The Victorian government's decision to reduce the cap on local government rates from 2.5 to 2 per cent, will place more burden on struggling rural and regional councils.
Instead of capping the rates that individuals and businesses pay, the current rate capping regime only limits the total revenue that local governments can receive from rates, giving councils the ability to separately increase or decrease the rates paid by individual classes of ratepayers.
Farmers have been hardest hit by this policy, which is why the VFF is advocating for councils to have the ability to set minimum and maximum rates.
Maximum rates would create a true rate cap by limiting the rates that have to be paid, whilst minimum rates would help to flatten the tax base, creating greater equity between farmers and other ratepayers.
Fundamentally however, a rate capping system does not create equity for ratepayers, that can only be achieved by looking at how we divide the pie, rather than thinking about how big it is.
When we do this, we find the greatest inequity is between rural and metropolitan ratepayers.
The VFF has taken the opportunity of the current Local Government Rating System Review to advocate for a more equitable distribution of rates across Victoria.
The state government should establish a state-wide general rate in the dollar based on the valuation of all property.
Revenue would then be redistributed on the basis of state-wide minimum service and infrastructure levels, equity and need - similar to how the government already distributes GST money to local government.
Like rate-capping, an equalised funding system would create greater transparency and accountability around how local government rates are spent, but more critically, it addresses equity for all ratepayers.