A review of the Tax Working Group interim report


On 20 September 2018 the Tax Working Group established by the Government to review our tax code and establish how it can be made to work for all New Zealanders published its interim report.

One of the hot topics of this report is whether or not a Capital Gains Tax should be introduced on secondary property. A C.G.T. is politically problematic – National despise the tax and promise that if elected in 2020 they will repeal it, yet some National Members of Parliament have admitted to wanting the tax so that they have something solid to campaign on. And the introduction of such a measure is not as straight forward as some think, according to A.N.Z., who believe that the determination not to impose it on primary residential properties – the property that one lives in for most of a calendar year – undermines the idea of it being applied fairly.

It depends on how one intends to implement it. To me a G.S.T. should only be imposed on gains that are surplus to actual needs – one needs a home to live in; a small business is ones source of income, so neither of these should be taxed. But a holiday home (permanent structure used for relaxation/recreational purposes)should be. I largely agreed with the A.N.Z. submission

G.S.T. was one idea that got a clear cut response in the report, which recommended that no new cuts or increases be introduced – in other words G.S.T. will be kept at 15%.

I view G.S.T. on council rates as a tax on a tax, and therefore it should be abolished. Former United Future Leader and Minister of Revenue Peter Dunne used to campaign heavily on this, but when he was in office it was not advanced any further.

Interestingly the Working Group saw use for environmental tax initiatives. Various environmental issues will require significant leadership in the near future, which might include financial controls to guide the thinking and actions of businesses and individuals.

I assume these might take on the form of Pigouvian taxes which are only triggered if something like a National Environmental Standard is breached. With waste management becoming increasingly important incentivising businesses to take steps that reduce their ecological foot print might also come into play. These might be something like no tax on the gains made from implementing energy savings.

Income tax does not seem to have made it into the report summary.

I would have no problems if the top tax rate was increased and maybe attached to the upper 5% of income earners, adjusted annually by a consumer price index or other relevant measure.

It is important to note that not all money raised will come from taxation. Some money will be gained from other measures I support, such as requiring all visitors to New Zealand to have health insurance; the confiscation of drug cash, and other gains made from criminal activity; a uniform levy on all tourists of say $75 to cover maintaining amenities.

Feedback on the interim report was received by 1 November 2018 and a final report is expected to be released in February 2019.

 

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