the lowest level of rates, from $1,056 to, in year 10, $2,932. As any senator can easily see, that is approximately a tripling of rates. In the fifth quintile, the highest level, it rises from $1,546 per year to $5,322 per year—again, in fact more than a tripling of the rates that a person will pay. In every category, a similar outcome ensues. But the ACT government maintains that somehow this shift into general rates will not lead to the very tripling of rates which the government's own review suggests would be the consequence of making this policy decision.

On the radio a week ago, the ACT Treasurer, Mr Barr, tried to explain how that could possibly be and he made a number of postulations as to how this might occur. He said it would not necessarily triple because the increase in population over the next 20 years would provide an increase in revenue and a broader base. Of course, that is true. It also provides for more people living in the territory who need services and therefore the cost of providing those services goes up. So, you do not get the benefit of an increase in the population. He did go on to say that you get better economies of scale with a larger population. Again, that is true but not to the tune of $350 million. Patently, you could not get economies of scale at that level.

He also suggested in the same interview on ABC Radio that the increase might not all be in residential rates; it could be partly in commercial rates. But bear in mind again that before these so-called reforms began, 83 per cent of total rates in the territory were raised from residential rates. If there is going to be a shift into commercial rates, there is going to be a massive increase, clearly, to make up that half-a-billion dollars to achieve that level of replaced revenue. Mr Barr went on to suggest that the GST would be rising in line with population and therefore GST revenues for the ACT. That is also probably true, but again the cost of services also rises as more people come into the territory to make up for that increase in population.

You cannot possibly expect an increase in the GST to the tune of $350 million. In fact, in recent years the GST revenues seem to have been falling. He said that there was a five-year plan to explain how this revenue would be replaced. The five-year plan is publicly available but it does not explain how they replace the $350 million in lost revenue from the abolition of these taxes. He does make it clear that the ACT government will abolish stamp duty over 20 years and, as a Liberal, I am very happy to see taxes abolished, but I am not quite so happy when I see them simply moved over into other forms of taxation and other forms of taxation going up.

Real tax reform is when you take the tax burden lower, not when you simply transfer it elsewhere. If the ACT government wants to abolish stamp duty on conveyancing and other things—which brings in a huge amount of money—over 20 years or some other period of time, then it has to fund the shortfall over a similar period of time—unless, of course, you want to run up a debt and deficit to bridge the gap between your decision to decrease revenue in one area and not increase it in another area at the same time.

It boils down to this: the ACT government clearly intends to abolish a very large amount of taxation in the territory. It equally intends to transfer that burden into rates—that is its clear published policy—but it cannot explain exactly how that will occur and exactly what the extent of household rate increases will be, even though it has published a document which explains under this preferred option what that would mean for rates. What that would mean for rates is unarguably, according to this document, a tripling of people's rates.

If that is not what is intended, then the government needs to explain to the people of the ACT exactly how that is going to be achieved. The government here has studiously avoided offering any such explanation. In these circumstances I put to the people of the ACT that not only is the claim sustainable that rates in the ACT will treble under a re-elected Labor government, supported by the Greens, but also that that is the only reasonable supposition to make based on the evidence available to the people of the ACT.

The Labor Party could clarify this by explaining where else the $350 million will come from. It has failed to do so. It has eight days in which to do so and I invite it to clear up this matter. If it fails to do so, however, my party will insist on continuing to bring this matter to the attention of the ACT community because the claim that rates will treble is absolutely sustainable and clear.