Rates
78. My next proposal concerns rates. The rateable values of all properties were revised from 1 April 1991, based on rental values as at 1 July 1990.
79. Today's rates are at an historically low level. From 1931 to 1972, they were charged at 17% of rateable values. Since then, the percentage charge has varied from as high as 18% to as low as the current 5.5%. At this level, they represent a very minor charge on ratepayers in residential properties. For the average household, rates are equal to less than 2% of household incomes. For businesses, rates are less than 1% of average operating expenses.
80.
Furthermore, rates as a proportion of rental values have fallen substantially. From 1973 to 1977, they were around 8%. Today, they are less than 4%. Rates have thus declined as a proportion of the total costs of accommodation. It is very likely that this benefit has not been passed on to tenants, but has been appropriated by property owners in the form of higher rents.
81.
Rates offer special advantages as a source of revenue. They broadly reflect the ratepayer's ability to pay, since they are related to the rental value of the property occupied. At the same time, they are a stable and predictable source of revenue. I therefore propose to increase the general rates for 1992-93 by half of a percentage point. This means that the total charge to rates will be 6%. No changes are proposed to the Urban and Regional Council rates.
82.
Members may recall that the rates relief scheme introduced on 1 April 1991 will end on 31 March 1992. The scheme was introduced to provide temporary relief, particularly for domestic ratepayers, to enable them to adjust to the higher rates immediately after the revaluation. But the fundamental principle of rating is that ratepayers should contribute according to the rental value of the properties they occupy. Rates relief undermines this principle and should only be a temporary measure.
83. As it happens, extending the scheme for a further year would anyway benefit less than 6% of ratepayers in domestic properties. The main beneficiaries would be ratepayers in commercial and industrial properties (about 50% of whom would be better off). The scheme has served its purpose and should not be extended.
84. The higher rates will have a moderate impact on ratepayers in domestic properties. Some 7 out of 10 of these ratepayers will experience an increase of about 9% in their rates bill. In cash terms, the increase for the average private flat will be about $43 per month. As regards public housing, the Housing Authority's rents include an element for rates and are normally revised every two years on a rolling cycle. It will be for the Authority to decide how best to reflect this rates increase in their rents. Nevertheless, I estimate that the increase in rates will come to around $15 per month for the average Housing Authority flat.
85.
Business premises will experience higher percentage increases. Rates have been very low, and even at the new levels, they will still be low compared with rents and other operating expenses. The average office tenant, for example, pays $34 per square
18