James Shaw on “do we deserve to be re-elected if we don’t?”

In his opening speech in Parliament this year Green co-leader James Shaw suggested that ‘we’ – the Green Party at least – may not deserve to be re-elected unless a more comprehensive Capital Gains Taax – “tax income from capital the same way that we tax income from work” – is introduced.

Green Party Economic Policy:

Capital Gains Tax

  • In order to treat all income the same, introduce a comprehensive capital gains tax on inflation adjusted capital gains at the time the capital gains are realised.
  • Exempt the family home from capital gains tax.

Now Jacinda Ardern has said that not only will the Government not be proceeding with plans to introduce a CGT, but that it will never happen while she leads the Government, Shaw is left looking silly and impotent, again.

And Shaw has made things worse by they do deserve to be re-elected because of other things they are doing on climate change, tackling homelessness, and cleaning up rivers – but progress on those issues is hardly worthy of self praise.

Shaw was interviewed on RNZ Morning Report: Capital gains tax plan dropped – James Shaw responds

The Green Party co-leader James Shaw has been dealt two hefty blows – not only the confirmation the capital gains tax has been ditched but that Jacinda Ardern has also taken it off the table as long as she is Prime Minister.

In February he suggested on this programme that the government didn’t deserved to be re-elected if it didn’t follow through with a capital gains tax. Now he’s changed his mind saying they do deserve to be re-elected for their work on climate change, tackling homelessness, and cleaning up rivers.

Suzie Ferguson: New Zealand First pulled this down, didn’t they.

James Shaw: Well as the prime Minister said they couldn’t form a consensus in Cabinet around that um recommendation on the Capital Gains Tax and so the pulled it.

Suzie Ferguson: And so you are outside Cabinet but clearly were supportive.

James Shaw: Well, you know we were consulted on the indecision, um and so you know we just got to a point where we said well, you know this is clearly not going to go any further so Government has to proceed.

Suzie Ferguson: But the Prime Minister ultimately must have buckled under pressure from Winston Peters, because Labour supported it, and the Greens supported it, so who’s left?

James Shaw: Well, I mean that’s a question for her and the Deputy Prime Minister. I wasn’t privy to those conversations. Um, you know our relationship primarily was through Grant, you know we were talking to him on a regular basis about where we were hoping it might go. Um but it is a coalition government and ultimately in coalition governments not everyone gets everything they want all the time.

Labour and NZ First have a coalition agreement, Greens are outside of this arrangement providing ‘confidence and supply’. It sounds hear like Shaw was not a part of the CGT discussions at all, he was merely being informed by Grant Robertson of the lack of progress. So sitting on the sidelines, impotent.

Suzie Ferguson: Indeed, but what is the quid pro quo?

James Shaw: Ah there isn’t a quid pro quo. I think the, um, you know the thing about this government actually is that you actually look at each issue, um, by issue, and and each thing stands or falls on it’s merits.

This issue fell seemingly without Greens having a say.

Suzie Ferguson: Mmm, but you’re having to swallow quite a dead rat on this one, so are you saying you’re not getting anything in return?

James Shaw: Well like, we’re getting to be in government, ah and along with that ah comes a substantial ah set of policy gains that we wouldn’t have if we weren’t in government.

Greens have achieved or are trying to achieve some policy gains, but these are dwarfed by the policy gains that NZ First have been able to achieve – which must be with Green approval. it looks like Greens give a lot, and get little. Word is that Shaw is struggling to get his Climate Change policy past NZ First. These are big impediments to core Green policies.

Suzie Ferguson: Mmm, but what is the point in being in government if you don’t get some of the major wins?

James Shaw: Well we are getting some of the major wins. So I’ll give you some examples. Um we’ve put fourteen and a half billion dollars into a rapid transit um buses, light rail, aah walking and cycling over the next ten years.

That’s proposed, not done. Greens will struggle to be in Parliament let alone Government for anywhere near that long. Recently the Minister of Transport conceded that light rail is likely top be scaled back. And the Auckland City rail loop cost has just jumped by a billion dollars, this must put pressure on other transport spending.

James Shaw: We’ve had the largest funding in conservation in the last sixteen years.

The funding of most things goes up over time, so it is only a gain if funding increases are significantly above inflation (I don’t know in this case if it is).

James Shaw: Um we’re about to introduce the zero carbon bill into Parliament. So you’ve got you know across the whole range of areas huge progress, more progress than we were able to make in  the last twenty years we were in opposition.

Suzie Ferguson: It’s been reported though this morning on Politik that New Zealand First will be folding their opposition to Labour’s climate change policies, and that is the price. Is that not the case?

James Shaw: I haven’t read Politik this morning, sorry.

Suzie Ferguson: But is that something you know about or not?

James Shaw: Look I’m not aware of that report so I can’t comment on it.

Suzie Ferguson: So there is no quid pro quo as far as you know? That’s what that report would seem to indicate.

James Shaw: Well like I said I haven’t seen it so I couldn’t, it’s hard for me to comment on something I haven’t seen.

Suzie Ferguson: Mmm but it’s not anything you’ve heard from the Prime Minister or indeed as these final negotiations have been taking place?

James Shaw: No it’s not.

This is what was said at Politik:

Jacinda Ardern claimed to her press conference yesterday that the decision to dump the tax was made without any sort of a deal with NZ First.

But nothing comes for nothing in politics.

And NZ First must surely expect there will be a price to pay. Most likely this will be in them folding their opposition to Labour’s climate change policies.

That may just be speculation.

Suzie Ferguson: Can the Government still claim to be transformational?

James Shaw: Yes, I think we can…

Suzie Ferguson: Why?

James Shaw: Well because like I said, on so many areas, and Grant Robertson was talking about that earlier this morning, the work that we’re doing on ending homelessness, on lifting people out of poverty, ending child poverty, on mental health, on climate change, on conservation, on cleaning up our water, those are the areas that really tipped the election in 2017, and those are the areas we are making progress on.

Most of those are being worked on rather than making notable changes. It may take another year (or longer) to judge how successful they have actually been.

James Shaw: Now, I’m not saying that I’m not disappointed about this decision, I am, and Green party policy hasn’t changed on that, but you know as with anything. You’ve got to take it all in the round, and when I said aah that I think that we should you know be questioning ourselves, we should always be questioning ourselves about how transformational our Government is.

And actually I think that we’re doing in fact have done more in the last eighteen months than the previous government did in nine years, and so I would choose it every time.

That’s a tired old comparison that Labour and Greens keep trotting out. It’s rhetoric with no factual basis.

Suzie Ferguson: To achieve targets around lifting children out of poverty and social justice, the only way to achieve those targets now is going to be with borrowing isn’t it.

James Shaw: (deep breath) Ah well that is a question for the Minister of Finance, um and…

Suzie Ferguson: But I’m asking you because it’s Green Party policy as well, so how would you be wanting to achieve those targets. You’re going to need extra money coming from somewhere. Are you going to borrow it?

James Shaw: Yes we are. Um but but I can’t comment on this year’s budget obviously because that’s about to be announced.

This year’s budget has nothing to do with the future plans that will be affected by no longer being able to get on previously relied on tax from a CGT.

Suzie Ferguson: But you’ve been talking about relaxation, or possible relaxation of the fiscal rules you signed up to. Is that how you get these over the table.

James Shaw: I believe so, yes.

Suzie Ferguson: So there is going to be extra borrowing.

James Shaw: I can’t tell you that.

Shaw is Associate Minister of Finance so must be privy to some sort of discussions on how policy promise might be funded without having a CGT.

Suzie Ferguson: But you believe so.

James Shaw: Well well look no ultimately I think that if you look at the long term fiscal strategy ah of ah Government um you know we have said that we think that needs to be reviewed, and we intend to do so.

Um at the moment actually the economy is doing very well, ah and we’ve got revenue coming in, so you know we are able to invest in things we wouldn’t have otherwise been able to invest in otherwise.

Suzie Ferguson: You famously said that the government didn’t deserve to be re-elected if you didn’t follow through with a capital gains tax…

James Shaw: …that’s not strictly true…

Suzie Ferguson: …hang on a minute. Um why did you say that?

James Shaw: What I said was we should be asking ourselves the question of whether or not we deserved to be, and we should be asking ourselves that question al the time, on the basis that at the last election ah you know a majority of New Zealanders voted for change, they voted for bold change.

I don’t see how he can claim that. People vote the way they do for a wide variety of reasons. Some may even have voted for NZ First hoping they would go into Government with National. The party wanting the most radical change, the Greens, got substantially fewer votes than they got in the previous election.

James Shaw: Now you know tax reform was…

Suzie Ferguson: And now you say they’re not getting it as of yesterday.

James Shaw: …well no tax reform is a part of that picture but it’s only a part of that picture. And like I said if you look at everything that we’re doing, whether it’s in the domain of lifting people out of poverty or ending homelessness or cleaning up the environment, ah you know action on climate change.

We have taken some really big calls and we will be taking some really big calls over the course of the coming eighteen months before the next election.

Depending on what Winston allows them to call.

James Shaw: And so in the round yes, I do believe that we deserve to be re-elected, but we should never stop asking ourselves that question.

On the basis of losing the CGT battle, and the big calls to be made over the next 18 months, I think it is premature to claim the Greens deserve to be re-elected.

From Shaw’s big speech to start the year in Parliament in February:

Now, the Green Party has long been calling for that fundamental imbalance to be addressed, and every single expert working group in living memory has agreed with us, but no Government—no Government—has been bold enough to actually do it. But if we are to be the Government of change that New Zealanders wanted and elected, we must be bold.

The crises that we face on multiple fronts—the wealth gap, climate change, the housing crisis—we cannot solve without fundamental reform. These crises have been allowed to metastasise because generations of politicians have timidly tinkered rather than actually cut to the core of the problem.

And the consequences of that timidity—the consequences of that timidity—are being felt by Karen and by hundreds of thousands of New Zealanders just like her, trapped in “Generation Rent”. So when the commentators pontificate about whether this Government can politically afford to do what no other Government before it has done, I ask “Can we afford not to?”

Can we afford not to?

We were elected on the promise of change. If we want to reduce the wealth gap, if we want to fix the housing crisis and to build a productive high-wage economy, we need to tax income from capital the same way that we tax income from work.

The very last question that we should be asking ourselves is: can we be re-elected if we do this? The only question we really ought to be asking ourselves is: do we deserve to be re-elected if we don’t?

That’s a question that voters will answer in 18 months.

See James Shaw slams tax timidity, calls on Labour, NZ First to be bold with CGT

 

 

NZ First on the Capital Gains Tax capitulation

NZ First have prevented the Government from proceeding with any changes to capital gains taxes, despite a CGT being a core policy of Labour, backed by Jacinda Ardern, and despite it being something Greens have wanted for a long time (and James Shaw stated earlier this year that the Government didn’t deserve to be elected if they didn’t introduce a CGT).

New Zealand First Leader media release:

Tax Working Group Report

New Zealand First Leader Winston Peters has welcomed Cabinet’s decision not to implement an extension of capital gains taxation, following the Prime Minister’s statement in response to the Tax Working Group Report.

“This decision provides certainty to taxpayers and businesses. We in New Zealand First wanted first and foremost for New Zealanders to have time to discuss and debate the contents of the report,” stated Mr Peters.

“During that time we have listened very carefully to the public.

“There is already an effective capital gains tax through the Bright Line test brought in by the last National Government and New Zealand First’s view is that there is neither a compelling rationale nor mandate to institute a comprehensive capital gains tax regime,” said Mr Peters.

“We also welcome the announcement that the coalition government will be urgently exploring options with the Inland Revenue Commissioner, in concert with central and local government, for taxing vacant land held by land bankers and reviewing the current rules for taxing land speculators. Tightening these rules was a priority for New Zealand First.

“Current tax policy, rigorously enforced by an Inland Revenue Department properly resourced will by itself 1) improve the administration of existing tax policy, and 2) target those multi-nationals not paying their fair share of tax,” Mr Peters said.

There was nothing about a CGT in the Labour-NZ First coalition agreement. This was the only reference to tax:

  • Increase penalties for corporate fraud and tax evasion.

Peters via Twitter yesterday:

Despite the claimed hearing and listening, Peters has done what he has said he would do for a long time.

During the 2017 election campaign (Politik): Peters ready to throw spanner in Labour’s capital gains tax plans

Peters says he is not ready to support any moves labour might want to make to extend capital gains taxes.

Finance spokesperson Grant Robertson has arrived at a neat compromise. Labour would set up a Taxation review once it got into Government.

Phil Twyford (on The Nation): “In the first three years we’re going to do a taax working group that will redesign the entire tax system”.

Robertson (on NZ Q&A): “We will have a working group that will have a look at getting a better balance into our tax system between how we tax assets and how we tax income”.

Peters though is adamant.

“I am not for an extension of the capital gains tax” he told POLITIK.

Peters is critical of the review and Labour’s plan to provide details on it’s water levy policy after the election.

“How many times can you get away with this sort of nonsense” he said.

So why did Labour insist on going ahead with the Tax Working Group that had an aim of recommending a capital gains tax?

It seems to have been a wasted exercise, unless the intention was to provide Peters with an opportunity to say NO CAPITAL GAINS TAX.

Poll – most people against Capital Gains Tax

A Business New Zealand/Reid Research poll has found that most people are opposed to a Capital Gains Tax. Labour has found in the past that a CGT was unpopular with the electorate.

CGT should be a priority for the Government?

  • No – 65%
  • Yes – 22.8%

Has CGT harmed the Government?

  • No – 33.1%
  • Yes – 47.8%
  • Don’t know – 19.2%

I don’t know if the CGT proposals have damaged the Government. I don’t know how anyone else can say with any certainty that it has or hasn’t.

Do you think there should be a capital gains tax on things like businesses and farms?

  • No – 54.3%
  • Yes – 31.6%
  • Don’t know – 14%

Do you think there should be a CGT on earnings on KiwiSaver?

  • No – 90%
  • Yes – 4.4%
  • Don’t know – 5.6%

The Reid-Research poll was conducted between March 15-23. It had a sample size of 1000 voters, with a margin of error of 3.1 percent. 

Source – Newshub

No reported and presumably not asked – do you understand what a Capital Gains Tax is?

Also not asked – will NZ First allow Labour to implement a CGT?

Also today, a pro-CGT protest at Parliament was very poorly supported – Few people at campaign launch in favour of capital gains tax

About 10 people were present for the launch of the campaign by Tax Justice Aotearoa NZ at Parliament this morning.

 

 

Ardern blames media for lumps in CGT porridge

Jacinda Ardern fronted up on the first Newshub Nation of the year. She was asked about the blast of criticism following the release of the Tax Working Group report. She appears to blame NZ Herald columnists for giving the report negative coverage – but she and her Government seemed woefully unprepared for discussion following it’s release.

Yeah, and the Greens are all on board with the capital gains tax. It’s Winston Peters who could prove the hurdle. And you yourself, pre being elected and pre being in this coalition situation have talked about maintaining a right as a leader to make sure the tax working group reports back and that you’re able to— you can enact whatever it say. And, you know, that’s your right, and so that right might be lessened.

I don’t know how that’s been characterised. Of course, we all campaigned as individual party leaders. And everyone will have seen some of the statements I made as Labour leader.

Yeah.

I’m now the Prime Minister in a coalition government, and I have three parties I need to build consensus with. And, actually, that’s what I just have to do day-to-day. And the tax working group report — it’s no different. But having said that, obviously now we’re in a process of just allowing the public to see and the public to have that debate, and I think we should. You know, one of the things that I do think is unfortunate, though, is that, you know, there is a large group of New Zealanders, particularly young New Zealanders now who actually, if their aspiration has been homeownership has just become harder and harder. There’s a group of New Zealanders who don’t have columns in the Herald, who might not be having a chance to have their say on this. We need this debate in New Zealand, because we’re one of only a handful of countries in the OECD that doesn’t have this form of tax.

Sure.

And so let’s debate it.

And you’re leading it. You’re part of that debate, obviously, and your language is being scrutinised. Earlier this week, you seemed to be softening your language about, you know, having concerns about farmers and small businesses. So does that mean that you’re going towards where Winston Peters might sit?

It was an acknowledgement that in all of the debates we’ve had on capital gains. It often has been quite heavily focused in the commentary around, for instance, investment properties, and less so in the space where the tax working group went, which is broad-based and covering additional sources of income, and so small businesses in particular have been brought into that debate. And message was I hear that there’s a lot of arguments for and against, and I hear that. Because that was a new part of the debate, I didn’t want anyone to think that we weren’t considering all of the issues around that area.

So you say that, you know, you’re not going to reveal your position until you’ve reached consensus with your partners.

Yes.

That’s two months away. Are you concerned that this is creating uncertainty?

No. It’s a debate.

It’s a debate that Ardern and her Government started very poorly on, leaving a huge vacuum for concerns to be raised in. The lack of any clear plan has enabled uncertainty to grow, and her waffly response here is unlikely to help at all.

Capital Gains Tax has been proposed in Labour policy for many years. It helped defeat Labour in 2014. as a result Andrew Little dumped the policy. Ardern raised it again in the 2017 campaign but rapidly backtracked when it was slammed as electorally toxic.

Once in Government Ardern handed the decision making over to ex-Finance Minister Michael Cullen and the working group, but a year later, after CGT was proposed in the report, Ardern seems to still be floundering on how to handle it.

She may well have a problem with Winston Peters. whose support she needs. But she also has a problem with her own handling of tax reform – the right say she’s proposing too much, the left say she isn’t considering enough reform.

Rather than some semblance of getting things just right Ardern looks like she is poking at lumpy CGT porridge with a long toothpick.

Ardern defends CGT and tax plan, Soper sulks

Stuff:  Jacinda Ardern notes ‘vast majority’ would be better off

Prime Minister Jacinda Ardern delivered a defence of the proposed capital gains tax plan today, noting the vast majority of Kiwis would be better off.

She also said the concerns of farmers and small business-owners were “top of mind”.

The tax working group, chaired by former Labour finance minister Sir Michael Cullen, recommended the Government introduce a new broad-based CGT on rental properties, land, businesses, and shares, paid at the income tax rate. The family home would be excluded.

This would raise roughly $8.3 billion over the next five years, but that could be ploughed back into the hands of taxpayers through a suggested income tax cut, and another tax break for KiwiSaver accounts. This would deliver a tax cut between $420 and $595 a year for almost all taxpayers.

Ardern said that because of this tax switch most Kiwis would come out financially ahead.

“The vast majority of New Zealanders would be better off. I think New Zealanders know this too: they are not ​looking at the proposals individually but as a potential package where they could receive income tax cuts or a boost to their KiwiSavers.”

“In Australia only 4.7 per cent of taxpayers paid capital gains tax in 2015. Over 95 per cent of Australians pay no capital gains tax in any given year,” Ardern said.

Ardern also sought to downplay the impact of the tax in general, saying it would only affect four per cent of the tax base when fully implemented in 10 years.

“It is far from an attack on the Kiwi way of life,” Ardern said.

She said the purpose of her statement was to make sure that the debate was based on facts, and declined again to endorse the actual plan.

Barry Soper’s take: Prime Minister Jacinda Ardern in state of shock at reaction to Capital Gains Tax plan

If you thought the Government (well more correctly the Labour Party) is hell-bent on committing political suicide you’d be wrong.

The Beehive is reeling and sitting in the top office of the ever diminishing building Jacinda Ardern’s in a state of shock at the reaction to the Taxation Working Group’s report.

Tax had been talked about so much they decided to hand it over to the Tax Working Group, led by Sir Michael Cullen, who knew better than to ever suggest a capital gains tax, correctly appreciating the political danger of it.

Ardern must have been having a nap during the two campaigns Labour fought and lost because of it.

Now she’s wide awake to the political damage it’s doing to Labour, spending the first six minutes of her post-Cabinet press conference yesterday giving us a lesson on how to report it accurately.

Ardern was at pains to ensure the students understood her lecture. The debate should be about a fairer and more balanced taxation system and is most certainly not an attack on the Kiwi way of life as some have claimed.

In her setpiece lecture she told us small business and farming are crucial to the economy and she wanted to be clear, she said referring to her notes on the lectern, that the effects on them will be at the top of her mind when the options are assessed.

Surely that, coming from the captain, leaves room for a sigh of relief.

As the lesson was drawing to a close she told us the bleedingly obvious: that the tax would be paid only when a capital gain is realised, or when an asset gets sold, so there won’t be an ongoing impost.

Until you’ve sold your next asset that is – and the capital gain on any asset won’t be assessed until after the law takes effect, most likely in April 2021. So the nest egg you’ve realised up until then won’t attract the captain’s call.

By and large, Ardern declared, the tax system was working well.

Yeah well if it ain’t broke – don’t fix it.

I wonder if Soper has a property nest egg or two he is worried about being taxed on.

It has been claimed that baby boomers will be hit the hardest by a CGT as many have invested in property aas a retirement fund. I have doubts about this.

If Labour get NZ First to agree to support CGT legislation, and if Labour get back into Government later next year, the CGT will only come into force in 2021. If Labour follows TWG advice and don’t make the tax retrospective, only capital gains from 1 April 2021 will be taxed.

So most of the capital gains scored by baby boomer investers, up until then, should be safe from tax. If they sell up soon they will be sweet.

It will be longer term property investors of the future who would pay the bulk of Cullen’s CGT, while baby boomers bask in their gains untaxed.

James Shaw slams tax timidity, calls on Labour, NZ First to be bold with CGT

In his opening speech for the year in parliament yesterday Green co-leader James Shaw slammed timid tinkering with tax, and, confronting pontification about whether the current Government can “politically afford to do what no other Government before it has done” and introduce a Capital Gains Tax asks “Can we afford not to?”

That must be aimed at Labour and NZ First, who have to agree with Greens on any tax changes following the Tax Working Group process.

First Shaw illustrated the tax disparity issue wit no tax on the capital gains of property.

Karen is a renter. She’s got a career, and she earns roughly the median wage. Over the last 10 years, she’s earned about $450,000 and she’s paid, roughly, $70,000 in tax. She budgets well, she can manage the rent, and she can manage the other expenses, but she can’t quite have enough left over to save.

And then there’s Paul. Paul also earns the median wage. He’s a bit older than Karen, and Paul got lucky and managed to buy some rental property before house prices really started rocketing—about the time that Karen came into the workforce, about the time that John Key became Prime Minister. On the day that Paul sells that rental property, he makes as much as Karen has in the last 10 years, and he pays zero tax on that income

Now, what does Paul do? He uses that as a deposit to buy two more houses. That is the rational thing to do. And what does Karen do? Well, Karen keeps renting because there is no way on God’s green earth that she’s going to be able to scrape together a deposit on $45,000 a year.

And that, in a nutshell, is why we have a large and growing wealth gap in this country, and it is undermining our ability to pay for the public services that we all rely on, including Karen—including Paul.

There is something missing from this illustration.The implication here is that ‘Paul’ paid no tax, but ‘Paul’ must be earning something to live on for the ten years before scoring a capital gain, and after reinvesting capital gains on more property, so could have been paying some tax.

Now, the Green Party has long been calling for that fundamental imbalance to be addressed, and every single expert working group in living memory has agreed with us, but no Government—no Government—has been bold enough to actually do it. But if we are to be the Government of change that New Zealanders wanted and elected, we must be bold.

The crises that we face on multiple fronts—the wealth gap, climate change, the housing crisis—we cannot solve without fundamental reform. These crises have been allowed to metastasise because generations of politicians have timidly tinkered rather than actually cut to the core of the problem.

And the consequences of that timidity—the consequences of that timidity—are being felt by Karen and by hundreds of thousands of New Zealanders just like her, trapped in “Generation Rent”. So when the commentators pontificate about whether this Government can politically afford to do what no other Government before it has done, I ask “Can we afford not to?”

Can we afford not to?

We were elected on the promise of change. If we want to reduce the wealth gap, if we want to fix the housing crisis and to build a productive high-wage economy, we need to tax income from capital the same way that we tax income from work.

The very last question that we should be asking ourselves is: can we be re-elected if we do this? The only question we really ought to be asking ourselves is: do we deserve to be re-elected if we don’t?

Shaw is effectively throwing down the tax gauntlet to Labour and NZ First, suggesting they don’t deserve to be re-elected unless they introduce a CGT.

I have to say, boldness is needed everywhere, everywhere.

That is a challenge to the other parties in Government with the Greens. The re-election comment is particularly pertinent for NZ First, who were well under the threshold in the latest poll.

Tax reform and capital gains tax still unresolved

According to media claims the Cabinet has received copies of the Tax Working Group recommendations, but it could take some time to find out what they are going to decide to run with. – or what the are allowed to run with by Winston Peters.

Group chairman Michael Cullen has suggested that tax changes could be decided in Parliament this term ready to come into effect in April 2021 providing Labour gets a mandate in next year’s election. But Grant Robertson has warned that it could take some time to work through the recommendations with Labour’s partner parties in Government.

Audrey Young (in Major challenges for ‘exasperated’ Ardern):

Robertson played Robin to her Batman at the post-Cabinet presser, initially fronting on the Government response to the insurance industry inquiry.

The subject quickly changed to the final report of the Tax Working Group and its promised capital gains tax which is due to be handed to the Government this week.

Robertson patiently continued his mission to change the language over the tax by calling it a “capital income tax” rather than a “capital gains tax” — an attempt to equate it to all other income.

Ardern became impatient when questions turned to the undisputed veto that NZ First will have on any capital gains tax — the Greens have been unequivocal supporters and NZ First longstanding opponents.

Apparently a capital gains tax is just like every other issue the Government debates, and requires the agreement of all three parties.

Not just apparently. Tax reform is far from a done deal. It is a Labour only promise, but with no public agreement with either NZ First or the Greens.

Stuff:  Decision on capital gains tax will take a wee while, Grant Robertson warns

There will be no quick decision from the Government on whether to implement a capital gains tax, Finance Minister Grant Robertson has signalled – noting Labour would have to work that through with its coalition partners.

The Tax Working Group (TWG) chaired by Sir Michael Cullen is understood to have completed its report for the Government, with a “clear majority” favouring subjecting capital gains from the sale of property, shares and businesses to income tax.

But Robertson told RNZ the Government would need to take its time to read the TWG’s report “work through the details of it and work out what package we can agree to as a coalition government”.

Remarkably the Labour-NZ First coalition agreement did not mention the Tax Working Group, nor CGT, and neither did Labour-Green Confidence & Supply Agreement, so the recommendations of the TWG and what Labour would like to do will all need to be negotiated with Winston Peters and NZ First, as well as with the Greens. This alone is likely to take time.

Inland Revenue said on Tuesday morning that the report had not yet been delivered to the Government, and no date has been set for it to be made public, but sources said the report was being read in the Beehive.

Robertson said he expected to get the report by the end of the week but he and Prime Minister Jacinda Ardern did not rule out a coalition partner vetoing any legislation.

“There is a wee ways to go before the final decisions about this report will be made,” Robertson said.

“As we do with all these reports, we will take a look at it and put it out with a few interim comments from us,” he said.

So it could be some time even before the report is made public. Labour want to work out how to try to sell it before they advertise it.

Cullen said in December that he believed Parliament would have time to pass legislation paving the way for any proposed tax changes before the election, so those changes could take effect from April 2021.

Theoretically Parliament may have time, but Labour won’t want to take any tax changes to Parliament without agreement from NZ First, and the Greens.

Politik: And now the hard part; getting Winston to agree to a capital gains tax

Prime Minister Jacinda Ardern confirmed yesterday that iot was still the government’s intention to bring forward legislation for any tax changes before the end of its current twerm though those changes would not come into effect until after the enxt election.

But whether it will propose a capital gains tax will now depend on whether it can persuade NZ First to agree.

Ardern and Finance Minister Grant Robertson were coy yesterday on whether they thought they could win that derbate.

Meanwhile NZ First Leader, Winston Peters, is not saying much beyond repeating his 2017 assertion that we already had a capital gains tax.

“What i tried to point out then was that we had a cpaital ghaimn tax and that we had had one for a long time,” he told POLITIK last night.

“Now the question is are you talking about broadening it.

“The position of New Zealand First is that we will wait for the report, we will evaluate it and then we will give our view.”

Tax reform has already limited by Labour in their terms of reference for the TWG. They will presumably also want any changes to fit within their wellbeing agenda.

It will only happen if it also fits with the electoral wellbeing of Winston Peters and NZ First

Q+A – Michael Cullen on the Capital Gains Tax and TWG

Chairman of the Tax Working group, Michael Cullen, was interviewed on Q+A last night on Capital Gains Tax and water.

He was also interviewed on the Nation on Saturday.

Scoop: On Newshub Nation: Simon Shepherd interviews Tax Working Group Chair Michael Cullen

  • Sir Michael Cullen says there’s currently under-taxation at the top end of the income and wealth scale, and under his working group’s recommendations “people who have substantial capital assets in one form or another” would end up paying more.
  • Sir Michael disputes the effect Labour’s capital gains tax policy had on the party’s 2011 and 2014 election losses: “There was no real sign, actually, that that had any great impact in shifting votes around.”
  • He says some charities getting tax breaks might not be using their income for charitable purposes: “Some of those charities – at least on first examination – appear to not be passing on much of their income out to the supposed intended beneficiaries.”
  • Sir Michael says proposed environmental taxes on things like waste dumping would be aimed at changing behaviour, not increasing revenue: “Hopefully behaviour changes, so that the amount of money that you collect at the end of the day may not be much more… there’s just a lot less waste going to landfill.”
  • He says tax cuts for lower income earners would be an effective way to offset increased user-pays charges: “Actually reducing the bottom tax rate, or having even a tax-free area at the bottom, is more effective in compensation.”

Full transcript (Scoop)

The Q+A panel on Cullens interview and tax.

 

For and against a CGT and Michael Cullen interview on the Nation

Michael Cullen, ex finance minister and now chairman of the Tax Working Group, will be interviewed on Newshub Nation this morning at 9:30m am (repeated Sunday morning 10 am).

Following the release of the Tax Working Group’s interim report, Simon Shepherd sits down with its chairman Sir Michael Cullen to look at how tax changes could increase income equality and help the environment.

Future of Tax: Interim Report (PDF)

The contentious hobbled CGT should be a talking point.

Stuff:  Ministers issue fresh request to Tax Working Group to ‘consider inequality’

The Government has given the Tax Working Group a prod along after it stopped short of reaching a recommendation on the merits of a broad-based capital gains tax in its interim report.

It set out two models for what a broad-based tax on capital gains could look like in its interim report published on Thursday.

Chairman Sir Michael Cullen said “the key issue” it had looked at was tax on capital income, but said it was not a “no brainer”.

Finance Minister Grant Robertson and Revenue Minister Stuart Nash immediately released a letter they had sent to the TWG.

The letter asked the TWG to “consider a package or packages of measures which reduces inequality, so that New Zealand better reflects the OECD average whilst increasing both fairness across the tax system and housing affordability”.

The ministers also asked the TWG to examine which of two models for taxing capital gains that the TWG considered “would be best to ensure the tax system was … fair and balanced”.

A source close to the TWG said the letter sent “a strong signal” about the Government’s desire for a broader capital gains tax.

Max Rushbrooke for a CGT and pro-equality tax changes: Tax report highlights NZ’s inequality issues

Though it may not have settled on an answer yet, yesterday’s interim report by the Tax Working Group was crystal clear about the problem: we have a tax system that does very little to enhance fairness and reduce inequality.

The need to restore fairness runs like a silver thread throughout the working group’s analysis. Hence one of its preferred options is to tax nearly all the gains that people make from selling assets.

…it would also help reduce inequality, because these so-called capital gains will be largely the preserve of the very well-off. Indeed, many of these people have become adept at disguising their income as capital gains in order to avoid paying tax.

There are, of course, some downsides to introducing a thorough tax on capital gains. It creates more reporting requirements, and could encourage people to hold on to assets for longer. But these seem like minor problems when set against its major benefits.

Peter Dunne is against it: It’s time to bury the capital gains tax

The spectre of a capital gains tax on residential property sales and other substantial assets has loomed large over the New Zealand tax scene for about fifty years now.

Government is a little different, but the outcome seems likely to be the same. While this time the Government has left open the possibility of a capital gains tax, it is the Tax Working Party that looks likely to rule it out, saying the issue is ultimately a political one. And, given the Government’s commitment not to introduce such a tax before it gets a specific renewed electoral mandate, the prospects look as distant as ever. Very few governments win elections promising to introduce more taxes.

All of which raises the question as to why the capital gains issue keeps getting raised, especially since the arguments in favour from both a revenue gathering and efficiency perspective are not that strong.

Advice I received when Minister of Revenue was that it could be over a decade from the time of introducing a broader based capital gains tax until it produced any significant revenue gain for the Government.

Also, it has been long accepted that the family home would have to be exempted from any such regime, further diminishing its likely impact. Even in the rental sector, the impact would likely be negative for tenants, with landlords boosting rents to offset any negative tax impact when those properties are sold.

… the application of a capital gains tax to other substantial items would be just as fraught, as items will appreciate over time at different rates, while some will depreciate. The administration of such a tax will impose additional strains and complexities on an already struggling tax system for not much revenue gain.

When tax policy moves too far into the area of engineering income redistribution or social equity complicated issues invariably arise at the margins, which the tax system, by virtue of its blanket approach, is not well designed to cope with.

All of which means that the Government would do far better to focus its ongoing attention on ensuring that the greatest amount possible of all taxes currently levied is collected before embarking on the imposition of new or additional taxes.

For all these reasons it is time to bury the capital gains tax argument for good, and focus afresh on tax policy that works, rather than just feels good.

 

UPDATE:


Audrey Young: Capital gains tax defining issue for Labour, NZ First

Tax could make or break Government at the next election. Illustration / Guy Body

One thing is clear after this week’s tax report – tax could make or break the Government at the next election, and a capital gains tax (CGT) will be a defining issue for the relationship between Labour and New Zealand First.

The tax blunder last time taught Jacinda Ardern and then finance spokesman Grant Robertson that the “how” of progressing a policy is as important as the “what”.

Capital gains tax has been an integral part of the post-Clark Labour story. In a sense, Robertson owes his job as Finance Minister to it.

It may be that New Zealand First sees CGT as such a defining issue for Labour that it is obliged to support it as an article of good faith.

Both parties will also be mindful of the integrating effect of the policy on the Coalition.

Because the capital gains tax would not take effect until after the election, it would bind the Coalition partners, Labour and New Zealand First, closer together and require Peters and Ardern to campaign jointly under their tax policy.

That will fundamentally change the dynamics of the next election, whatever the merits and disadvantages of a capital gains tax itself.

 

 

Cullen confirms CGT will not be addressed in interim TWG report

Michael Cullen, chairman of the tax Working Group, has confirmed that the interim report due to be released this month will make no recommendations on a Capital Gains Tax.

Stuff: Absence of tax recommendation means ‘more uncertainty for longer’, says National

The Tax Working Group will not recommend whether or not New Zealand should get a broad-based capital gains tax, in an interim report due out this month, chairman Sir Michael Cullen has confirmed.

Stuff had previously reported that any recommendation on the controversial tax would be deferred until the working group publishes its final report in February.

Cullen said on Wednesday that he was “happy to confirm that”.

Finance Minister Grant Robertson has played down the implications, saying the work the Tax Working Group was involved in was “always supposed to be a two-stage process”.It seems remarkable that one of Labour’s most prominent policies and their big tax policy, CGT, would not be addressed on the first report.

Surely for a tax package to make any sense it would include the major components, in general terms at least.

As Amy Adams says, this won’t do anything to address uncertainty in the business community.

It seems to confirm that what the TWG would like to recommend on a workable CGT is outside the parameters given them, or Labour have indicated is not something they want to hear at this stage.