Cullen quick to go on the tax attack
The IRD is hardly known for taking a ‘close enough is good enough’ approach.
possible costs was guesswork, the Tax Working Group’s own interim report appears to back up his argument.
Warning of substantial compliance costs, the report stated there would be a need to value all assets, as at a particular day. ‘‘This will impose a significant cost on many taxpayers for certain asset types’’.
Cullen swiftly went on the attack, describing the warnings as ‘‘scaremongering’’. Rather than defend the proposals that the working group has released to the public, Cullen pointed to solutions which exist, so far, only in the minds of the working group’s members.
Cullen has also floated the idea that while extending a capital gains tax in the way proposed may indeed require a mass valuation of businesses, it would not be nearly as onerous as imagined, because a degree of guesswork would be acceptable.
‘‘Provided the valuation is reasonably fair, it doesn’t matter too much at that point of entry into the system. From the long-term revenue perspective, whether it’s entirely accurate, as long as it’s reasonably fair, it doesn’t matter that much,’’ Cullen said on Friday.
This approach is both highly pragmatic and unusual.
Cullen saying the IRD will be okay with valuations that are ‘‘reasonably fair’’ is about as reassuring as Steven Joyce saying that the National Party’s campaign advertising was ‘‘pretty legal’’.
The IRD is hardly known for taking a ‘‘close enough is good enough’’ approach.
Cullen’s solution comes days after one of the Tax Working Group’s members, former IRD deputy commissioner Robin Oliver, was reported to have described the mass valuation approach put forward by the working group as ‘‘challenging’’.
It is not the first sign of division in the group and highlights the likelihood that as it attempts to design significant reforms to the tax system, some of its members might not support the proposed changes.
While less than ideal for the credibility of the changes, the significance of division should not be overstated. Tax reform is challenging and reasonable people disagree on design.
Those of us outside the working group, though, are supposed to simply sit and wait. Cullen has a solution to the problems, rendering the interim report of the working group meaningless.
For a process which is meant to be about improving the fairness of the tax system, this is a rather authoritarian approach to debate about how to achieve it.