Government response to the Tax Working Group recommendations

Most of the attention on the Government response to the recommendations from the Tax Working Group report was on the scrapping of plans for any new type of Capital Gains Tax. See CGT backdown, everyone claims victory.

But the report also covered a number of other tax changes.

Beehive:  Govt responds to Tax Working Group report

The Coalition Government today released its response to the recommendations of the independent Tax Working Group report.

The report found that on the whole New Zealand’s tax system was working well, but made a number of recommendations to improve fairness, balance and structure.

The Government is not adopting any of the recommendations on capital gains taxation and has agreed no further work is necessary on that aspect of the report.

Winston Peters said no, so Labour and the Greens agreed that their CGT plans were stuffed.

“The final report covered all aspects of the tax system, and a number of the recommendations will now be considered for inclusion in the Government’s Tax Policy Work Programme,” Grant Robertson said.

“That includes exploring options for targeting land speculation and land banking.

“We intend to direct the Productivity Commission to include vacant land taxes within its inquiry into local government funding and financing,” Grant Robertson said.

Exploring options? I thought that’s what the TWG was supposed to have done.  But now they are going on to exploring more and doing another inquiry. Given the supposed purpose of the TWG, this sounds like further kicking of the tax can down a dusty potholed road.

“Officials have been directed to prioritise work on the TWG’s recommendations on ways to encourage investment in significant infrastructure projects and improve the integrity of the tax system to crack down on tax dodgers,” Stuart Nash said.

A refreshed tax policy work programme will be released mid-year.

So yesterday they announced what they plan on announcing later in the year.

The Coalition Government reiterated it will not introduce resource rentals for water or a fertiliser tax in this term of Parliament.

Another Peters veto of Labour and Green plans?

Other priorities for the Government this year include progressing legislation for research and development tax incentives; GST on low-value goods from offshore suppliers; a discussion document on a digital services tax, and further work to ensure multinationals pay their fair share of tax.

On to a discussion document and further work on things that have been talked about for years.

Summary of the Government’s responses to the recommendations

In that summary there are a number of TWG recommendations flagged as “Endorse the TWG recommendation” – in just about every case the recommendation is not to change anything.

There are several recommendations flagged as “Consider as a high priority for work programme”, meaning no decision has been made on what to do.

What was this Government response for? It has done little but admit they were abandoning any CGT plans indefinitely.

‘Surprise card’ (really?) could help sell CGT

An obvious possible aim with Michael Cullen’s Capital Gains Tax proposals, especially the very high tax rate, was that the Government could adopt a watered down version and sell that as a good thing – this is an old political trick, lead with something terrible and then claim that a half as terrible policy was somehow great.

There are hints that this is indeed a deliberate approach taken, with a more moderate CGT being quietly circulated.

Tom Pullar-Strecker (Stuff): Surprise card could help Labour sell a capital gains tax ‘light’

The Government has a trump card that could make a capital gains tax less unpopular and far harder for any future National government to reverse.

Tax Working Group chairman Sir Michael Cullen has proposed making a tax on capital gains “tax neutral” by handing back the $8.3 billion in revenue it is expected to generate over five years, mostly through income tax cuts and improved KiwiSaver incentives.

But a well-placed source believes the Government is likely to propose slashing the rate of a capital gains tax (CGT) and introducing significant exemptions to get the tax in place, while still offering all the major “carrots” and keeping the change tax-neutral.

That could be achieved simply by declaring that the CGT should be “tax neutral” over a longer period than five years, say 10 years.

A ‘well-placed source’ sounds suspiciously lie a leak strategy is being used.

The Government asked the Tax Working Group (TWG) to come up with tax packages that were tax neutral.

But Finance Minister Grant Robertson confirmed it was the working group that determined that should be over five years, with “no ministerial direction” on the timeframe.

Robertson would not rule out changing the time period, saying only that the Government was “carefully considering the report and all of its recommendations”.

The source suggested that if the Government did shift the goal posts set by the working group it could halve the maximum tax on capital gains from the currently proposed top income tax rate of 33 per cent, to 16 or 17 per cent.

It could also decide “not to touch KiwiSaver” by exempting KiwiSaver funds from paying tax on Australian and New Zealand shares, exclude more “lifestyle blocks” from a CGT, and introduce a threshold under which small business owners would not pay tax on their capital gains.

Together that would address the “four main concerns” with a CGT, including one “which is gaining traction” that it would be unfair to tax capital gains at 33 per cent while not adjusting them for inflation, the source said.

This makes it sound like Robertson may be the ‘well-placed source’. Which wouldn’t be surprising.

It also wouldn’t be surprising if Cullen and Robertson had either planned a strategy of proposing a heavy handed CGT and then switching to a CGT-lite from the start, or have sugested the lite version in response to the widespread negative reaction to the version proposed by the Tax Working Group.

Lengthening the period over which a CGT would be tax neutral could also make it less appealing for any future National government to quickly reverse the tax changes, since many of the benefits from the overall changes would then be more heavily “front loaded”, the source observed.

Chris Wales, a former leader of PwC’s global tax team who has advised prime ministers and finance ministers in several countries, including Britain’s Tony Blair, said the approach could be “wise, sensible and democratic”.

“At a simplistic level, people will, of course, be relieved that the potential breadth of a CGT has been reduced and that the rate is nowhere near the 33 per cent that the TWG has put forward,” Wales said, speaking from Kiev.

The Government could argue it had respected the outcome of the group’s deliberations but listened to the people as well, he said.

It sounds like ‘the people’ are being played here.

There’s not much of a surprise in that.

Cullen to be paid $1k a day for ongoing media work on tax recommendations

I think it’s unusual for the chairman of a Government working group to continue promoting recommendations and defending the Government’s position via media after delivery of their report. I hope it’s more unusual to be paid $1000 a day to do it.

Stuff: Sir Michael Cullen debates impact of tax reform on farmers, without the politics

Sir Michael Cullen has continued his public statements on the impact of capital gains tax, although his tone has softened considerably.

On Wednesday the Tax Working Group chairman released a lengthy statement on the impact the proposals of the Tax Working Group would have on farms.

It came two days after the former Labour MP and minister of finance questioned statements made by the National Party about the possible impact on KiwiSaver.

Cullen did not say why he issued the latest statement, instead claiming he had “responded to a request to comment on recent claims about the effect on farmers”.

This week it emerged that while the Tax Working Group has disbanded, Cullen has had his contract extended by the Government.

Cabinet papers show Cullen was to be paid $1062 a day in his role as chairman of the TWG.

“We extended his appointment as the chair of the TWG to 30 June because we were aware there would be extended public discussion on the report, and this has played out,” Finance Minister Grant Robertson said in a statement.

That will be close to $100,000 over three months.  Where is Ardern’s so-called fairness in this?

If Ardern and Robertson aren’t capable of explaining and defending the working group recommendations then perhaps they should be paying Cullen out of their salaries.

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.

National response to Tax Working group final report

Simon Bridges set the National tone to the Tax Working Group final report prior to it’s release.

NZ Herald:  National Leader Simon Bridges says a capital gains tax would lead to Kiwis leaving NZ for Australia

Speaking to media this morning, Bridges came out swinging and said such a tax would come at the detriment to middle New Zealand.

“[It would be] a recipe for more people buggering off to Australia.”

Interest.co.nz:  Bridges says a capital gains tax would cause people to leave for Australia (where there is a capital gains tax)

That point was hammered on Twitter as well.

Bridges’ initial response to the release of the report yesterday:

That has also been widely ridiculed.

A Labour friendly report that is likely to be watered down substantially by Winston Peters is not exactly an all out assault.

A prior tweet is closer to the mark:

One distinct possibility is Peters demanding a farm exemption. And possibly a small business exemption. And a hobbled CGT quickly becomes a crippled CGT, if it gets NZ First approval at all.

Regardless of this, National have been hammering the report.

Simon Bridges: More costs as tax monster unleashed

The Tax Working Group has gone much further than a Capital Gains Tax with a raft of new taxes targeting hard-working New Zealanders, National Leader Simon Bridges says.

There are eight new taxes including; an agriculture tax, a tax on empty residential land, a water tax, a fertiliser tax, an environmental footprint tax, a natural capital enhancement tax, a waste levy and a Capital Gains Tax.

“This is an attack on the Kiwi way of life. This would hit every New Zealander with a Kiwi Saver, shares, investment property, a small business, a lifestyle block, a bach or even an empty section,” Mr Bridges says.

“For farmers, who are the backbone of our economy, this is a declaration of war on their businesses and way of life. They would pay to water their stock, feed their crops and even when they sell up for retirement.

“Labour claims this is about fairness, but that’s rubbish. The CGT would apply to small business owners like the local plumber, but not to investors with a multi-million dollar art collection or a super yacht who won’t pay a cent more.

“The TWG has recommended one of the highest rates of Capital Gains Tax in the world. The Government would reap $8.3 billion extra in its first five years from ordinary Kiwis – small business owners, farmers, investors, bach and lifestyle block owners. After 10 years it would be taking $6 billion a year from Kiwis.

“It will lead to boom times for tax lawyers and accountants and even Iwi advisers, given recommendations for exclusions that include Māori land in multiple ownership.

“We believe New Zealanders already pay enough tax and the Government should be looking at tax relief, not taking even more out of the pockets of New Zealand families.

“National says no to new taxes. We would repeal a Capital Gains Tax, index tax thresholds to the cost of living and let Kiwis keep more of what they earn.”

Amy Adams: Massive tax grab will hammer NZ economy

New Zealand might have been expecting a capital gains tax to be announced today but the full suite of taxes proposed by the Tax Working Group would threaten the very viability of large swathes of the NZ economy, National’s Finance Spokesperson Amy Adams says.

“The new taxes proposed today will create a compliance mine field, massive distortions in the market and weaken our international competiveness at the very time the Government acknowledges the international economic risks are growing,

The proposal from the Government’s handpicked Tax Working Group doesn’t line us up with other countries as has been claimed, instead it would impose one of the most onerous capital taxation regimes in the world with 100% of the gain taxed at full marginal rates, limited relief for capital losses, no inflation adjustment and limited rollover relief.

“The Capital Gains Tax proposed by Sir Michael Cullen and the Tax Working Group will hit every small business owner, KiwiSaver account, farm, family bach, lifestyle block and investment in New Zealand. It will act as a massive disincentive to save, invest or build a productive business.

“There is nothing fair about saying owners of baches and lifestyle blocks will face a tougher CGT than corporates.

“It would add significant complexity to our relatively simple tax system, likely exempt Iwi assets, require all eligible assets to be re-valued within five years and further drain New Zealand’s already shallow capital markets.

“New Zealand doesn’t need a Capital Gains Tax and the Government has to date failed to confirm this would be a revenue neutral package. The CGT alone would raise an additional $32 billion over ten years and there is no evidence any offset will be of the same magnitude.

“On top of the Capital Gains Tax, other new and increased taxes, include a vacant residential land tax, a water tax, a fertiliser tax, an environmental footprint tax, a natural capital enhancement tax, extending the waste tax.

“It is quite simple, a country can’t tax itself to prosperity.

“New Zealanders already pay enough tax and National believes if you want New Zealanders to succeed on the world stage the tax burden should be reduced, not increased.

“National has promised to repeal the Capital Gains Tax, index tax thresholds to inflation, repeal the Regional Fuel Tax and not introduce any new taxes in our first term. Our full tax package will be released closer to next year’s election.

“The longer the Government dithers over its response to this report, the more our economy will be hurt by the fear and uncertainty these recommendations will rightly cause.”

Labour will likely have predicted and prepared for this sort of over reaction.

And what Labour ends up getting NZ First to agree to is likely to take much of the sting out of these attacks.

Peters the elephant in Labour’s CGT room

Labour told the Tax Working Group what they couldn’t do, and the Tax Working Group final report seems to be largely a Labour prescription. It even uses Labour-like terms such as Future of Work as well as Future of Tax. This isn’t all that surprising given the involvement of Michael Cullen.

But while the Group’s recommendations, especially on Capital Gains Tax, may look like a Labour wish list, the elephant in their room is Winston Peters and NZ First. With National saying they are against the CGT Labour will need NZ First support to get anything done.

Greens have already said that the Government won’t deserve to be re-elected unless they introduce a CGT – see James Shaw slams tax timidity, calls on Labour, NZ First to be bold with CGT.

An exchange in Parliament yesterday after the release of the report gives a good indication of where Peters is at on the CGT.

Question No. 2—Prime Minister

2. Hon PAULA BENNETT (Deputy Leader—National) to the Prime Minister: Does she stand by all her Government’s statements, policies, and actions?

Rt Hon WINSTON PETERS (Deputy Prime Minister) on behalf of the Prime Minister: Yes.

Hon Paula Bennett: Does she agree with comments by the Rt Hon Winston Peters in regards to capital gains tax that, “They won’t work in this country. They won’t work in any other country. They never have worked.”?

Rt Hon WINSTON PETERS: On behalf of the Prime Minister, the responsibility of the Prime Minister is for comments made by Ministers when they were Ministers, not beforehand. And, on behalf of the Prime Minister, I should not have to tell that member that.

Hon Paula Bennett: Does she agree with comments by the Rt Hon Winston Peters that, “You can’t possibly go into an election saying, ‘My tax policy will decided by a committee.’ “?

Rt Hon WINSTON PETERS: On behalf of the Prime Minister, for the second time now, I am not responsible for comments made by members of Parliament before they held a ministerial warrant under my premiership. That’s the substance of the matter and whether she agrees or not here’s the fine point about a democratic constitutional Government: that is, we’re going to consult with the people of this country in the next two weeks. [Interruption] I tell you what we can trust: somebody that hasn’t got a massive vested interest in this case, somebody that hasn’t got a massive vested interest in property, and is not now thinking about the country but just her narrow, selfish, egotistical self.

SPEAKER: I am going to remind the Deputy Prime Minister that he is speaking as the Prime Minister.

Hon Paula Bennett: No, no, let him go. Does she agree with the comments by the Deputy Prime Minister just yesterday who said, “The farming community, they are in for the long haul and there is no way a capital gains tax would have any effect on them at all.”, when today’s report says it will cost farmers $700 million a year?

Rt Hon WINSTON PETERS: On behalf of the Prime Minister, I have read the Deputy Prime Minister’s comments on the farming show. I know that he comes from a seriously agrarian background and understands the long-term ownership aspirations and intergenerational aspirations of farming families around this country, and not one of them who aspires to that will be affected by any capital gains tax.

Hon Gerry Brownlee: That’s not right. That’s not right. Read it.

Rt Hon WINSTON PETERS: No, I’ve done some work in my time, son, not like you.

SPEAKER: Order! The pair of you.

Hon Paula Bennett: If the Prime Minister is correct in her comments, then why on earth would they be saying that it would cost $700 million a year if a capital gains tax is applied to farms?

Rt Hon WINSTON PETERS: On behalf of the Prime Minister, there is the rub. Who is saying that and what do they mean by “if”? I mean, the criteria would be whether or not this is an expanded tax, and at this point in time it is not. It’s merely a report with a number of options—all 99—and what I’d like to know on behalf of the Prime Minister is: how come they had only four hours to study this and yet had already put out their views before the report came over their desks?

Hon Paula Bennett: Does she agree with the comments by the Hon James Shaw recently who said, “The only question we should be asking ourselves is: do we deserve to be re-elected if we don’t.” with regards to implementing a capital gains tax?

Rt Hon WINSTON PETERS: On behalf of the Prime Minister, that is a fact, and I’m glad about that. This is the first fact I’ve heard thus far in question time—that Mr Shaw said that. Mr Shaw’s a visionary Minister and is looking to the full debate and discussion that’s going to take place over the next eight weeks. Why don’t we all show some patience and be prepared to consult with the public of this country, the businesses of the country, rather than give your own narrow venal views.

Hon Paula Bennett: Can she confirm that any changes as a result of the recommendations in the Tax Working Group’s report will be revenue-neutral?

Rt Hon WINSTON PETERS: On behalf of the Prime Minister, it’s very difficult to come to a report—

Hon Paula Bennett: Grant just told you to say that you haven’t made any decisions.

SPEAKER: Order!

Rt Hon WINSTON PETERS: Unlike that member, doesn’t need instructions, able to think for himself, doesn’t need a speech writer, not embarrassed by being shown up every day—no. On behalf of the Prime Minister, the Prime Minister and her colleagues are not going to come to a decision until they have had the full consultation. And I must say, the most interested person in this is the Minister of Finance—the consultation process—and when that consultation is finished, we will share with the public our findings.

Hon Paula Bennett: You got that right.

 

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.

 

 

Tax Working Group final report

The final report from the Tax Working Group has been released. It’s a long report, with a long summary so I won’t post even that.

The bottom line for me seems to be that I would benefit from the tax cuts (about $1000 per year for the household),  the CGT would have little or no effect, but the environment taxes could have an impact.

That is, if the Government adopts the recommendations. Labour seem to be distancing themselves from the report, and Winston Peters has strongly opposed a CGT in the past.

Capital Gains Tax is the big talking point. Stuff: Capital gains tax: Tax Working Group announces support for capital gains tax, cuts to income tax

KEY FACTS

– Capital gains to be taxed through income tax.

– Family home (one per person) to be excluded from tax, within some limits

– Gains to be taxed from date tax comes into effect on assets people already own

– Tax generally to apply when people sell assets, with limited “rollover” relief if proceeds are reinvested

– Rollover relief to apply on death/inheritance

– Capital gains won’t be adjusted for inflation

– Investors to have up to 5 years to have some assets valued.

– Personal possessions, including artworks that may be held as investments, to escape net

– Capital losses could “generally” be offset against other taxable income.

– Income tax breaks worth between $420 and $595 a year to almost all taxpayers

– Low and middle-income KiwiSavers to benefit from reduction in tax on employer contributions

– Wealthier KiwiSavers to lose out from taxation of funds’ Australian and New Zealand shares

Funnily, the pop up video advertisement accompanying this was on ‘How to boil and egg”.

RNZ – Capital gains tax recommendations: What you need to know

The group, chaired by Sir Michael Cullen, has recommended the following:

  • Tax the capital gain on sale of land, shares, business assets, intangible assets such as intellectual property.
  • Tax to be imposed when the asset is sold, and levied at the seller’s marginal tax rate.
  • The tax would NOT apply to the family home, and personal assets such as cars, paintings, jewellery, and household appliances.
  • A holiday home WOULD be taxed on sale.
  • No change to GST and no exemptions for certain types of products, such as food and drink.
  • The capital gain on shares in companies would be taxed but in some circumstances capital losses would also be able to be offset against other income.
  • The capital gain on the sale of a business would be taxed, including the goodwill.
  • No changes to income tax rates, but a recommendation to raise the income threshold for low and middle income groups.
  • Environmental taxes: changes to the emissions trading scheme to be more like a carbon tax.
  • Dirty taxes on solid waste to reduce volumes to landfills.
  • Taxes on water pollution and water extraction.
  • Taxation of fertiliser use. Consider congestion charges to tackle traffic issues.
  • The government’s full response, including any planned new taxes, is expected in April.
  • The intention is to have legislation passed ahead of next year’s election, but changes won’t come in until 1 July, 2020.
  • National would have the opportunity to repeal the legislation if it wins the election.

It is all here:

But these are just TWG recommendations. The Government say they will decide what if anything to implement, and any changes would not take effect until after next year’s election.

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.

 

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