By Angela Dorizas

Local government has welcomed the release of the Henry Tax Review and the Rudd Government’s decision to reject an expansion of land tax to all landowners.

In its response to the long awaited review of Australia’s tax system, the Government adopted four of the 138 recommendations.

Prime Minister Kevin Rudd and Treasurer Wayne Swan announced on Sunday that in addition to a 25 per cent increase on tobacco excise, the Government will also introduce a new 40 per cent tax on mining profits and increase the compulsory superannuation contribution paid by employers from 9 per cent to 12 per cent by the end of the decade.

Australian Local Government Association (ALGA) president Geoff Lake said although the Government’s initial response focused on a few specific areas, the Henry Review offered a number of recommendations relevant to local government.

“Local government recognises the importance of tax reform and getting it right,” Cr Lake said in a statement.

“We look forward to working with the Government, and through the COAG process, to secure more sustainable funding streams for councils and local communities into the future.”

Among the recommendations, the Henry Review proposed that the states permit councils a ‘substantial degree of autonomy’ to set property rates; road-user charging for heavy vehicles be progressed with revenue flowing to asset owners, including local councils; COAG review zoning and planning arrangements to ensure housing supply and affordability; and COAG review infrastructure charges to ensure they reflect actual costs of developments.

ALGA particularly welcomed the Government’s rejection of an expansion of land tax.

“We welcome the Government’s rejection of recommendations 52 and 53 that state governments expand land tax to cover all landowners,” Cr Lake said.

“Local government believes that state governments have already overreached into property tax and we do not support any further burden being placed upon ratepayers by state governments.”

ALGA’s only criticism was that the Henry Review had incorrectly linked planning processes and housing affordability. Cr Lake said this “myth” would hopefully be debunked in COAG forums.

The Local Government and Shires Associations (LGSA) of New South Wales were particularly pleased by the recommendation that councils should have some autonomy in setting property rates.

Local Government Association of NSW president Genia McCaffery said this echoed calls the sector had been making for the State Government to “step back from micro-managing NSW councils and dictating to their communities”.

“The review supports our view that the State must credit us with the maturity and ability to negotiate with our communities as to what they want us to provide and how they want us to fund it,” Cr McCaffery said.

“It recognises that council rates overall are relatively efficient, simple and fair, and serve as a stable source of revenue.

“It also acknowledges the important role that developer levies play in providing essential infrastructure for communities that arise as a result of new developments.”

ALGA and LGSA called on the Federal Government to include the sector in any future consideration of road user charging.

Shires Association of NSW president Bruce Miller said revenue from road-user charging for heavy vehicles must flow to local councils, as recommended by the Henry Review.

“Councils operate 80 per cent of Australia’s road network, and while we do receive some support from State and Federal grants, we certainly struggle to maintain those roads,” Cr Miller said.

“Heavy vehicles generate a lot of the wear and tear that councils must repair, so it is entirely appropriate that they should help pay for the upkeep of road assets.”