Land Taxes and Revenue Needs as Communities Grow and Decline: Evidence from New Zealand

Motu Working Paper No. 04-01

50 Pages Posted: 3 Mar 2004

See all articles by Suzi Kerr

Suzi Kerr

Motu Economic and Public Policy Research Trust

Andrew Aitken

Motu Economic and Public Policy Research

Arthur Grimes

Motu Economic and Public Policy Research Trust

Date Written: January 2004

Abstract

New Zealand is unusual in that nearly 60% of local services are funded from property taxes. These are a mixture of land taxes, capital value taxes, annual rental value taxes and uniform general charges. We explore the efficiency and equity of this system at both national and local levels. We find that the national property tax base is large relative to spending needs but that the variance in per capita tax bases across territorial local authorities is probably greater than is efficient or equitable. We find that land taxes are more progressive than capital value taxes. Our research also addresses local authorities' ability to provide services as their property tax base changes as a result of external economic shocks. We consider the occurrence of and responses to "fiscal stress" in a system of local government that is heavily dependent on property taxation. We provide some examples of the wide range of actual responses by local councils faced with similar population changes. Finally, we offer some tentative conclusions and implications both for New Zealand local public finance and for the use of property taxes, and particularly land taxes, more broadly.

Keywords: New Zealand, local government, property taxes, land taxes

JEL Classification: H23, H73, H71

Suggested Citation

Kerr, Suzi and Aitken, Andrew and Grimes, Arthur, Land Taxes and Revenue Needs as Communities Grow and Decline: Evidence from New Zealand (January 2004). Motu Working Paper No. 04-01. Available at SSRN: https://ssrn.com/abstract=512084 or http://dx.doi.org/10.2139/ssrn.512084

Suzi Kerr (Contact Author)

Motu Economic and Public Policy Research Trust ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand
+64 4 383 4250 (Phone)
+64 4 383 4270 (Fax)

Andrew Aitken

Motu Economic and Public Policy Research ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

Arthur Grimes

Motu Economic and Public Policy Research Trust ( email )

19 Milne Terrace
Island Bay
Wellington 6002
New Zealand

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