Tax Working Group report today

There is a lot of speculation on what the tax Working Group report will recommend today. Some of that may be well informed, but I think there’s a lot of guesswork.

Most attention is on what sort of Capital Gains Tax will be recommended, but there should be plenty of other things of interest.

I’ll just wait to see what comes out (and I probably won’t get a chance to comment on it until tomorrow).

But I’m sure that regulars here will feed this thread with news and discussion points through the day.

 

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51 Comments

  1. Reply
    • Ray

       /  21st February 2019

      Well. I have speed read the report, which of course isn’t necessary going to be what Labour will take to the people next year.
      To be honest I can’t see why they bothered as bottom line, as reported, there isn’t much tax to be gained and what there is only a measly 3 to 4.5% of the total take and that is going to be “given back” as tax concessions.
      There is a nifty potential “get out of jail card” in the form of Rollover which means you can avoid paying Capital Tax in certain situations.
      They think Trusts are all fine and dandy, which is no surprise considering the people who made up the Working Group.
      That is my first impression, we will see.

      Reply
  2. PDB

     /  21st February 2019

    Whatever they throw out today NZL First will still need to buy-in to the idea so expect plenty of changes before the govt releases their final version for consideration.

    Reply
    • PDB

       /  21st February 2019

      Some of the stuff included in the report is laughable and if all was implemented would be a total nightmare to administer. No point going on about it until Winston has his input and the final version is released by the govt.

      Reply
      • PDB

         /  21st February 2019

        The press scrum just cornered Winston – same old lines about reading the report and talking to the business community before he makes a decision. I’d bet he will make a stand against most of these proposals (especially those on farms) in order to try and win back his dwindling support base. Watch this space.

        Reply
  3. Blazer

     /  21st February 2019

    a brighter future’….for..hamsters..thanks Honky Tonks..

    https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12205655

    Reply
    • High Flying Duck

       /  21st February 2019

      My goodness first home buyers may need to compromise or get in a flatmate to help meet the repayments. That never happened in the past!

      Reply
  4. PDB

     /  21st February 2019

    Everybody sit down…this is totally out of the blue…ready??

    The tax working group is suggesting…brace yourselves….a CGT!

    Reply
    • PDB

       /  21st February 2019

      Herald: “Tax rate to be set at the income-earner’s top tax rate, likely to be 33 per cent for most.”

      “Houston, we have a problem!”

      Reply
      • High Flying Duck

         /  21st February 2019

        My bet is it will be watered down to an expansion on Bright-Line only. They will be pushing it uphill for anything else.
        People understand property gains being taxed. Kiwisaver, farms and small business sales with the inherent complexities not so much.
        “Tepid” response from the Government so far, emphasising the report said the existing tax framework worked well…
        Jacinda at pains to note this is not a Government report, but an independent working group.

        Reply
        • duperez

           /  21st February 2019

          Ms Ardern could be at pains to note this is not a Government report, but an independent working group report because it’s not a Government report, but an independent working group report.🙂

          Reply
          • Kitty Catkin

             /  21st February 2019

            (snorts) What does she take us for ?

            Reply
            • Gezza

               /  21st February 2019

              Tbh I expect a lot of it goes straight over her head. It’s Grant who looks after the books.

            • Kitty Catkin

               /  21st February 2019

              She’s the PM, it shouldn’t go over her head. She’s paid to know these things.

            • Gezza

               /  21st February 2019

              She’s paid to front for the government. Ministers are the ones supposed to know their onions. That’s why she ropes in Ministers to her Monday post-Cabinet Press Conferences. It’s cuts down on the number of ums and ahs.

            • Kitty Catkin

               /  21st February 2019

              So is the PM, surely. She’s not there to send intrusive ‘heartfelt letters’ to families of suicide victims. The PM should be aware of what’s going on; this means that they are not caught on the hop and made to look foolish.

        • PDB

           /  21st February 2019

          Can’t have been too ‘independent’ from govt considering they were instructed by the govt not to look at certain taxes before they began.

          Reply
          • High Flying Duck

             /  21st February 2019

            She forgot to mention the Government had set all parameters and exclusions leaving a very narrow remit that could only plausibly come up with one option.
            Otherwise it was completely arms-length and the recommendations came, I’m sure as a complete surprise.

            Reply
  5. Zedd

     /  21st February 2019

    WHY are so many kiwis opposed to a CGT ?

    Could it be that they are OK, seeing those ‘at the bottom’ pay their fair share.. BUT those in the top half (with 90% wealth/assets) spend all their time looking for ‘loopholes’ & screaming ‘NO MORE taxes’.. even if this will make the tax system FAIRER.. for all ?

    .. just look at most other OECD countries; they already HAVE a CGT ! :/

    Reply
    • btw: What ever became of the ‘Panama Papers’ reports; ‘NZ has become a Tax-haven for the filthy rich/Intl tax avoiders ??’

      ..swept into the trash, just before Mr Key left office… perhaps :/

      Reply
      • PDB

         /  21st February 2019

        Zedd: “What ever became of the ‘Panama Papers’ reports”

        A bit like all the sob stories of child poverty, people sleeping in cars, crowded housing etc even though under this govt housing issues have got far worse – buried by the MSM because we have a left-wing govt.

        Reply
        • Zedd

           /  21st February 2019

          ‘even though under this govt housing issues have got far worse’ sez PDB

          Did you hear Q-time yesterday ?
          It was ‘revealed’ that the previous Govt. were kicking folks off waiting lists & otherwise ‘manipulating’ the data, to fit their agenda !
          This Govt. have just shown the situation for what it REALLY is: a CRISIS

          may I suggest you ‘check your FACTS’ as you have said to me

          Reply
          • PDB

             /  21st February 2019

            You seem to ‘hear’ a lot of things Zedd, too many drugs can do that to you.

            Or in this case you ‘heard’ something on tv that supported your political leanings even though the ‘facts’ suggest the housing waiting list has skyrocketed since the col govt came in well beyond a few people being ‘kicked off’ the list previously (back in 2010). You probably still believe that Kiwibuild will fix all and tooth fairies are real.

            Reply
            • Zedd

               /  21st February 2019

              I read it.. I hear it… BUT I just cant believe it; your total misinfo.

              Do you even read your comments, before hitting the ‘send button’ ? :/ 😀

    • High Flying Duck

       /  21st February 2019

      People are against it because CGT raises very little revenue while adding significant and ongoing compliance costs on everyone.
      Their sole purpose is to punish asset owners and other than that they achieve nothing.

      Reply
      • Kitty Catkin

         /  21st February 2019

        Wasn’t Michael Cullen the one who sold the now KiwiRail…and bought it back for more than he sold it for ?

        Reply
        • Gezza

           /  21st February 2019

          1ewes at 6 mentioned lower income earners should get income tax cuts so it can’t be all bad. All the righties here wanted income tax cuts.

          Reply
          • Gezza

             /  21st February 2019

            Also 1ewes at 6 mentioned proposals for several more levies (#more taxes) which I guess will produce a few lower income earners.

            Reply
          • Kitty Catkin

             /  21st February 2019

            The people of Auckland seemed very cynical when 3’s reporter spoke to them; the congestion tax and another Ak tax were most unpopular.

            Reply
            • Kitty Catkin

               /  21st February 2019

              From what you say, one will cancel out the other…they must think that we don’t know that levies are taxes.

      • lurcher1948

         /  21st February 2019

        You seem a bit upset Kitty? we are here to help you

        Reply
  6. duperez

     /  21st February 2019

    “National Leader Simon Bridges said the recommended capital gains tax was an ‘attack on the Kiwi way of life.”

    I like it how Mr Bridges is so concerned about the Kiwi way of life. I bet when he’s on the front bench in Government nothing like a housing crisis will develop which is an attack on our Kiwi way of life.

    The end is nigh, the world as it we know it is about to end.

    Reply
  7. David

     /  21st February 2019

    Cullen couldnt get a CGT tax done when he had 9 years at it Ardern was batshit crazy to appoint him, she did make a captains call during the election to bring in a CGT then did a huge reversal shortly after.. much to the relief of the media. Now she has a problem.

    Reply
  8. David

     /  21st February 2019

    Cullen has failed in designing a fairer tax system, what he has delivered is a political document calling for the worlds most draconian CGT which Ardern can now water down. Basically he is playing the public or giving Ardern cover to play the public when she rejects the horror show and tries to sell something that looks less ugly.
    It will start with rental properties, then shares, then farms, then kiwisaver..something about boiling a frog springs to mind.

    Reply
    • Blazer

       /  21st February 2019

      property speculators and developers do not like paying their fair share.

      Small wonder they want to maintain the advantages they enjoy not available to ordinary…hard working ..NZ’ers.

      Reply
      • High Flying Duck

         /  21st February 2019

        Property speculators already pay tax, as do developers. CGT has no effect on them.

        Reply
        • Blazer

           /  21st February 2019

          Why are they so opposed/worried…then?🤔

          Reply
          • artcroft

             /  21st February 2019

            The one I know isn’t worried. He told me that property speculator (or words to that effect) were listed as his occupation on IRD forms, so he already paid CGT. It was mum and dad investors who would be hit by this new rule.

            Reply
          • High Flying Duck

             /  21st February 2019

            They aren’t. Property investors, the rural sector, lifestyle property owners (including those on cheaper land in the regions), share investors and business owners are though.
            The working group was very careful to show how the “rich” are the main target by leaving out small businesses and investors from their figures.

            Reply
      • David

         /  21st February 2019

        I pay it already and gst on any profit as do most speculators. The people Cullen is after are the folk who have a second property they rent out and hope to sell when they retire as part of their pension. They will have bought the property with income that has already been taxed, they will pay tax on any profit made over the years, they will pay down principal with after tax money and they wont have been able to claim any depreciation on the way through.
        Property investing is not an area I would recommend to anyone given the atitude of this government which you may well cheer but its the taxpayer who will have to house everyone now.

        Reply
        • Kitty Catkin

           /  21st February 2019

          David, if someone is making nothing, or even making a loss at first on a rental property and sells it some years later at a profit which may well be a paper profit….they will be grossly unfairly penalised !!! It seems not to take depreciation into account, or loss of income from the house being empty, or….

          Reply
  9. Alan Wilkinson

     /  21st February 2019

    The devil is in all the details. I bet the Government will fudge those for as long as possible.

    Reply
    • Corky

       /  21st February 2019

      Apparently there was a second report ( minority report?) that offered alternatives that all the Tax Working Group agreed on. Cullen has said nothing about that?

      Reply
  10. High Flying Duck

     /  21st February 2019

    Hidden away, and not provided to the media was the dissenting view by 3 members who opposed the final report. Their reasoning is compelling.

    “The dissenters are former Bell Gully tax partner Joanne Hodge, Business NZ chief executive Kirk Hope, and former Inland Revenue deputy commissioner Robin Oliver.

    It said that the compliance and administrative costs of a capital gains tax (CGT) and its impact on “efficiency” would outweigh any gains in terms of increased tax, “fairness perceptions and possible integrity benefits”.

    “Business must take risks and be encouraged to experiment with new ideas and methods. Entrepreneurship and experimentation should be encouraged and not penalised.

    “New Zealand’s tax system should not impede this,” they said.

    The comprehensive CGT the working group was proposing would harm innovation and be likely to “distort investment decisions”, they said.

    While he warned again in November that unanimity was never going to be realistic in its final report, he said objections among the minority who did not back its plan were “mainly about some aspects of how you do it, rather than whether you do it”.

    But the difference of opinion expressed in the minority report appeared wider than that.

    Hope, Hodge and Oliver agreed there might be a case for taxing more gains from investment properties, saying there was evidence rental home owners were relying on tax-free rises in house prices to make their investments stack up.

    Former IRD deputy commissioner Robin Oliver now works as a consultant.
    PHIL REID/STUFF
    Former IRD deputy commissioner Robin Oliver now works as a consultant.
    But they said that could best be achieved by tightening existing rules such as the “bright-line” test. They also agreed with officials that a capital gains tax would push up rents.

    The three also clearly opposed taxing capital gains on land, businesses and shares.

    Valuing business assets that would be subject to a CGT would be costly they warned.

    “It can be seen from the rules the group has designed that there will be complexity, high compliance costs and inconsistent rules and these are characteristics of many overseas capital gains systems,” they said.

    https://www.stuff.co.nz/business/110679417/capital-gains-tax–what-the-dissenters-said

    Dissenting report (including alternative proposition agreed by all members):

    https://taxworkinggroup.govt.nz/sites/default/files/2019-02/twg-bg-4050912-extending-the-taxation-of-capital-gains-minority-view.pdf

    Reply
    • High Flying Duck

       /  21st February 2019

      Apologies for not editing that very well.
      The ‘he’ who warned in November about unanimity was Michael Cullen.

      Reply
  11. High Flying Duck

     /  21st February 2019

    More on the minority view…from Grant Robertson:

    “Robertson and Nash gave little away, but the finance minister made one telling point. Buried in papers released as part of the report was a short report from three members of the working group who refused to support the bulk of the recommendations, but made one suggestion.

    BusinessNZ chief executive Kirk Hope, along with former Inland Revenue deputy commissioner Robin Oliver and former Bell Gully partner Joanne Hodge, said the cost and complexity of a CGT outweighed the benefit.

    But the report did acknowledge that there “might be a case” for taxing residential rental property.

    Asked about the minority view, Robertson said it was “probably worth looking at it the other way around”. Rather than being the minority, Robertson said, the argument for focusing on residential rentals was something the entire working group agreed on.

    Even supporters of CGT usually acknowledge that, while it raises revenue and usually taxes the wealthy rather than the poor, it also tends to discourage the type of investment we want to encourage, namely saving and entrepreneurialism.

    Building a case for taxing the owners of rental properties is much easier, even if a shortage of housing will not be solved by any new tax.”

    https://www.stuff.co.nz/business/110774058/sir-michael-cullen-recommends-the-type-of-tax-he-never-dared-try-himself

    Reply
    • Kitty Catkin

       /  21st February 2019

      Farmers are rightly as mad as wasps. I wonder what else they’ll be taxed on ?

      Reply
    • Alan Wilkinson

       /  21st February 2019

      IF it is implemented in a few years time we will be dealing with all the Mums and Dads who have lost their life’s savings making “more productive” investments.

      Those responsible will then be happily retired on generous Ministerial superannuation.

      Reply

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