This afternoon, Prime Minister Jacinda Ardern made a stunning announcement.
It was stunning for all of the wrong reasons, but perhaps first and foremost how it seems to have caved into the lobby group with the loudest megaphone, namely the Tax Payers Union, which is a right leaning group. It was a stunning announcement, because it was a complete u-turn to the image that the Government has been cultivating as one that wants to address poverty, the huge wealth imbalance in the country and the social disparities that it is causing. The Government will regret its move to abandon the C.G.T.
I saw this article from Craig Elliffe and Chye-Ching Huang after the failure to do anything about enacting such a tax in 2009-10. I cannot help but wonder what they would say now.
Not surprisingly the Green Party is disgusted. A C.G.T. was to be the corner stone of any plan to address poverty, which is high their agenda.
I am disgusted myself. New Zealand is the only country in the O.E.C.D. not to have a C.G.T. and possibly for as long as the next 18 years – with the exception of the Keith Holoyoake-led National Government of 1960-1972, and the war time Savage/Fraser-led Labour Government, no government has lasted more than 3 consecutive Parliamentary terms. And no National-led Government is going to introduce such a tax. Before then they would prefer to cut income tax or raise goods and services tax (G.S.T.).
How much did New Zealanders honestly know about a C.G.T.?
My guess is probably not a lot. I wonder how many of them have learnt to critically evaluate something, instead of just reading about the pros and cons. I never took accounting or economics at school and only did a first year economics paper at University that immediately screamed “give it up, Rob – you’re not an economist!”. Which I heeded – I haven’t touched an economics paper since.
So, what do I believe the consequences of this are?
In a purely political sense, provided they do not do anything dumb between now and the 2020 General Election, the Greens stand a good chance of enjoying a bit of a surge in support. It will come from those on the left flank of Labour who are not quite in the Green Party camp, but do not really feel as though they belong with Labour.
In a financial sense, Labour has squandered perhaps its best chance to enact something that addresses a long standing and well known problem – our treatment of capital gains is inconsistent, unfair and inefficient. The Government has indicated that most of the other 100+ recommendations made by the Tax Working Group in their report will be implemented or examined further. The question, though is whether the sum of these apparently lesser measure will be noticed. Nor is C.G.T. a new idea, having been examined by Governments in 1967, 1978, 1982, 1987, 1988, 1989, 2001 and 2009-10.
In a social sense, the potential support for those trying to get on the property ladder for the first time has been taken away by failing to address those who buy multiple properties to use as a money making scheme. It also sends an improper message to those who do indulge in this behaviour that the Government does not care much for making sure you pay due tax.