Tax review too rushed — Treasury
Briefing suggests longer timeframe
The Treasury has warned that 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, t asked 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 is 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 tax can do in delivering environment benefits.
In its October briefing to incoming Minister of Finance Grant Robertson, released yesterday, 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 that the group would 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 might want to look at the corporate tax rate, which at 28 per cent 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 had signalled significant monetary policy priorities, including reviewing the Reserve Bank Act to broaden the central bank’s objectives. The agency suggested Robertson use the signing of the policy targets agreement with the next governor of the bank, which he will do by March next year, as “an early chance to reconsider how monetary policy objectives are specified” and said it might 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 Government has said it plans to reinstate contributions to the NZ Superannuation Fund in the current 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.” —