Property Taxation in New Zealand

Published: 2002

Authors: William McCluskey , Arthur Grimes, Jason Timmins

Produced as the Lincoln Institute of Land Policy Working Paper WP02WM1

Since European colonisation of New Zealand in 1840, property taxes have formed the foundation of local authorities' revenues. Currently, over half of local authority revenues are sourced from rates on property. The nature of the rating system has changed over history and today three different types of rating system are used within the country.

The two dominant systems are levied on land value and on capital improved value (land, building and other improvements) respectively. For most of the twentieth century, the land value system was the dominant system used by local authorities, but since the mid-1980s the capital value based system has become increasingly prevalent.

We outline historical developments in systems of property taxation in New Zealand including influences which led to changes in the systems over time. We then examine in more detail the modern funding systems stipulated for local government, together with the "toolkit" of funding options available to local authorities.

Our paper concludes with an empirical examination of local authority revenue and expenditure patterns. Within this work, we uncover a pattern which relates choice of rating system to the level of mean income within local authorities.