A budget for the times

A budget for the timesThe 2014-2015 ACT Budget handed down today reflects the current economic environment with a number of positive initiatives which will be of direct benefit to the Territory, although there are also some significant tax increases that may have the perverse outcome of slowing economic growth.Property Council ACT Executive Director, Catherine Carter, said:”There are some strong positives in this Budget, particularly the strong investment in infrastructure, which will help to create jobs for Canberrans and stimulate the economy. This includes investment in projects such as the University of Canberra Public Hospital, the Australian Forum, and initiatives aimed at revitalising the City and Woden Town Centre.”The Property Council supports the ACT Government’s prudent approach to borrow funds to invest in major capital works and infrastructure projects, leveraging the Territory’s strong credit rating and low levels of debt in order to invest in infrastructure which will serve the community for many years to come.”There are strong economic and equity arguments for borrowing to fund infrastructure as it spreads the costs and benefits across generations and so is better and fairer approach than paying for infrastructure straight from the balance sheet.”The Property Council also continues to support the Government’s tax reform program, with the goal of creating a tax system which is fairer, simpler, and efficient. We support its efforts to reduce dependence on stamp duty which is a volatile, unfair and inefficient tax, which is unsustainable into the long term.”For that reason, we welcome the announcement of a new flat rate of 5.25 percent on properties valued at above $1.455 million, which effectively lowers the rate of tax.”However, these positive measures are tempered by an increasing taxation burden fall on the ACT property sector.”In particular, we note the 10 percent increase in residential rates, as well as a further increase in general rates for the commercial property sector. Land tax, which applies to the residential property sector is also being restructured with the result being a substantial increase in land tax payments.”The sharp increases in general rates casts doubt the credibility of the ACT’s 20-year tax reform program. Equity needs to be at the centre of genuine tax reform. Excessive taxation on property owners and business operators will limit private investment, particularly in property.”In addition, the Fire and Emergency Services Levy (FESL) is now being amended to tie it to average unimproved values (AUV) which will, on the Treasurer’s estimates, lead to an increase in that levy for commercial properties by an average of 35 per cent.”The Fire and Emergency Services Levy continues to be an ineffective and inequitable tax. The tax penalises property owners, acting as a disincentive to investment in the capital. The reliance of the levy on the average unimproved value of commercial properties also makes it uncertain and subject to a volatile revenue source.”Fire and emergency services – like police, ambulance, health services and education – are core functions of the government sector. It is appropriate for these services to be financed from consolidated revenue rather than relying on a specific levy. Importantly, this would also ensure these critical services have a stable funding base, and are not subject to avoidance or fluctuation.”The property sector is a lynchpin of the ACT economy, contributing more tax than any other industry. It more than pays its dues.”While the ACT Budget largely represents a positive response to current economic conditions, we are concerned that the hikes in rates and taxes will undo the otherwise good work done through leveraging economic opportunities from infrastructure spending,” Ms Carter concluded.For further information contact:Catherine Carter, ACT Executive Director, 02 6248 6902 or 0412 330 079