Liberal Land Tax Increases Debate

By November 20, 2015 Victoria Park

MR B.S. WYATT (Victoria Park) [4.30 pm]: I move —

That this house condemns the Barnett Liberal National government for its three consecutive increases in land tax which are significantly impacting landowners and small businesses at a time when businesses are experiencing an economic slowdown.

The opposition has moved this motion to outline the frustration of those people who have received land tax assessments recently. Those increases are on the back of two land tax increases in a row by the Barnett Liberal– National government—a 12.5 per cent increase, and a 10 per cent increase. There has now been, in effect, a 25 per cent increase. The Labor opposition opposed those increases on each occasion they were brought into Parliament, and every Liberal and National Party member voted for those increases, without exception. We raise this issue because the latest increases in land tax are having a dramatic impact, at a time of slowing economic activity. This issue needs to be discussed, particularly when we listen to Liberal members of Parliament talk about their commitment to lower tax, smaller government, and the evils of land tax. We hear that particularly in the first speeches of members of the Liberal Party. Despite the fact that the Barnett government has presided over record revenue, we have had three land tax increases in a row. Members will remember the fully funded, fully costed election campaign. We were told that all the promises that were made by Mr Barnett and the Liberal Party were fully funded and that no increases in taxation would be necessary to deliver those outcomes.

I have noted this week with some bemusement that ministers have been desperate to find some reason to talk about red tape. I note that the Minister for Finance, who introduced the land tax legislation into Parliament, is not here for this debate. I hope he will speak in this debate. I know that the Treasurer is the person who makes the decision, but it was the Minister for Finance who introduced that legislation, and it made its way through the Parliament under his guidance. The Minister for Finance said yesterday, in a brief ministerial statement when he tabled the government’s “2015 Report Card: Red Tape Reduction”, and I quote the minister  “The government has delivered practical benefits for small business and the community by saving time and costs, and making life easier”.

I can tell members from the emails that I have received, and they have been in their dozens and dozens, and from the phone calls from business owners and landowners all over Perth—indeed, member for Collie–Preston, from all over Western Australia—that people are furious that they are being slugged with these increases in land tax at a time of slowing economic activity. As I was saying, there have been horrendous increases in land tax by the so-called Liberal Party of Western Australia. We have had three increases in a row—one, two, three.

Mr M.P. Murray: You’re chasing them out again!

Mr B.S. WYATT: I would be embarrassed, too, members of the Liberal Party, as they abscond from the Parliament. I would be embarrassed, too, as they leave.

I want to remind members of what the media was reporting about the economy at the time of the budget cut-off— perhaps not the first or second time, but certainly the third time. I want to read into Hansard an article from ABC News online article dated 4 February this year. The article is headed “Perth office rental vacancies at 20-year high due to mining slowdown”. The article refers to some comments from Joe Lenzo from the Property Council of Australia and states in part

“ The Property Council of Australia’s latest office market report found the Perth CBD office vacancy rate increased from 11.8 per cent in July last year to 14.9 per cent in January.”

For those who want to have their wealth managed, the article states also

“Momentum Wealth managing director Damian Collins believes Perth office vacancy rates could nudge 20 per cent by next year.

How astute he was, when we see where they are now. That was in February of this year. We have found out today that Perth rental vacancies have risen by 64 per cent in 12 months. That is according to property analysts SQM Research. The Real Estate Institute of Western Australia’s rent report, which was also issued today, shows that the median rent has dropped by $50 for the year to September, to sit at $400 a week. That is probably not a bad thing. Rental rates have been very high for a long time. It is obvious from article after article that the commercial and residential property market is softening.

I also want to make some comments about the performance of the broader economy. We all are familiar with CommSec’s “State of the States” report. Various Treasurers—I am not sure whether that includes this Treasurer— have talked about the state of this state during the good times. They have waved this report around and said how wonderful Western Australia has been doing. I want to read from part of the “State of the States October 2015 economic performance report”. The report refers to employment in great detail, state by state. It states —

  • At the other end of the scale is Western Australia. Trend unemployment stands at 6.2 per cent, 45.2 per cent higher than the 4.3 per cent ‘normal’ or decade-average. The report states about population growth
  • Western Australia remains second on population growth with an annual growth rate of 1.39 per cent—slowest pace in a decade. And population growth is almost 47 per cent below decade average levels.

When the report comes to looking ahead, it states “In contrast to NSW and Victoria, it is clear that both the Northern Territory and Western Australia are losing momentum. The mining and energy sectors are transitioning from the investment phase to production. But unlike NSW and Victoria, housing demand is not filling the void.” Members who paid attention to budget paper No 3 will remember that last year’s budget was predicated on very, very strong housing construction, and we have had three land tax increases in a row.

I want to spend some time to read in some of the emails I have received. I can critique the government until the cows come home—I have done it for a number of years—but I find that the government rarely listens to me, so I want to go through some emails from people who have received their land tax assessments. I listened with some interest to the Premier when I put a question to him last week about land tax increase impacts on someone who had contacted me with a four per cent increase to their valuation for land tax, but a 140 per cent increase to their land tax bill. That is what Liberal Party members’ last land tax increase did. I know government members have been receiving the same calls and emails as I have received. I will deal with Frank Milici in a minute; he has been very prominent on radio with his public critique. I spoke with him about some of the conversations he has had with Liberal Party members, and I will talk about them in a minute. The Premier said that these large landowners can sell or rearrange their property, and it is just what happens. That was the Premier’s response when I asked about that scenario of the person with a four per cent increase to their valuation receiving a 140 per cent increase in the land tax bill.

I want to refer to two people in particular as examples. I put these examples to the Treasurer as a grievance last week, but I will briefly remind the house who they are. Remember colleagues that the Premier said that these people are all large landowners who can rearrange their property portfolios. Mrs Silvana Sciullo is from Thornlie and she received a land tax bill that showed a small increase in her land valuation, but a 93 per cent increase in her land tax bill. The bill was up from $1 466 to $2 830. Mrs Sciullo is not a large property holder, she is a self-funded retiree. She has worked hard to get there and she has structured her finances so that she can do that. She has two properties in Carlisle. One of those properties is now empty, and it has been for some time, as she has not been able to rent it. I think that she said that the rent had come off the other property by about 20 per cent. Dr

M.D. Nahan: Do you know the valuations of those properties?

Mr B.S. WYATT: I would have a copy of her valuation in my file, but I will go through another example. Mrs Fiodora is in Maddington and in exactly same scenario as Mrs Sciullo. She is a self-funded retiree who lives off the income of two rental properties. We are all familiar with front-and-back properties. Her land tax assessment went up by 142 per cent off the back of a 13 per cent valuation increase. In response to the Treasurer’s question, I have noted here that the valuation for her properties went from $1.3 million to $1.45 million, which was about a 14 per cent increase in the valuation of her property, but a dramatic jump in the land tax payable. Mrs Fiodora made the point that she was getting $420 a week in rent in 2014, but that is now down to $360 a week.

I remember Troy Buswell sitting in this chamber and talking about a cap on how much the valuation could increase— I do not know whether any members remember the cap, but I am sure the Treasurer might refer to it, if he responds to this motion today—at a time of huge dramatic property increases and when the rental market was tight with rents going up. I remember having this conversation as the then Treasurer, Troy Buswell, sat in the chamber. He made the point that the impact of land tax increases were passed on to small businesses and renters. The point I am making is that the government has increased this dramatic slug on property owners at a time when we have the exact opposite economic conditions, in which dramatic increases in consumer price index rises are in land valuations, and even they are disputed here and there.

I am surprised that a Liberal Premier would critique large landowners or landowners, full stop. I received an email from Roy. I will not say Roy’s second name, because I have not asked his permission to do so. The email states

“Dear Minister, I would like to protest at the exorbitant increases in land tax. We are professional landlords, owning a considerable number of residential rental properties in WA. We have just received one land tax assessment notice which has in creased from $5000 last year to $13000 this year!!”

That is a 160 per cent increase —

As a small business we will struggle to find this additional impost. We can not pass this cost on to our tenants via increased rents. Of course, they cannot do that in the current climate — In fact we are finding not only are rents decreasing considerably at present , by about 20% , vacancy periods are increasing considerably, and also banks have increased interest rates for investment loans.”

The email goes on and on. This email was sent to the Treasurer’s office and provided to me by Frank Malici? Frank has contacted and spoken with a number of members of Parliament. He contacted my office, and I gave him a call. He was one of the early ones to contact me—he got his assessment early—and I think he has been on 6PR radio since. Frank was very open in his conversation with me. He said, “Look, I know that I’m lucky. I’ve worked hard and I’ve got a number of properties”, but in his email to the Treasurer’s office he states

“I have leased contracts with commercial and residential tenants. The increase in land taxes cannot be passed on at this stage. I will pass that increase on when the contracts are renewed I find it unrealistic that tenants, landlords and business should be affected by such a significant increase. In addition it is unfair to ask any tenant especially commercial tenants to absorb such a significant increase. In some cases it may cause the tenant to reduce his staff or possibly close there business. I suspect that the average sound minded person would expect to pay CPI or something around CPI. I do not expect or believe that an increase of 50% to 750% increase is reasonable.”

I quoted that directly from Frank’s email. When I called Frank and had a conversation, I was disturbed that he told me that he had had a few calls from some Liberal MPs. I asked him what they had said to him. He said that one of them had said to him, “Keep going to the media. I did not know that this was going to happen.” The other Liberal MP, who is not in this house at the moment—if he comes in, I might point him out—said to Frank, “I thought it was a CPI increase we passed this year when it came to the party room for discussion.” Interestingly, that member of Parliament did not raise his voice when the legislation came into this chamber and we talked about the 25 per cent increase in revenue raised as a result of the land tax increase, which is certainly not a CPI increase, and the 12.5 per cent and 10 per cent increases before that that are certainty not CPI increases.

I want to focus on another email I received, because Mr Milici made the point that in some cases it may cause a tenant to reduce his staff. Like many members, a chunk of my weekend is spent watching kids play sport and then driving them somewhere to play more sport and then driving them to a party. That is our weekend. As is often the case, that is the job of dads. I sit and chat with a lot of fathers. One father with whom I generally do not talk politics; we talk about how wonderful a tennis player I was compared with my daughters. Generally, that is what we talk about. Last weekend, three fathers wanted to talk to me about their land tax bills. I had no idea about their businesses or their holdings. It is the proverbial barbecue stopper. I got an email from one of those fathers. When I read it, I want members to think about Mr Milici’s comments about staff being laid off.

This is an email I got from Peter. It reads —

Some numbers for you;.

Over a portfolio of properties that I hold, which may I say has taken me 30 years to build up too.

  • Land Tax has increased this year by 60%
  • Land Tax of $56,460.00 from last year’s total of $38,563.00 has increased by $20318.75 So, a significant landholding; there is no doubt about that —
  • Over the portfolio the Land Tax now consumes on average is 22% of the rental income.
  • Including Council Rates, Water Rates and Insurance, now consume on average is 38% of rental income.

I will not read it all out because these emails are long and are from people who are very frustrated. He goes on to make this point —

“I employ 60 x subcontractors throughout the year, some once or twice, others monthly and an another weekly. The consequences of this Land Tax theft to me is this; No more proactive maintenance, only essential maintenance subcontractors will be used, filtering all the way to our weekly subcontractor who will terminated immediately. 1/In other words, you have taken money out of my pocket, which I spend with subcontractors who in turn spend into the economy. 2/Property purchasing or building for rental accommodation ceased indefinitely. 3/We are immediately looking to other states and countries for greater investment opportunities and moving our holdings. 4/Assessing the viability of selling out of our property holdings. As obviously encouraged by the Premier

.The email continues —

All these actions above will deliver no ongoing support for economic activity and will only a         accelerate into a contracting economy.

This is another email that I want to make sure is put on the record, from John. It was sent to my electorate officer and reads-

“Hi Alison, as discussed by phone the other day, I wish to impress upon Ben and any one else who will listen, my complete discussed and frustration at the Governments very poor policy decision in regards to Land Tax Assessment. You would have to be living under a rock to not know that property values have declined or at least remained dormant for the last few years and people like my wife and I who invested in a property portfolio a few years ago have had nothing but bad news regarding their investment except the relatively low interest rates that currently exist.”

Further along, the email reads —

“At a time when property values are at best flat and rents are on the decline, this Government says the best way to reward those Landlords, for doing what is rightly the job of the State, is to hit them in the bread basket. We all need to live within our limits and we all need to accept a fair percentage of the burden when things get tough, but I fail to see how an increase of over 100% on Land Tax is appropriate when CPI, and all increases associated with it, are in the order of 3%, not withstanding the increase in Shire Rates, Water and other commodity expenses.”

One final email; I literally have dozens, but I will read one final email from another constituent of mine who I have spoken to called Paul. It reads —

“Dear Ben I am absolutely stunned at my land tax assessment for the 2015/16 period. In 2014/15 is was $8,702.45 (discounted payment) based on a $2,002,000 value, whilst for 2015/16 it is $19,807.55 (discounted payment) based on a $2,283,000 value. That is an increase in land tax of 167 per cent on a 14 per cent increase in land value.”

I noted on social media commentary suggesting that there is a general view that these are all rich landowners, which is the view that was taken by the Premier when I put the same question to him, “They are all rich landowners who can afford it.” That is why I make the point: that is not the case. I went through the examples of Mrs Sciullo and Mrs Fiodora, and that is not the case. The government is hitting those who may have significant landholdings and who may, in particular, hold commercial tenancies, with a huge increase in land tax that they do not have the capacity to pass on.

I have sat here and listened, time and again, to my Liberal Party colleagues in this place talk about the importance of small government and low taxes. I bring this matter to their attention simply because I want to hear what they have to say. The Liberal Party is either a small government, small taxation party, or it is not. The Minister for Planning, the member for Kalamunda, gave a very interesting first speech, which I will quote from. I cannot believe I did not find this until now. His first speech concludes —

“We need to ensure that our children and grandchildren can look to the future with confidence and without being burdened with excessive debt as a result of inappropriate spending by our generation. It is immoral to expect those who follow us to pay for our consumption today; we will be able to do nothing better than to leave the finances of this State in good order.

How things have changed! The member for Balcatta also made a very impassioned first speech in which he made the point

“ I am aware of the impact of excessive taxes, charges and fees …”

But he voted on three occasions to increase them! We pointed out to him the increases and the impact that they would have, but he still voted for them. The member for Balcatta has also spoken to Mr Milici—I know that—and made some comments very contrary to how he voted in this place. I make this point to Liberal Party members: if this is, indeed, a big taxing, big spending government, they should embrace that and be what they are. They should not go out and say to the business community, “We’re your friends. We believe in small government and small taxes.” Of all people, the Treasurer is relying on land tax as his one source of revenue. He is not reforming it or changing it; he is hiking it up by 10, 12.5, 25 per cent over three years—this Treasurer, of all Treasurers! He used to rail against such inefficient taxes. Government members should be what they are and defend what they are. I hear from people who are angry about their land tax assessment who say, “Well, we’ve spoken with Liberal members and they are shocked. They didn’t know it was going to be this big.” The member for Balcatta said on the phone to some of them, “I thought it was a CPI increase we were supporting. I didn’t read the bill.” Other Liberal members have said, “You should do more media. This is outrageous. I can’t believe how big that increase has been.” There have been increases of 90 per cent, 100 per cent, 115 per cent, even 160 per cent in one case.

I hope that some government members will get up and speak. I hope that the Minister for Finance speaks on this motion. They will say, “Oh, we’re going to build this and do that and employ these people”, but they should be honest about this. This is what today’s debate on the health system brought to us. Liberal members get up and say, “Everyone in WA is paid the most”, as if that was something the Liberal government inherited. The Liberal Party never said when it did that that at some point it would have to sack a whole lot of people. It never said at any point during the 2013 election campaign, “Look, when we say fully funded, fully costed, what we actually mean is that you’re gonna get not one, not two, but three increases in your land tax and an increase in your payroll tax.” I never heard that; I never heard that at all. I know that Liberal Party members are getting the same responses I am around land tax, and I want an explanation. They have all emailed me. I put some of those questions to the Treasurer in my grievance last week. It is always hard to respond within seven minutes, but those constituents want to know; Mrs Sciullo and Mrs Fiodora want to know what they can do. How can they increase their income to cover that increase in land tax? They cannot sell their property because their property is their income; they are self-funded retirees. That is how they have designed and constructed their finances. As many of them have pointed out in their emails to me, this is not an environment in which that can be easily passed on. We are not in that environment anymore; we all know that. We read it every day in the media.

What stuns me the most is that it is the Liberal Party that has done it. It should not stun me, after watching what has happened over the last seven and a half years with debt and spending; it is fairly standard operating procedure for the Liberal Party. When I go back and read those first speeches, when I go out to various functions and hear many members opposite talking about their commitment to small government and small taxes, and when I hear minister after minister this week talking about reducing the burden of red tape on small business, I find it hard to reconcile that with the government at the same time whacking businesses with these sorts of land tax increases. They should be honest about what they are.

This is a big spending and big taxing government. Before the government says it is a revenue problem, I want to remind colleagues what has happened to revenue over the time of the Barnett government. Total state revenue has increased by 63 per cent. That is not a revenue problem. Payroll tax has increased by 84 per cent, land tax has increased by 73 per cent and royalties have increased by 174 per cent. Total state revenue is up 63 per cent. Stamp duty went down. Stamp duty is a bit of a shocker. Liberal Party members should not get up and say we have a revenue problem. The Liberal Party is either committed to the Liberal philosophy or it is not. I have said to every person who has contacted me about their land tax assessment, “Make sure you contact the closest Liberal you can find and let them know.” The Labor Party pointed out in this place, at every one of those three land tax increases since the fully funded, fully costed election campaign, the impact they will have. The Labor Party voted against it. I saw the names of the Liberal Party members who voted for it, including members who are now saying to aggravated landowners, “We didn’t know.” Not a word was uttered by them during the debate. No concern was raised in this place. Members knew what they were doing. Look those people in the eyes and say, “Too bad, so sad.” The Premier did that. He said, “You’re all wealthy landowners; rearrange your landholdings.” That was his response in question time. Hopefully the Treasurer will get to his feet, when we have finished our contribution, to answer those questions that were put to me and no doubt have been put to the Treasurer. If they were emailed to me, they were emailed to Liberal Members too.

Mr R.F. Johnson: I have had loads of them.

Mr B.S. WYATT: Member for Hillarys, too right you have. I have had them from all over WA, and some of my colleagues will make some points about emails they have received. It seems that has not stuck in the minds of Liberal members of Parliament. Every single time the budget is read, every single time that increase comes in, they say, “Guess what? We’re still the lowest. We still compare really well to other states”, as though people should be thankful with the wet blanket that has been put on them. The response from government is, “Be thankful; it could have been a hell of a lot worse.” I hope I hear from the Liberal members who are now saying to those people getting their land tax assessments, “We didn’t know; I’m sorry, we thought it was a CPI increase.” They should get up and explain why they thought it was CPI when the Labor Party was telling them what the increase was. They should explain that to the Parliament and to the people who are contacting them; it is only fair.

I have made the critique time and again that this government does not have a financial plan. It spends. It increased debt to unknowable levels during the boom. During the boom, revenue was surging into Treasury coffers. When the economy comes off, what did it do? It hiked up taxes. I have never seen anything quite like it. If the Treasurer was still writing pieces for The West Australian or The Australian Financial Review, he would be slamming the Treasurer for doing those things. He would be slamming the Treasurer for being lazy by hiking up land tax and not thinking about reforming it. He would be slamming the Treasurer for blowing out debt during the boom and putting the handbrake on the economy through these taxes during the softening stage. When the Treasurer wrote with anger, he wrote with precision. I have read a lot of his articles. I am pretty sure that Eric Ripper has read a lot of them too. It is extraordinary. Ultimately, the Liberal Party is here to spend and tax. It should go to the election on that; be honest about it. “Fully funded, fully costed” was perhaps the greatest lie around that campaign and we are still being punished for it. The health system is about to cop it, as we saw from today’s debate.

I have one final point about revenue because I know someone will say it: the Treasurer has actually been a little better than the Premier on this, except for the usual stuff in question time. Generally, in debate the Treasurer has been a bit better than the Premier on this; that is, the reliance on, “Oh, it’s the GST.” Remember what I said, members: total revenue has increased by 63 per cent under the term of the Barnett government. At no point when the state budget is being set by Treasury do we not know what the GST will be that year. When we look at what was expected and what was actual, the difference is minuscule. Treasury is pretty good at knowing what we will have in a budget year. We know what our GST revenue will be. The only time the government can use that as an excuse is if it has gone into a budget assuming, based on something, that it will receive a lot more revenue somehow, which would be not just incompetent, but negligent, financial management. Even with that decline in GST—we are all familiar with the GST—there has been a 63 per cent increase in revenue under the term of the Barnett premiership.

My final point is that revenue has been up. The government has had the complete reverse policy when it comes to managing taxes and spending during a boom and a slowdown. This is not financial management, my friends; this is financial incompetence. The government needs to explain—every government member in here, not just whoever speaks this afternoon—to those aggravated landholders who are getting land tax assessments exactly why they supported it because they knew what they were supporting and they knew what it would do to the economy.