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.

Reserve Bank must now consider employment alongside inflation

A new Policy Targets Agreement requires Reserve Bank “monetary policy to be conducted so that it contributes to supporting maximum levels of sustainable employment within the economy” as well as still keeping inflation between one and three percent.

I have no idea how the Reserve Bank will influence employment levels.

It could be tricky if the objectives clash.

Grant Robertson: New PTA requires Reserve Bank to consider employment alongside price stability mandate


Finance Minister Grant Robertson and incoming Reserve Bank Governor Adrian Orr today signed a new Policy Targets Agreement (PTA) setting out specific targets for maintaining price stability and a requirement for employment outcomes to be considered in the conduct of monetary policy.

The new PTA takes effect from 27 March 2018, when Adrian Orr starts his five-year term as Governor. The new PTA has to be signed under the existing provisions of the Reserve Bank Act 1989, which has price stability as the Reserve Bank’s primary objective.

The agreement continues the requirement for the Reserve Bank to keep future annual CPI inflation between 1 and 3 percent over the medium-term, with a focus on keeping future inflation near the 2 percent mid-point.

The new PTA now also requires monetary policy to be conducted so that it contributes to supporting maximum levels of sustainable employment within the economy.

“The Reserve Bank Act is nearly 30 years old. While the single focus on price stability has generally served New Zealand well, there have been significant changes to the New Zealand economy and to monetary policy practices since it was enacted,” Grant Robertson said.

“The importance of monetary policy as a tool to support the real, productive, economy has been evolving and will be recognised in New Zealand law by adding employment outcomes alongside price stability as a dual mandate for the Reserve Bank, as seen in countries like the United States, Australia and Norway.

“Work on legislation to codify a dual mandate is underway. In the meantime, the new PTA will ensure the conduct of monetary policy in maintaining price stability will also contribute to employment outcomes.”

A Bill will be introduced to Parliament in the coming months to implement Cabinet’s decisions on recommendations from Phase 1 of the Review. As well as legislating for the dual mandate, this will include the creation of a committee for monetary policy decisions.

“Currently, the Governor of the Reserve Bank has sole authority for monetary policy decisions under the Act. While clear institutional accountability was important for establishing the credibility of the inflation-targeting system when the Act was introduced, there has been greater recognition in recent decades of the benefits of committee decision-making structures,” Grant Robertson said.

“In practice, the Reserve Bank’s decision-making practices for monetary policy have adapted to reflect this, with an internal Governing Committee collectively making decisions on monetary policy. However, the Act has not been updated accordingly.”

The Government has agreed a range of five to seven voting members for a Monetary Policy Committee (MPC) for decision-making. The majority of members will be Reserve Bank internal staff, and a minority will be external members. The Reserve Bank Governor will be the chair.

 

Reserve Bank Governor-Designate, Adrian Orr, said that the PTA recognises the importance of monetary policy to the wellbeing of all New Zealanders.

“The PTA appropriately retains the Reserve Bank’s focus on a price stability objective. The Bank’s annual consumer price inflation target remains at 1 to 3 percent, with the ongoing focus on the mid-point of 2 percent.

“Price stability offers enduring benefits for New Zealanders’ living standards, especially for those on low and fixed incomes. It guards against the erosion of the value of our money and savings, and the misallocation of investment.”

Mr Orr said that the PTA also recognises the role of monetary policy in contributing to supporting maximum sustainable employment, as will be captured formally in an amendment Bill in coming months.

“This PTA provides a bridge in that direction under the constraints of the current Act. The Reserve Bank’s flexible inflation targeting regime has long included employment and output variability in its deliberations on interest rate decisions. What this PTA does is make it an explicit expectation that the Bank accounts for that consideration transparently. Maximum sustainable employment is determined by a wide range of economic factors beyond monetary policy.”

Mr Orr said that he welcomes the intention to use a monetary policy committee decision-making group, including both Bank staff and a minority of external members.