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Rates are a type of property tax system in the United Kingdom, and in places with systems deriving from the British one, the proceeds of which are used to fund local government. Some other countries have taxes with a more or less comparable role, like France's taxe d'habitation.
Rates by country
Local government authorities levy annual taxes, which are called council rates or shire rates. The basis on which these charges can be calculated varies from state to state, but is usually based in some way on the value of property. Even within states, individual local government authorities can often choose the specific basis of rates - for example, it may be on the rental value of houses (as in Western Australia) or on the unimproved land value (as in New South Wales). These rateable valuations are usually determined by a statutory authority, and are subject to periodic revision.
Rates are referred to as property taxes in Canada. These taxes are collected primarily by municipal governments on residential, industrial and commercial properties and are their main source of funding.
In Hong Kong, rates on property is based on the nominal rental value of the property. Unlike in England and Wales, it is still levied on domestic property as well as non-domestic premises. Prior to 2000, it was used to fund municipal services, the responsibility of the now-abolished Urban Council and Regional Council, through the Urban Services Department and Regional Services Department. The revenue now goes to the Treasury. The bill is issued quarterly.
Ireland is re-introducing rates in 2013 after having abolished them in 1977. The rates will be based on a self-assessment of the property values and set at 0.18% of a property's value annually, and 0.25% for any part of a property's value over €1m.
Israel has a similar tax known as arnona that goes back to the days of the British Mandate of Palestine. It is levied by the municipality (or, in smaller localities, by the moatza eizorit, i.e., Regional Council) based (currently) on the square meterage of dwelling or business. Specific rates vary widely among municipalities, with Jerusalem and Rehovot having the highest rates in the country. In rental dwellings, tenants (rather than owners) generally pay the arnona. Single parents and some forms of economic hardship qualify for discounts or even exemptions.
In New Zealand, rates provide the major source of revenue for funding Territorial Authorities of New Zealand expenditure since the late 1800s. Rates are basically a tax on real estate property. For the year ended June 2005, rates made up 56% of local authority operating revenue.
Almost all property owners in New Zealand pay rates. People who rent property do not pay rates directly, but property owners will take account of the cost of rates when they set the rent. As a result, those who rent properties also have an interest in the level of rates, as well as in the services provided by councils using these rates.
Some types of property are exempt from rate levies - government land and rail land, for example. Other categories of property may possibly only be rated at 50% (land used for some types of sports purposes). And Maori land - particularly where ownership and therefore liability for rates are hard to establish - can also get special treatment. Exceptions are listed in Schedule 1 Part 1 of the Local Government (Rating) Act 2002.
Property values may be assessed in three different ways – on the basis of land, annual or capital value – using valuations prepared in accordance with the Rating Valuations Act 1998. The valuation process is overseen by the Valuer-General. Each local authority, after consulting with their community, can decide which basis to use.
Councils can use a mix of these different methodologies when assessing rates based on the value of holdings, for example land value for its general rate and capital value for a targeted rate.
Councils can also levy flat charges per rating unit (i.e. each lot of land, with some exceptions where multiple adjacent lots may be considered one rating unit if in common ownership, or where multiple dwelling units are on a single lot) - generally called a uniform annual general charge. Other methodologies also exist, such as a charge per toilet bowl or urinal, or a water charge per cu metre of water supplied.
The Local Government (Rating) Act 2002 is the governing legislation and provides a number of options for setting rates, such that local authorities can use combinations of general rates, targeted rates and/or uniform annual general charges.
Rates in the United Kingdom are a tax on property used to provide some of the funding of local government.
Domestic rates, split into regional and district rates, are currently collected in Northern Ireland. They were collected in England and Wales before 1990 and in Scotland before 1989. Outside Northern Ireland Council Tax is collected instead of domestic rates.
In the US, real estate taxes which are based on a percentage of the property's actual or nominal value are referred to as "property taxes". The term "rates" is not used in this context. Property taxes are the prime funding method for local government, and are normally the responsibility of the property owner, regardless of whether the property owner lives on the property.
- "Rating and Taxing Valuation". Landgate. Retrieved 24 November 2012.
- "About Rates". City of Sydney. Retrieved 6 April 2013.
- See http://ndhadeliver.natlib.govt.nz/ArcAggregator/arcView/frameView/IE12126512/http://www.dia.govt.nz/Agency-Independent-Inquiry-into-Local-Government-Rates-Index at page 8
- See http://www.legislation.govt.nz/act/public/2002/0006/latest/DLM133512.html
- See, for example, the discussion/explanation on page 9 of http://ndhadeliver.natlib.govt.nz/ArcAggregator/arcView/frameView/IE12126512/http://www.dia.govt.nz/Agency-Independent-Inquiry-into-Local-Government-Rates-Index
- Government, Local. "Council funding". www.localcouncils.govt.nz. Retrieved 2015-12-03.
- See http://www.legislation.govt.nz/act/public/2002/0006/latest/DLM131394.html? for the most recent reprint of the Act
- Dobson, Alban; Hull, Hubert (1931). The Land Drainage Act 1930. Oxford University Press.