Labour’s ‘tax working group’

Labour have been saying for some time that in government they would set up a ‘tax working group of experts” to examine options for reforming our tax system.

Grant Robertson on 29 March 2017: Speech to launch the Budget Responsibility Rules

We recognise that the best taxation systems have three key characteristics – they are fair, simple, and collected. The current taxation system fails this test and needs reform. In government we propose to establish a tax working group of experts to examine how best to deliver tax changes that are positive for the economy and New Zealand taxpayers.

On 13 May 2013: Grant Robertson speech to Congress 2017

We need a fresh approach.   If we want a fair share of prosperity for all New Zealanders then we need a better, more balanced and fairer tax system. We are determined to get this right.

That is why we are establishing a tax working group in government.  It will not be the random and unfocused undertaking we saw from National.  It will have a mandate.   A mandate to develop a system that has the values of simplicity, fairness and collectability.  A system where multinationals pay their fair share, where income, assets and wealth are all treated fairly, and where the new and different world of work is recognised.

In advance of that review we have made some decisions that give a clear indication of our thinking.  We are cracking down on tax loopholes for property speculators, including through taxing anyone who flips an investment property within five years.  We are also saying that with the changing technology it will be possible to more accurately assess your tax obligations- and therefore we can get rid of secondary tax.

Labour have been criticised for not being up front on what they will do on tax if they get into government. Deferring to their proposed tax working group is seen as a way of avoiding saying what they intend to do, especially regarding Capital Gains Tax.

Under Jacinda Ardern’s leadership there have been more decisions made, so while they are using the tax working group as an excuse for not being clear about some plans there are a number of things that they have already specified

RNZ:  They were PREFU fighting, Dunne dusted & when minors attack

Labour’s standing by its decision to set up a tax working group should it become government and take advice from it on how to reform the tax system. Jacinda Ardern and Grant Robertson claim the current tax system isn’t fair, but won’t openly campaign on what they think a fair system looks like.

While it’s widely assumed Labour is inclined towards introducing a Capital Gains Tax (they campaigned on one in 2011 and 2014), Ardern insists she won’t make up her mind until she’s seen the tax group’s recommendations.

But Ardern has already made up her mind on a number of tax issues. And:

Yet as Guyon and Lisa point out in the podcast, she has confirmed that she and Robertson will appoint the members of the group, so can more or less ensure the result she wants.

Particularly if they have have already decided on many key aspects of tax.

Vernon Small in We were expecting lollies, but the surpluses refused to come to the party

Labour leader Jacinda Ardern and her finance spokesman Grant Robertson followed that up by scotching any plans for a personal tax increase, either now or as a result of the tax working group the party plans to set up after the election.

In fact the agenda for that working group – and the range of tax changes Labour may countenance – is shrinking faster than the forecast surplus.

Ardern on Wednesday also flipped any possible change to GST into the out tray.

So the list of things the working group will not countenance now includes a capital gains tax (CGT) on the family home, a tax on unrealised capital gains, any increase in income tax – including a new higher top rate – and GST.

Labour has already confirmed it would increase to five years the brightline test when capital gains tax is automatically levied on the sale of investment properties – although that could be part of the working group’s mix. It also has in train a royalty on irrigation and bottled water and an levy on tourists.

That seems to leave the working group with a wafer-thin agenda that includes residual issues around a CGT and perhaps the option of a land tax.

  • Labour won’t rule out a CGT (interpreted as wanting to impose one).
  • Any CGT would exclude family homes.
  • Won’t rule out CGT on businesses and farms.
  • No increase to the top PAYE tax rates.
  • Will scrap the currently planned PAYE tax cuts due 1 April 2018.
  • No increase to GST.
  • Will scrap secondary tax.
  • Will put a ‘royalty’ (tax) on bottled water and irrigation.
  • Will put a levy on tourists.

Are there any more to add to this list? This is already a significant number of significant limitations that Labour would supposedly impose on any tax working group of experts.

Ardern seems to have made up her mind about many taxes, but keeps using the ‘tax working group’ as an excuse for not campaigning on a Capital Gains Tax that, if they implement, would be badly hobbled by excluding  family homes, which involve over half property sales.

 

17 Comments

  1. Missy

     /  August 25, 2017

    The CGT is where Cunliffe ran into difficulty if I recall correctly.

    I seem to recall some suggesting that in the case of a parent dying and leaving a family home to the children it would be seen as a death tax by stealth. I remember an interview Cunliffe did on the radio where he suggested that they would probably allow a month for anyone who inherited a family home to sell it before incurring CGT, this is hardly enough time and it was pointed out that the will most likely wouldn’t be probated in that period.

    Putting an exception on any CGT might work, but they need to look at all possible scenarios, do they want to be seen as introducing a death tax, and if not do they have provisions for inherited property. For many NZers they will inherit their parents home, though many will not keep it, so if it is seen as a ‘second home’ then it will incur CGT, and what if you have multiple siblings inheriting, and one decides to live in it until it is sold, does it then become a family home even though for the other siblings it would be a second home.

    • Blazer

       /  August 25, 2017

      The issues you mention are addressed by many other countries with CGT…so it won’t be a..concern.

      • Missy

         /  August 26, 2017

        Which countries and how? Don’t just say other countries are addressing the problems without giving examples or some might think you are talking a load of rubbish.

        Also, if other countries are addressing these issues why weren’t they mentioned at the last election to show how these problems could be addressed?

  2. artcroft

     /  August 25, 2017

    A good summary of the current policy situation. Thanks PG

    • Deborah Russell is an outspoken critic of our system and its lack of WEALTH taxation. She will inevitably be front and centre of any left wing Working Group “Looking at” our tax system. Many of her ilk favour broad sweeping, (some a capture all) WEALTH TAXATION. This despite the fact that in 2016, the US-based Tax Foundation ranks New Zealand’s overall tax system as second in the developed world for its competitiveness – and top for its individual (i.e. personal) taxes.

      Russell is on record here:

      “New Zealand’s tax regime in itself may be internally perfect, it may be coherent, and it may exemplify a good tax system. It is not clear, however, that for all its perfection, it is serving the broader New Zealand economy and society well.

      We need to recast the tax system as a tool of the economy, and a tool that serves New Zealand more broadly. A coherent tax system with high integrity is very desirable, and it is something we should strive for. But more broadly than that, we should strive to meet New Zealand’s social goals. The tax system should be a tool for achieving those goals, rather than an end in itself, to be admired for its purity.”

      A capital tax, equity tax, or net worth tax, call it what you will, would levy you on your total value of personal assets. Typically liabilities (mortgages/loans) would be deducted. A wealth tax taxes accumulated assets(stock), as opposed to income tax, which taxes you on the flow of assets (a change in stock).

      I suggest that any attempt to implement these measures would be met with NZFirst and National both being vehemently against it. Were it ever to be implemented, the smart money would be on the flight of billions in assets to more tax friendly havens. In France, where (of course) they have a wealth tax, it’s reckoned to earn the government about $2.6 billion a year, but it has cost the country more than $125 billion in flight loss!

      NZ currently has a simple but productive tax system.

      Personal income tax of:

      33% from $70,000

      30%: $48,001 to $70,000

      17.5%: $14,001 to $48,000

      10.5%: $0 to $14,000

      Compmay Tax 28% (too high!)

      We also have Goods and Services Tax (GST) at a flat rate of 15% and a comprehensive tax credit scheme, “Working for Families” credits for low and middle income earners.

      In addition we have:

      No inheritance tax
      No general capital gains tax, although it can apply to some specific investments.
      No local or state taxes apart from property rates levied by local councils and authorities
      No payroll tax
      No social security tax
      No health care tax, apart from a very low levy for New Zealand’s ‘accident compensation injury insurance scheme

      I remain opposed to further taxation that punishes people for what they accumulate with after they’ve well-paid their dues.

      A tax on accumulated assets runs counter to personal freedom and individual liberty. The state has no business helping themselves to the personal belongings of any citizen, unless it has been illegally obtained.

  3. Trevors_elbow

     /  August 25, 2017

    Dishonest, tax and spend Labour…. nothing new to see. They are just trying harder to hide the real agenda which is wealth taxes if every form and a move to a larger, more controlling State.

    Socialist Cindy aka Taxcinda – your money is the states money, us the motto

    • Blazer

       /  August 25, 2017

      Tax is unavoidable for….most.National want to take the assets that belong to all NZ’ers and sell them to their acolytes.National have been captured by discredited Reaganomics,and globalisation.They couldn’t run..a bath.

      • Trevors_elbow

         /  August 25, 2017

        Socialism in your form is an unavoidable outcome of jealousy and poor me wailing…….

        Donate YOUR wealth and income to the needy and the chances. The rest of us pay enough already….

  4. PDB

     /  August 25, 2017

    *Company tax – not ruled out as far as I’ve seen?
    *Land tax – this has been mentioned in the past few years by Labour but haven’t seen them asked about it recently.
    *Emissions tax on farmers (looks likely under Labour and continues their crusade against farmers).

    Newshub: “Today Ms Ardern revealed she could charge farmers for emissions in the first term of a Labour Government by bringing agriculture into the Emissions Trading Scheme.”

    • Blazer

       /  August 25, 2017

      you have an obsession with 3 letter words that end in…X.Get some…help.

  5. PDB

     /  August 25, 2017

    PG: Regional fuel tax for Auckland.

    • Missy

       /  August 26, 2017

      That isn’t a tax PDB, Jacinda said it was crowd sourcing, so not sure it can be counted.

      (And just to spell it out for Blazer, that is sarcasm).

  6. Mefrostate

     /  August 25, 2017

    Land tax is absolutely crucial in my opinion, excellent article on it here: https://www.newsroom.co.nz/2017/08/24/44545/land-tax

    TOP’s taxation policy is the closest thing to it, and why they’re likely to receive my vote.

    • Corky

       /  August 25, 2017

      ”Land tax is absolutely crucial in my opinion.”

      Not if you want Labour in power.

      We aren’t all stupid. The tax working group would be well weighted towards introducing new taxes once Labour was in power. How disingenuous.

      However, this weakness will be ruthlessly targeted by National. That, and a bombshell policy announcement could make Jacinda have to work for a living.

      • Mefrostate

         /  August 25, 2017

        I’m saying NZ needs a land tax (offset by reduced income taxes), which is one of the only options seemingly left on the table for the working group.

        • PDB

           /  August 25, 2017

          “TOP’s taxation policy is the closest thing to it”

          A land tax is a simple tax unlike TOP’s extremely convoluted attempt of something similar.

  7. Roofer

     /  September 3, 2017

    We already have a land tax on unimproved land value. It is called Local body rates. IT is a very poor tax and a very blunt instrument.