Are Labour’s tax plans bottom lines?

Labour has announced changes to tax in the their alternate budge, promoting it as Labour’s alternative Budget for a strong economy and fair society.

The tax increases are modest compared to Labour’s proposals in 2011 and won’t affect most people very much (until CGT kicks in).

The biggest unanswered question is whether these changes would be bottom lines for a Labour led government, or whether Labour would be prepared to negotiate changes with Greens or Mana in a coalition agreement.

Both Greens and Mana support a Capital Gains Tax but they also want to increase other taxes except for lower income earners where they both propose large tax free thresholds.

Are Labour’s tax proposals open to coalition negotiation?

Stuff reports that Labour softens its tax stance.

Labour leader David Cunliffe said the party would impose a new top tax rate of 36 per cent on income above $150,000 a year, a move that would cost someone on $200,000 a year about $30 a week.

It is a major softening of former leader Phil Goff’s 2011 plan to lift it to 39c.

However, a parallel rise in the tax on trusts to 36c would see it bring in about the same amount of extra revenue.

Parker said aligning the trust rate with the top tax rate would avoid trusts being used as tax-avoidance vehicles.

There’s doubt about whether it will bring in the amounts claimed as the company tax rate would remain at 28% which will encourage restructuring for those who can to avoid the higher personal and trust rates.

The change would favour those in business over wage earners, but because it’s just a tweak to the top rate for high income earners most people probably won’t be bothered by it.

The 15 per cent tax on capital gains, excluding the family home, would bring in $790 million a year by 2020.

That seems much as previously announced (2011) with a number of exemptions and still defers to an Expert Panel.

An Expert Panel will be established to deal with issues that are technical in nature and involve areas where a high degree of specialised knowledge is required before a final decision can be reached.

They also propose a ‘crackdown on avoidance’ (which in general is nothing new):

A crackdown on tax avoidance, particularly by multinationals such as Facebook and Google, would bring in $200m a year by 2018-19.

Inland Revenue would “embed” auditors in companies with a history of tax avoidance.

It’s highly questionable whether tax on multinationals can be increased significantly without international co-operation.

Green Party tax policy:

To promote greater equality, the Greens will enhance the progressivity of the tax system by introducing an income tax-free threshold and a comprehensive capital gains tax (excluding the family home).

To create incentives to move the economy in a more sustainable direction, the Greens will introduce a suite of ecological taxes on waste, pollution, and scarce resources.

The introduction of a comprehensive capital gains tax, new ecological taxes, and through better enforcement of current tax law, the tax base will be broadened and hence made more resilient.

Mana tax policies:

Remove GST from all food (and everything else), but introduce a tax on fast foods and soft drinks.

Significantly increase the tax take by introducing a tax on financial speculation, called the “Hone Heke tax” (chopping down GST and income tax), which will be designed using examples of similar taxes introduced overseas. Initially it will be used to replace the annual $15 billion collected by GST.

Reduce the tax paid by low income earners by not taxing the first $27,000 earned and introduce a more progressive tax scale where the wealthy accept the responsibility to pay the largest share of the tax income.


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1 Comment

  1. Brown

     /  26th June 2014

    Not a peep about spending less. Absolute short sighted losers.


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