Govt’s shock decision throws spanner in works for 2020
Bridges claims credit for tax bombshell but Deputy PM says decision has weakened National Party’s chances at next election
The Government’s surprise decision to ditch a capital gains tax has changed the political landscape just 18 months ahead of the 2020 election. The National Party leader, Simon Bridges, has claimed credit for the decision, saying it was a result of his party’s relentless pressure, while brushing off questions about a potential leadership spill.
But Government MPs say yesterday’s bombshell has actually weakened National’s position by neutralising what would have been a strong campaigning position.
New Zealand First Leader, and Deputy Prime Minister, Winston Peters said the Government’s move would be the final nail in Bridges’ leadership coffin.
Prime Minister Jacinda Ardern said there were two main reasons the Government rejected a capital gains tax (CGT).
One was a failure to get agreement from coalition partner NZ First and the second was not having a mandate from New Zealanders.
“In short, we have tried to build a mandate but ultimately have been unsuccessful.”
The Tax Working Group, chaired by Sir Michael Cullen, recommended the Government adopt a capital gains
tax of up to 33 per cent on shares, KiwiSaver and investment properties.
But Ardern said she had always been clear that the Government would not be able to proceed with such a tax unless Cabinet was able to form a consensus — “that has not happened under this Government”.
Ardern took it one step further and ruled out ever campaigning on a CGT while she was Prime Minister.
“Under my leadership, we will no longer campaign for, or implement a capital gains tax.”
Ardern saw the capital gains tax rejection as less of a failure of the Government and more of a reflection of the reality of MMP.
The Government is made up of three parties — NZ First and Labour in a coalition Government, with the Green Party providing supply and confidence.
This means any Government policy opposed by the Opposition needs to have the support of all three governing parties. In this instance, NZ First exercised its veto.
However, Ardern said the Government was not bullied into ditching the capital gains tax by NZ First.
After her media conference, Peters said coalitions were “difficult to operate” but it wasn’t a case of winners and losers, but rather what policies had the support of the majority of the public.
The “absolute complexity” of the capital gains tax was one of its negative aspects and such taxes overseas had not worked.
Peters was highly critical of a capital gains tax just weeks before the 2017 election, when he said such a tax would not work in New Zealand.
He has, however, always been open to the Tax Working Group and its report.
Speaking to media in Tauranga, Bridges was chalking up the Government’s rejection of the capital gains tax as a “win for National under my leadership”.
“We’ve embarrassed the Government out of a CGT and that is good for New Zealanders.”
Both Ardern and Peters denied this was the case.
“In the Government’s so-called year of delivery, they’ve dropped their flagship tax policy,” Bridges said.
“The big question remains, what are they doing to encourage the economy to grow?”
But his press conference was dogged by questions about the future of his leadership after a report this week that National MPs were losing confidence in him following a series of a stumbles.
Was he about to get rolled? “No. National supporters right now will be feeling really good, and that’s because of my leadership in the National caucus,” said Bridges.
“I’m talking with all my colleagues all the time. I feel confident and comfortable in my leadership.”
The Greens have always favoured a capital gains tax and its co-leader James Shaw said he was disappointed by the decision.
Shaw had previously said the Government did not deserve to be reelected if it backed away from a capital gains tax, and yesterday defended those comments.
“When I said that I was making a call for bold action, and when you look at what this Government is doing on climate change, on cleaning up our rivers, on ending homelessness, we are a bold Government.
“I absolutely believe we deserve to be re-elected.”
He rejected any suggestion that NZ First wielded too much power in the coalition Government.
Cullen — a former Labour Party Finance Minister — said it was clear Peters made the call for the Government to veto the capital gains tax.
“The Government was unable to proceed because Peters has ruled it out, let’s be quite clear what’s happened here.”
He suggested Peters made the decision not to support the tax for political reasons and the party may have been worried about going down further in the polls if they had supported a capital gains tax.
Although Ardern ruled out a CGT, many of the other Tax Working Group’s recommendations were still on the table. Some areas of the report could help form Labour’s 2020 tax policy, she said.
Ardern said the group’s report had cost $1.6 million to date and was expected to cost $2m in total.