northland chamber

Rating Differential

This week – What is a commercial rating differential? Why does the Northland Chamber care about rating differentials? Why did the Chamber ask the Whangarei District Council to abolish the rating differential over the next 10 years in the recent submission to the long term community plan?

Whether you are a residential or commercial ratepayer, part of your rates bill includes general rates. The General Rates are those funds that are collected and are applied to activities that provide benefit to the whole community. These generally cover services where it is too hard to tax direct users.

The Rating differential is the loading that business and commercial premises have imposed onto their general rates. In Whangarei for instance the Rating Differential is 5.

This means that commercial or industrial users pay five times as much per dollar of land value than residential ratepayers.

Generally Local Authorities will use two arguments in justifying the differential
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Firstly, commercial ratepayers can recover the GST on and deduct rates for income tax purposes but residential ratepayers cannot. The fallacy in this argument is that it doesn’t recognise that the business’s income is subject to tax whilst the imputed income of a residential household isn’t.

The second argument is that business and commercial ratepayers impose greater costs on infrastructure than residential properties. The cost of servicing commercial roading, parking and other utilities requires a higher standard of service. This argument misses the point that the commercial sector is used by everybody – for example the CBD is at least as much a benefit to the residents who go there to work, shop, eat and drink as it is to the businesses located there.

Why is it the organisations that are by their very nature creating wealth and employing people are hit the heaviest?

Remember that the majority of businesses in Northland (96%) are SMEs in other words employing less than 20 people.

Some areas have recognised the importance of the business sector. And in an effort to become business friendly, have abolished the commercial rating differential (eg. Kapiti).

Other areas have varying differentials based on the type of commercial zones eg. Wellington.

The Northland Chamber of Commerce advocates for the abolishment of the Commercial Differential and ask all distict and regional councils to consider a policy of abolishment over a 10 year period as a sign that we are a business friendly region.
Remember – to subscribe to the FREE fortnightly Chamber E-news letter, full of interesting Northland business news, send an email to info@northchamber.co.nz . For joining enquiries please phone the office on 09-4384771 or check our website at www.northchamber.co.nz, www.kaiparachamber.co.nz and www.farnorthchamber.co.nz