Look who heads Labour’s tax working group
Former Labour finance minister Sir Michael Cullen will chair the Government’s controversial tax working group.
The Government has announced the group will have a ‘‘wide mandate’’ to look at New Zealand’s tax system, but has been directed to look at some specific areas including GST and measures to cool the housing market.
The group will be allowed to consider the issue of GST on lowvalue purchases, but will have no mandate to consider the GST rate. It could recommend GST be added or removed from some products.
That left the door open for GST to be removed from items like feminine hygiene products, fruit and vegetables and ‘‘basic food’’ items, which NZ First campaigned on. A capital gains tax (CGT) was still on the table.
During the election campaign, Labour said it planned to set up a tax working group to look into the best options for changes to the tax system.
Finance Minister Grant Robertson said the group would be considering changes that would ‘‘improve the structure, fairness and balance of the tax system’’.
‘‘Individual wage-earners, businesses, asset owners and speculators should pay their fair share of tax.
‘‘Right now we don’t think that is happening. This working group is not about increasing income tax or the rate of GST, but rather introducing more fairness across all taxpayers,’’ he said.
‘‘The working group will also consider how the tax system can contribute to positive environmental outcomes and the impact of likely changes to the economic environment, demographics, technology and employment practices over the next decade.’’
Robertson said he would not pre-empt the recommendations of the group, which were due by February 2019. He reiterated a promise that no tax changes would come into force before the next election.
He said criticisms the working group was a thinly-veiled ‘‘tax grab’’ would be assuaged by the fact that any proposed changes might be fiscally neutral, and the recommendations of the group would not be binding.
The group’s objectives included having a ‘‘sustainable revenue base to fund government operating expenditure’’ about 30 per cent of GDP.
It would also report on whether there were any changes which would ‘‘support the integrity of the income tax system, having regard to the interaction of the systems for taxing companies, trusts, and individuals’’.
The Government had budgeted
$4 million for the tax review. National finance spokesman Steven Joyce said the terms of reference looked like an
‘‘18-month-long rubber stamp process’’ to get a CGT across the line.
There was also ‘‘no pretence’’ at the independence of the group with the appointment of Cullen as chair, Joyce said.
“Sir Michael is many things but a politically independent voice on taxation policy he is not. Let’s face it, he was Labour’s last finance minister and one of the key coalition negotiators for the Labour Party,’’ Joyce said.
Meanwhile, the Public Service Association (PSA) has criticised the Government for the working group’s ‘‘narrow scope’’.
Inheritance tax and an increase the only way to achieve these goals - and the way we do this is through a fair and transparent tax system,’’ national secretaries Glenn Barclay and Erin Polaczuk said.
The PSA said workers should have ‘‘a strong voice’’ on the group, and called for union representation on the finalised panel.
Council of Trade Unions president Richard Wagstaff also rallied for union representation on working group.
Before the election, Labour would only say it would select an expert working group to decide the best way forward, but would not say who would be included in the group, or its terms of reference. The party was criticised for its vagueness.
The criticism was exacerbated by attack ads launched by the National Party.
Just over a week out from the election, Labour did a U-turn, saying it would wait until a second term before any tax changes from its working group would be introduced. Labour leader Jacinda Ardern said the timeline was established to give voters some certainty. Other than Labour’s already announced policies – such as cancelling National’s planned tax cuts, extending the ‘‘bright line’’ test over tax on selling houses to five years, and introducing water and tourist levies – no new taxes or changes would kick in before the next election.
The Government would legislate for the changes before the 2020 election but nothing would hit until April 1, 2021.