Treasury urges government not to rush on tax review

Sir Michael Cullen will lead the tax working group.

The Treasury warned the government's planned review of the tax system will be too rushed and suggested it extend the timeframe along with other reviews of New Zealand's monetary and fiscal policy settings.

Last month the government announced former finance minister Sir Michael Cullen will lead the tax working group, tasked with brainstorming a fairer and more balanced tax system. It will come up with a series of recommendations by February 2019, which the government will then use to inform its policy direction at the next general election.

The working group has been told to consider the economic environment over the next five to 10 years and how that's affecting changing business models, demographics and business practices; whether some form of housing, land or capital gains tax would improve the system; whether a progressive company tax with lower rates for small businesses would improve the system and business environment; and what role tax can play in delivering environment benefits.

In its October briefing to incoming Finance Minister Grant Robertson, released today, the Treasury recommended the working group include the treatment of capital income and assets in the tax system, "allowing for the consideration of a wide range of options" but warned the group will not be able to undertake a comprehensive assessment of all aspects of the tax system in its indicated timeframe. It suggested a longer timeframe, or "further targeted reviews of strategic issues in the tax system."

The Treasury also said the government may want to look at the corporate tax rate, which at 28% is above the OECD median, but said it could look at ways to reduce effective tax rates on business investment such as modifying depreciation rules. "Significant misalignment between personal and company tax rates could put pressure on the integrity of the revenue base," it said.

The agency said the government has signalled significant monetary policy priorities, including reviewing the Reserve Bank Act to broaden the central bank's objectives. The agency suggested Mr Robertson use the signing of the policy targets agreement with the next governor of the Reserve Bank, which he will do by March next year, as "an early chance to reconsider how monetary policy objectives are specified" and said it may be a good time to consider broader issues about governance and monetary and financial stability frameworks in the act.

The Treasury recommended a review of the statutory framework for financial stability policy to ensure the country can respond to emerging financial risks.

"The growth in the scope of prudential policy over recent years makes it timely to stand back and consider whether the statutory framework is fit for purpose, particularly given there are aspects of our approach that differ from international norms," it said.

The Treasury said progress toward Labour's budget responsibility rules can be achieved through greater increases in operating and capital expenditure than in previous budgets, as the government indicated in its pre-election fiscal plan. The agency is reviewing aspects of the fiscal management approach, which gives fixed baselines to government agencies with no automatic adjustments for inflation and other pressures in each budget, meaning spending comes through the budget process and allowances. Mr Robertson must decide whether to keep this approach.

The government has said it plans to reinstate contributions to the New Zealand Superannuation Fund in this financial year, and the Treasury recommended establishing a review of the fund's contribution and withdrawal formula "to ensure that settings support the objectives of the NZSF, including intergenerational fairness."

(BusinessDesk)


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Fair tax would be to be fair on Landlords who provide billions of dollars of housing for Tenant Families for the tax payer of New Zealand.

Saving the country billions.

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Likewise we should obviously remove any taxes supermarkets have to pay because they provide a free service to NZers.

Totally not a business at all, nope.

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The Tax Working Group has only one purpose and that is to bring in a comprehensive capital gains tax for New Zealand. It doesn't need two to three years to do that. The purpose of Cullen and the time he has been allocated is to put a political and nomological spin on it to make it appear palatable and reasonable by coming up with the right thought-speech and propaganda that makes the current absence of one look to be the most unfair thing that has befallen the nation ever and its introduction an urgent priority to rectify the situation.

The weak-minded, the gullible, the envious, the Left - in the media, the commentariat, business, and theoretical economics - will lap this up and use the phraseology of the working group in their arguments to push hard for its introduction. Look to see one of the more simple arguments being trotted out, that is that every other country has one, so New Zealand should have one too. Of course, when it comes to this everybody-else-does-it-so-we-should-do-it-too imperative being put on the other foot, i.e., every other country doesn't have New Zealand's anti-nuclear legislation, therefore, New Zealand shouldn't have it either, the silence from the Left is deafening. Draw your own conclusion on that.

What I imagine the Working Group won't tell us is, just how many people in New Zealand actually earn their living via capital gains, what is the quanta, the sum, the amount, i.e., how much realised capital gains are they earning on average, what percentage of realised capital gains are rolled over into new investments vs. how much is spent as income, and by how much (the sum) will investment be reduced by the taxation of capital gains, i.e., capital taken out of the hands of investors via taxation which will then be spent on the Government's vanity projects e.g., free tertiary education for 60 year olds and light rail from Auckland's CBD to Jacinda Adern's Mt Albert electorate? And finally, how will capital gains taxes increase the wealth and prosperity of the nation as a whole, if all asset classes are treated in the same way i.e., taxed. Where is the incentive to change investment from the so-called non-productive sector into the productive sector when the amount of any capital gain is taxed at exactly the same rate?

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Agree, and can't we just wait until all us boomers are safely through and passed on before taxing the tax-free money we make!? Taxers are for silly young workers!

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Sound analysis Steve. If the Coalition of Losers stay in power long enough (beyond this term), they will attempt to legitimise a capital gains tax on all assets. However, the NZ economy will slump, slowly but surely, and capital gains - especially in property - will become capital losses. This will not Grant Robertson and Jacinda spending money that is not theirs freely. If only there was someone in Labour who'se ever taken a business risk with their own money? If only...

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That's like asking a gang of robbers to not be too hasty when breaking into your house with crowbars.

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Are you talking about banks and property specuvestors here?

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That's classic Anonymous, very good

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