The pros and cons of a congestion tax

Last week I was speaking at a business breakfast, when I asked the room of small business owners whether falling interest rates had had any positive impact on how they’re running their businesses. Not a single had went up.
The fact is that low interest rates have not created the high-confidence environment that the government and RBA had hoped would occur. What’s needed instead is large-scale reform, like a significant cut to the corporate tax rate or GST.
What’s not needed is a CBD congestion tax, which has been mooted once again by the Grattan Institute. Indeed, any state government even considering such a tax would likely soon cease to be a government.
The proposal is to implement a London-style congestion tax, which currently slugs UK drivers who enter the London CBD with a charge of up to 14 pounds per day.
From a business perspective, this could be disastrous. Retailers are already struggling to pay rent and landlords are struggling to find tenants. There have been reports recently that one of Melbourne’s major retailers, David Jones, won’t be renewing its CBD lease. Slugging city-users with with an added tax burden will only serve to make matters worse for businesses like this.
From a congestion perspective however, a CBD levy could actually have a positive impact by opening the doors to car-pooling services like Uber Pool. Currently the majority of cars that enter the CBD are occupied by only one person, whereas implementing a congestion tax could well encourage more people to rideshare. In this way four cars entering the city become just one, which could have a positive impact on traffic.
The idea of a congestion tax is always divisive, but it has its pros and cons. What do you think? Would it change the way you move around the city? Or would you just pay it?

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