Page 3063 - Week 10 - Wednesday, 16 September 2015
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windfall gain by a lease variation, none of that should be shared with the community. That is the Liberal Party’s position. None of that windfall gain should be shared; none whatsoever. You would think the longest serving shadow treasurer in Australia’s history would know that a form of lease variation charge has been in place in the territory since the early 1970s. Why? Because it is good policy.
The basics of the lease variation charge are: the territory levies the lease variation charge when the development rights contained in a lease change and deliver increased value. The principle underlying the lease variation charge is a sound economic principle. Increases in the value of a block of land from changes to lease conditions are granted by the government. That is the change. The government says what was worth a certain value is now worth significantly more because your lease has been varied. It is only fair that the community who, through the government, grants this increase in value of land shares some of that benefit of an increase in value.
The efficiency of the lease variation charge as a revenue source has been tested time and time again by independent economic analysis. The 2010 report and the review of the change of use charge system in the ACT by Macroeconomics noted that the LVC taxes unearned windfall gains generated by ACT government planning decisions. The report noted:
Because this value is ‘gifted’ to the leaseholder, rather than earned, it is socially efficient and equitable that the government retains a significant proportion of that windfall and uses it for the benefit of the community.
That is the crux of the issue—when the government, through a planning variation or a lease variation, grants an unearned windfall gain, the community should retain some of that value. Presumably the Liberal Party still believes in part in that principle because their policy proposition is not to abolish the LVC altogether. If Mr Smyth truly believed the rubbish he has just spouted in his contribution, he would abolish the whole thing.
Mr Hanson interjecting—
MR BARR: He would commit to abolishing the entire tax rather than providing a four-year holiday in certain locations thereby distorting the market. If you have got the courage of your convictions, argue for the complete abolition of LVC, not a partial one.
Mr Hanson: Is that what you want us to do?
MADAM DEPUTY SPEAKER: Mr Hanson!
MR BARR: Come on, yes. If you truly believe all windfall gains from lease variations should go to developers and none should go to the community, get up and say that. Let us have that debate, because the lease variation charge is how we capture for the community a share of the increased value from public investments in infrastructure and urban density. LVC is one of the ways we provide the revenue necessary to fund the critical infrastructure and services all Canberrans need, and that is something that those opposite do not understand.
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