Editorial: Good reasons to ditch plan for tax on carparks

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A tax on carparks provided by employers might be justified on the principles of fairness and consistency that ought to govern all taxation.

A carpark has a clear monetary value and it is puzzling that it was not part of the 2007 legislation which introduced fringe benefit tax to cover benefits that employees receive as part of their employment. Why, after all, should those with free staff carparks receive a substantial untaxed advantage denied those who commute to work by other means?

The pursuit of principle can, however, be undone if the costs of a policy outweigh the benefits or if it is tainted by its own inconsistency, as this proposal is.

The wide range of groups opposing the change offers a strong pointer to its flaws. Employers, manufacturers, property owners, a carpark conglomerate, advertising agencies and the union Unite have become sufficiently agitated to form a BT Action Group, which has presented its view to Parliament's finance and expenditure select committee.

Among other things, the group suggested the tax would net just $17 million for Inland Revenue, while generating additional compliance costs of about $30 million for businesses. The proposal also ran contrary to a promise made by the Prime Minister not to introduce regional taxes. This one would be restricted to the central business districts of Auckland and Wellington, on the basis that their parking spaces are especially valuable.

The points advanced by the action group have considerable validity. If tax purity is the reason for this exercise, the impost should be applied throughout the country. An employee carpark, like other non-cash benefits such as petrol vouchers, is an advantage whether it is applied in Akaroa or Auckland. It is a perk for the car-driving workers of Whangarei as much as those of Wellington, and one denied those who get to work by bicycle, foot or public transport, even if the last of those modes is also subsidised.

The revenue this tax would gather, $17 million, is a drop in the public bucket. It could be justified only if there were no significant adverse consequences. Accountants Lock & Partners estimate the costs of gathering the carpark tax would be almost double the take. Then there is the damage that may be done to the city centres of Auckland and Wellington.

The capital has already been affected by the layoffs in government departments. Like Auckland, it also faces a struggle to retain businesses. Many small companies, in particular, are constantly assessing whether they would find it cheaper, and no handicap to their business, to move to suburban locations.

The potential damage does not end there.

The Unite union has warned that if nightshift employees lose their work carparks it would force them to walk to cars parked some distance away at unsafe hours.

Another factor that should be considered is the reaction of businesses that, according to the action group, will pay an extra $1500 a year for all on-premises carparks and close to $2400 a year for all commercially supplied places.

Some will either get rid of carparks or, perhaps more probably, recoup their cost through lower salary increases.

Given these drawbacks, it is unsurprising that even the Labour Party has voiced concerns. So has Small Business Minister and Act leader John Banks, who describes the tax as "petty". He, however, could yet be forced to vote for the change as part of his party's agreement with National to support confidence and supply bills.

It should not come to that. Opposition to the tax is widespread and well-founded. The Government sounds no more than lukewarm on the idea. It should drop it.