Beginnings of the Tax Working Group

Michael Cullen has been announced as chair of the Tax Working Group, and Terms of Reference have also been detailed.

There are no big surprises, yet, but there are contradictions. A major aim is simplification but things that won’t be considered like CGT on ‘family homes’, and things that will be considered, like GST exemptions, would complicate the tax system.

Towards a fairer tax system – Tax Working Group Terms of Reference announced

Finance Minister Grant Robertson and Revenue Minister Stuart Nash today announced the Terms of Reference for the Tax Working Group and that the Group will be chaired by Sir Michael Cullen.

“Our 100 Day Plan includes the establishment of a Tax Working Group. The Working Group will consider changes that would improve the structure, fairness and balance of the tax system,” says Grant Robertson.

“This Government is committed to a fair and progressive tax system. It is important that New Zealanders have confidence in their tax system and know that everyone is paying their fair share.”

“At the moment the tax system appears unfair – for example, it doesn’t treat income from speculation in housing as it does income from work.

Most people think that tax they have to pay is unfair, and that tax others can avoid paying is also unfair.

Making it ‘fair’ to everyone is pretty much impossible.

We want to consider how we can create a better balanced system and can encourage a shift to investment in the productive economy.

“Individual wage-earners, businesses, asset owners and speculators should pay their fair share of tax. Right now we don’t think that is happening. This working group is not about increasing income tax or the rate of GST, but rather introducing more fairness across all taxpayers.

“The Working Group will also consider how the tax system can contribute to positive environmental outcomes and the impact of likely changes to the economic environment, demographics, technology and employment practices over the next decade.

“As former Minister of Finance from 1999 to 2008, Sir Michael’s credentials are impeccable and he will be a huge asset to the Working Group.”

Cullen is widely respected, but he has a very Labour background.

“The other members of the Working Group will be announced before Christmas. They will include a diverse range of tax and finance experts and representatives of the business and wider community. The Working Group will be supported by a secretariat of officials from Treasury and Inland Revenue and have an independent advisor to analyse the various sources of advice received,” says Stuart Nash.

The make up of the group will be interesting.

“Final recommendations to Ministers are expected by February 2019. As promised before the election, any significant changes legislated for from the Group’s final report will not come into force until the 2021 tax year.

“It is important to ensure that all sectors of the New Zealand economy can feed into the Working Group’s processes and that all relevant perspectives are considered.”

“As we promised during the election campaign, certain areas will be outside the scope of the review, including increasing any income tax rate, the rate of GST, inheritance tax and changes that would apply to the family home or land beneath it,” Grant Robertson says.

Potentially omplicating factors that can’t be considered.

“We also want to thank our government partners, the New Zealand First and Green parties, for their input and support of the Terms of Reference for this important piece of work on the future of our tax system.

“This review is a core part of the government’s programme and I’m confident it will deliver recommendations that will enable us to put in place a tax system that is fair for all New Zealanders,” says Grant Robertson.

NZH:  Details of Government’s tax working group revealed

Robertson said what other reforms were considered would be up to the working group, but he did not rule out a number of possibilities raised by media during a press conference.

They included taking GST off fruit and vegetables or women’s sanitary products, requiring overseas retailers to collect GST on goods bought by New Zealanders, and changes to tax treatment of KiwiSaver.

Starting to introduce exemptions on GST could be the beginning of a slippery slope.

The other members of the eight-person tax working group are yet to be confirmed, but Robertson said there would likely be union representation, business representation, Maori business representatives as well as tax experts.

Trying to cover all bases, people wise.

The group’s objectives include having a “sustainable revenue base to fund government operating expenditure” of about 30 per cent of GDP, as well as:

• A tax system that is efficient, fair, simple and collected

• A system that promotes the long-term sustainability and productivity of the economy

• A system that treats all income and assets in a fair, balanced and efficient manner, having special regard to housing affordability

• A progressive tax and transfer system for individuals and families, and

• An overall tax system that operates in a simple and coherent manner.

The working group should report to the Government on:

• Whether the tax system operates fairly in relation to taxpayers, income, assets and wealth

• Whether the tax system promotes the right balance between supporting the productive economy and the speculative economy

• Whether there are changes to the tax system which would make it more fair, balanced and efficient

• Whether there are other changes which would support the integrity of the income tax system, having regard to the interaction of the systems for taxing companies, trusts, and individuals.

In examining the points above, the working group should consider in particular the following:

• The economic environment that will apply over the next 5-10 years, taking into account demographic change, and the impact of changes in technology and employment practices, and how these are driving different business models,

• Whether a system of taxing capital gains or land (not applying to the family home or the land under it), or other housing tax measures, would improve the tax system.

• Whether a progressive company tax (with a lower rate for small companies) would improve the tax system and the business environment, and

• What role the taxation system can play in delivering positive environmental and ecological outcomes, especially over the longer term.

The following are outside the scope of the working group’s review:

• Increasing any income tax rate or the rate of GST

• Inheritance tax

• Any other changes that would apply to the taxation of the family home or the land under it, and

• The adequacy of the personal tax system and its interaction with the transfer system (this will be considered as part of a separate review of Working for Families).
In addition, the focus of the working group should not be on more technical matters already under review as part of the Tax Policy Work Programme, including:

• International tax reform under the Base Erosion and Profit Shifting agenda, and

• Policy changes as part of Inland Revenue’s Business Transformation programme.

Sounds like a lot to consider.

Leave a comment

45 Comments

  1. Blazer

     /  November 23, 2017

    Wonderful to see it headed by NZ’s most astute Minister of Finance in the modern..era.

    Reply
    • Alan Wilkinson

       /  November 23, 2017

      “We won, you lost, eat that.” Followed by rampant house price escalation, record private debt, increased bureaucracy, welfare and taxation. Get ready for a rerun.

      Reply
      • Blazer

         /  November 23, 2017

        [Deleted. If you keep ignoring me I’ll start to ignore your comments unless I can be bothered releasing them from moderation. I’m not going to keep asking and warning. PG]

        Reply
        • And his pièce de résistance, the “Fair Dividend Rate” wealth tax on New Zealand funds invested in overseas shares. Target: the rich pricks.

          Reply
          • Blazer

             /  November 23, 2017

            if you want to target rich pricks..go for tax havens..thats where the real..’dodge’ is.

            Reply
          • Alan Wilkinson

             /  November 23, 2017

            Yep, that was a really stupid policy, -D. Along with his 39% nonsense. These idiots think any stupidity is fine so long as it is only a minority of voters affected.

            Reply
          • High Flying Duck

             /  November 24, 2017

            That bloody FDR is an ongoing blight on the tax system. And National were no better by leaving it in place.

            Reply
  2. alloytoo

     /  November 23, 2017

    A tax system can either be fair or efficient, it cannot be both.

    Reply
    • Blazer

       /  November 23, 2017

      of course it can…can we do it..yes we can…lets do..this!

      Reply
      • alloytoo

         /  November 23, 2017

        Utter Nonsense.

        If tax were fair then everyone would pay the same and everyone would receive similar benefits from the state.

        That is patently inefficient, many of those taxed would simply be unable to pay.

        It is far more efficient to tax those who have money (up until a point), and we as a society accept that.

        Don’t however make any claim that it’s fair. That’s the biggest lie a politician can tell.

        Reply
        • Blazer

           /  November 23, 2017

          How efficient’ ..do you think tax havens are then?Ordinary people,do not need them.

          Reply
          • Alan Wilkinson

             /  November 23, 2017

            For ordinary people, NZ is a tax haven. Half the population gets more back from the Government than they pay.

            Reply
            • PDB

               /  November 23, 2017

              Stuff (2016): “A table from Finance Minister Bill English’s office shows 663,000 households – or 40 per cent – receive more in tax credits and other benefits than they pay in tax. Thousands more are neutral contributors, or are close to it.”

            • High Flying Duck

               /  November 24, 2017

              To play devil’s advocate, I believe those figures cover direct taxes only and ignore GST which has a big effect on those who do not earn enough to save.

            • Alan Wilkinson

               /  November 24, 2017

              HFD, yes, but they also ignore the direct services in health, education and law enforcement provided.

            • Alan Wilkinson

               /  November 24, 2017

              Ok, AIG (NB not a bank):

              On September 16, 2008, the Federal Reserve provided an $85 billion, two-year loan to AIG to prevent its bankruptcy and further stress on the global economy. In return, the Fed took ownership of 79.9 percent of AIG’s equity.

              So shareholders lost 80% of their investment immediately.

              On November 8, 2008, the Fed’s $85 billion bailout of insurance giant AIG was revised. The Treasury Department purchased $40 billion in AIG preferred shares using TARP funds.

              And most of the rest a couple of months later. Meanwhile:

              In December 2012, the Treasury Department sold off the last of its remaining shares of AIG. In total, the government and taxpayers made a $23 billion profit from the AIG bailout.

              Your point was?

              https://www.thebalance.com/aig-bailout-cost-timeline-bonuses-causes-effects-3305693

          • Trevors_elbow

             /  November 23, 2017

            Off the point your replying too… again…

            Reply
          • alloytoo

             /  November 23, 2017

            Tax haven’s are a market response to oppressive tax regimes

            Reply
  3. Reply
    • Blazer

       /  November 24, 2017

      Who is the politician in charge?

      Reply
      • Michael Cullen is a retired politician. He has obviously got close links with Labour, so it doesn’t look particularly politically independent.

        Reply
        • Blazer

           /  November 24, 2017

          So he is retired and not a politician,like Key who is no longer a..politician.NZ is a pretty small pond,and as Labour and National are the traditional ruling parties, it is near impossible to get anyone without a political bent to..oversee ..anything.

          Reply
          • Conspiratoor

             /  November 24, 2017

            Unlike most folks here I have no political bent. Broke free from the ideological bubble years ago. I’m available for hire …put me in touch

            Reply
            • Blazer

               /  November 24, 2017

              very good con…the neutral’ PG just showing his all too common,mischievious…bias.

            • Conspiratoor

               /  November 24, 2017

              Interesting observation b. Hard to read but my view is he’s a political chameleon.

              Here’s an observation you might relate to…

              “Elites play an important role in processes of nationalism and nation-building, even though they can only do so in relation to a population at large.”

  4. PartisanZ

     /  November 24, 2017

    We could save ourselves a shitload of money here and simply adopt the recommendations of the last Tax Working Group, (or perhaps the one before that?), which genuinely did seem to be independent – under the auspices of Victoria University – most of whom recommended “a low-rate land tax as a means of funding other tax rate reductions” … [TOP policy] …

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10621228

    For once the word “Key” seems to have no political personality connotations …?
    [Links on this to several other articles]

    Reply

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