Labour response to Tax Working Group final report

Jacinda Ardern not ‘ruling anything in or out’ after capital gains tax recommended by Working Group

Prime Minister Jacinda Ardern won’t commit to any tax reform despite the Tax Working Group report released today recommended a comprehensive capital gains tax.

It’s hardly comprehensive – it is more comprehensive than the current tax on property for developers and speculators, but the recommendations have some significant exclusions.

“We’re going to give the public a little bit of time, we’re going to take a little bit of time to form some consensus around the Government’s response,” she said.

“As you can see in the report there are some areas where everyone agrees, and there are some areas where the group did not, it’s our opportunity as government to go away, take a little bit of time, build some consensus and then come back to the public.”

“We are not ruling anything in or out at this stage.”

But Minister of Finance Grant Robertson and Minister of Revenue Stuart Nash have fronted for the Government  – here is their official response:


Government response to Tax Working Group report

The Coalition Government will take a measured response to the final report of the Tax Working Group (TWG), Finance Minister Grant Robertson and Revenue Minister Stuart Nash said today.

“We welcome the release of the report and thank Sir Michael Cullen and the TWG for their hard work,” the Ministers say.

“The independent report finds that overall our tax system is clear and simple but there is room for improvement. There is some unfairness that we need to address. We will work through ways to do this to make the system fairer and more balanced,” says Mr Robertson.

“The overall findings confirm that there is no need for a major overhaul of the system,” says Mr Nash. “Our response will preserve the key principles of our existing broad-based low-rate tax system. In the words of the Prime Minister, we will not throw the baby out with the bathwater.”

As the Working Group has said, the Government is not bound to accept all the recommendations it put forward. There are options to accept some, and/or to phase or sequence aspects of the packages proposed by the Group. Both Ministers said it was highly unlikely all recommendations will need to be implemented.

“We will seek technical advice on addressing the unfair and unbalanced elements identified by the TWG and make further announcements in April on any measures to enhance the fairness and integrity of the tax system,” Mr Nash said.

“Our aim is to ensure the system is fair for families and businesses and that it offers balance across the wider economy,” Mr Robertson says.

“We look forward to discussing the recommendations with our Coalition and Confidence and Supply partners as we work to find consensus on the best overall package. We will work to get the balance right,” he says.

“I am also happy to reaffirm the commitment made when the TWG was established that no changes arising from the report will be implemented this term. We also set out some clear bottom lines. In particular, the family home, increases to income tax and GST, and an inheritance tax are off limits and this remains the case,” says Mr Robertson.

Mr Nash also confirmed that tax reform initiatives separate to the work of the TWG will continue in the meantime. “We remain vigilant to ways the current tax system fails to address global economic and social forces which affect economic activity. These deficiencies are being acted on through our existing programme of reform.”

The Ministers noted that the Coalition Government has already moved to restore fairness and balance through a series of business-as-usual reforms:

  • Digital Economy. As announced earlier this week we are taking steps to ensure companies in the digital economy who do business across borders pay their fair share of tax. A discussion document on the options for a design of a digital services tax will be released in May, and we continue to work with other countries for a global solution;
  • Multinationals. The aggressive tax planning of some multinational companies who do business here has been tackled through the Base Erosion and Profit Shifting (BEPS) legislation which came into force in 2018;
  • Bright line test. The previous Government’s bright-line test that determines whether you pay tax on residential property investments sold within two years of purchase was extended by this Government to include those sold within five years;
  • Ring fenced losses. Losses on residential investment properties are to be ring-fenced, to remove the ability of property investors to pay less tax on other income;
  • Research and Development. We are encouraging innovation and investment by business with a package of R&D tax incentives that come into force from 1 April 2019;
  • GST on offshore suppliers. Domestic retailers will finally be on a level playing field with foreign companies who sell low value goods into NZ and don’t collect GST;
  • Double Tax Agreements. The ability to detect and prevent tax evasion involving taxpayers who operate in both NZ and offshore jurisdictions is enhanced by DTAs. We have updated the DTA with Hong Kong, a major financial centre in Asia. Updated DTAs with China, Korea and Fiji are also on the Government work programme;
  • Hidden economy and tax evasion. We increased the ability of IR to go after tax cheats, especially in the hidden economy, with more funding for compliance and enforcement;
  • IR Business Transformation. The BT programme of modernisation within IR makes it easier to eliminate punitive secondary tax for those who hold down more than one job, and to automate tax refunds each year;
  • Families Package. Measures in the Families Package targeted low and middle income families including changes to Working for Families;
  • Business Advisory Council and Small Business Council. The PM’s Business Advisory Council and the Small Business Council have been tasked to come up with a strategic approach to supporting business across central agencies.

Timeline:
Ministers expect to release the Government’s full response to the Report in April 2019 following detailed discussions with officials and consultation between Government parties.

As previously indicated, it is the Government’s intention to pass any legislation to implement any policy changes arising from the report before the end of the Parliamentary term. No policy measures would come into force until 1 April 2021 – giving New Zealanders the chance to vote on any decisions made by the Government.

 

 

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4 Comments

  1. Sam Sachdeva (Newsroom): Govt’s tax trepidation opens field for attacks

    Sir Michael Cullen’s Tax Working Group may have mounted a solid case for a capital gains tax, but the Government’s failure to control the narrative around tax means its fate – and Jacinda Ardern’s transformational aspirations – are in doubt

    Jacinda Ardern was forced to abandon a captain’s call before the last election to make tax changes in her first term (instead pushing out any changes until after the 2020 election), while tax bedevilled Phil Goff and David Cunliffe before her.

    Failing to engage on the value of the CGT now leaves the impression, whether accurate or not, that there is not a good case to be made.

    That history, combined with the coalition arithmetic, would suggest a difficult road ahead for the linchpin of Cullen’s report.

    Of course, the Government could move ahead without a capital gains tax, or with one more narrow in scale than the working group has recommended, such as residential property only.

    But a failure to implement any meaningful change following the expensive exercise of the working group would indeed raise questions about whether the Government had earned the right to re-election, as Shaw said – particularly given Ardern’s desire to lead a “transformational” administration.

    But aspirations for transformation may pale when set against the more base desire for (re-)electability.

    https://www.newsroom.co.nz/2019/02/21/455606/govts-tax-trepidation-opens-field-for-attacks

    Reply
  2. Kitty Catkin

     /  22nd February 2019

    The Conservatives are here again; be careful where you click.

    Reply
  3. Gezza

     /  23rd February 2019

    Leaked from Beehive Letters

    Reply
  1. Labour response to Tax Working Group final report — Your NZ – NZ Conservative Coalition

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