Page 3009 - Week 10 - Wednesday, 17 October 2007
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In answer to a question on 31 May 2006, the Treasurer conceded that the introduction of the utilities tax would increase the costs of a range of services to ACT households. This included increases to the cost of water, sewerage, gas, electricity and telecommunication services, all as a result of the utilities tax. According to the Treasurer’s figures, this has amounted to an additional $131 in annual utility bills to the average ACT household.
It is only now that the people of Canberra are starting to work out what this tax is. I have been amazed at the number of people that have contacted my office, indeed the offices of my colleagues, who have said to us, “What is this? Is this a federal government tax? Is this something that Actew or Telstra have dreamed up?” When you tell them that it is the Stanhope Labor government dreaming up a new tax, people are just dismayed at the justification for this impost.
This came on top of increases in general rates due to changes in the 2006-07 ACT budget, which amounted to an average increase of $97 per household in 2006-07 and $141 per household in 2007-08. This also came on top of the fire and emergency services levy introduced in the 2006-07 budget, which amounted to an average of $84 per household in 2006-07 and an average cost of $87 per household in 2007-08.
The opposition has been critical of this government’s philosophy of high tax and high spending. It has put a substantial burden on Canberra families. However, in addition to the fundamental problem of this big government mentality, there are also further economic inefficiencies in the utilities tax. By imposing this tax on the provision of particular services rather than spreading the tax over a wider base, this creates more economic inefficiency than alternate taxation schemes by changing the relative costs of services.
For individual consumers this change in relative prices creates what economists call a substitution effect in addition to the income effect of higher costs. This means that consumers change their behaviour in ways that are less preferable to them on the basis of the government’s distortion of the market. There are many examples. People who may have multiple lines in their home will cancel a line and ordinary people who have anywhere to go in terms of reducing charges will start exploring those options.
The economic literature shows that this increases the distortionary cost or dead weight loss that results from such a tax even when compared to a broader tax that generates the same amount of revenue. This tax is clearly both excessive and economically inefficient and shows that the government has few standards in its insatiable grab from the wallets of ACT taxpayers.
It is revealing to contrast the attitude of the ACT government on taxation and the attitude of the Australian government. In a few years ACT residents, as well as Australians in general, have benefited from cuts in federal taxation. In particular, they have been able to keep more of their take-home pay as the Australian government has reduced the rates of income taxation and increased the brackets for assessment.
However, at a local level, the absolute opposite has been the case. ACT residents have been slugged with higher rates bills and higher bills for their utilities. Both the ACT
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