Dunedin City Council
GST’s Effects On Council Rates and Fees
As expected, the Government has raised the GST rate from 12.5% to 15% with effect from 1 October 2010. This will impact on the expenditure incurred by the Council as well as the rates and charges made to ratepayers and customers – and the Council’s projected incomes.
The Council had calculated the cost of providing its services assuming a 12.5% GST rate for all of 2010/11. To the extent that suppliers of the services that Council buys are able to increase their prices, Council’s costs will also rise. However, the extent to which that will happen is uncertain.
Rates invoiced before 1 October will carry GST at 12.5%; after that date, 15% will be paid to the Government. The extent to which ratepayers may wish to take advantage of the 12.5% and pay all of their rates before 1 October is uncertain.
It is the Council’s intention to ensure that the first instalment of rates is invoiced before 1 October for all areas of the city. The second, third and fourth instalments will, however, occur after 1 October 2010 and attract 15% GST. Whatever arrangements ratepayers may already have in place for payment by instalments, if they still wish to pay all of their rates before 1 October in order to avoid three instalments at 15%, or automatic payments or direct debit at 15%, then they are free to do so.
Fees and charges also pose uncertainties. Anything invoiced by the Council before 1 October 2010 will carry 12.5%; after that, it will be 15%. There is a second group of fees and charges which are set by the Government in statute which cannot change unless the statute changes. These include liquor licensing and parking infringement charges.
There are practical issues the Council will need to deal with in any change in fees and charges because of the GST increase. For example, under the 12.5% GST regime, of the $5 paid into a parking meter, about 55.5 cents goes to the Government as GST. Under the 15% GST regime, that figure rises to 65.2 cents. This is a loss in revenue to the Council of nearly 2%. This effect, magnified by the many millions of dollars of fees and charges on everything from library rentals, Moana Pool admission charges, parking revenues and building consents, adds up to a significant sum.
During 2010/11, the Council will monitor the extent to which the increase in GST affects its revenues and may have to consider altering its charges to recover the extra GST paid over to central government.
Contact DCC on 477 4000.
Post by Elizabeth Kerr