Keith Melville

Refunding the GST portion on rates back to local government will be nigh on impossible despite what some council candidates in the local body elections tell us

In promoting the refund in their election pitch, they are either misleading ratepayers or just unaware of the difficulties involved.

To say they are going to persuade the Government to give up something like $1.1 billion in tax revenue (2022 figures by economist Brad Olsen) to replenish the coffers of councils up and down the country, or $7.4 million to Whakatāne, (Olsen 2022), should be seen for what it really is.

It is just glib talk - a sop to give voters hope that there is an easy answer to the local government affordability crisis.

It is stuff from cloud cuckoo land, and it is being promoted by one of Whakatāne's mayoral candidates who should know better, and a few other candidates.

The real answer is not a council slush fund - it is for local government to cut its costs.

I am not saying GST on rates can't be refunded but to do it the Government, which is already hard-pressed financially would have to find the $1.1 billion from other sources. The options include borrowing the money and increasing New Zealand's already burgeoning debt, or cutting departmental budgets, which have already been slashed to pay for the previous government's excesses, or increasing other taxes.

As Olsen said in his 2022 study, returning GST to local government would make big changes to the balance of central government finances.

The process would also take an extraordinary amount of Government time. The Treasury would need to study the idea, a law change would be required, and the public would need to be consulted.

Those candidates who seem to believe it can be done, complain that GST on rates is a tax on a tax. And it is just that, but that is hardly unusual. Most times you buy something you pay a tax on a tax. That is the nature of GST.

Disclosure: I am not an accountant nor a tax expert. I am a retired reporter with an interest in local government politics.