Cautious reaction: ‘Nothing off table’
The Government’s initial response to its own Tax Working Group’s recommendations is extremely cautious but ministers say nothing is off the table.
The TWG, chaired by former Labour finance minister Sir Michael Cullen, has recommended the Government introduce a new broad-based capital gains tax (CGT) on rental properties, land, and shares, paid at the income tax rate. The family home would be excluded.
The report estimates this would raise roughly $8.3 billion over the next five years but that could be ploughed back into the hands of taxpayers via a suggested income tax cut, and another tax break for KiwiSaver accounts. This would deliver a tax cut for almost all taxpayers of between $420 and $595 a year, particularly those without investment property or serious assets.
The Government are planning a full response in April, and will not implement any changes until after the next election, giving voters a chance to effectively decide the issue.
‘‘I’m not ruling anything in or anything out today,’’ Finance Minister Grant Robertson told a press conference in Parliament, shortly after the report was released. Robertson repeatedly said questions on specific issues would not be answered, as the Government attempts to build agreement on any reform.
Labour ministers face an uphill battle getting coalition partner NZ First to support serious changes. NZ First leader Winston Peters has spent many years railing against any change.
While his public demeanour has softened, Stuff understands his party remain ‘‘uninterested’’ in a CGT, although other measures included in the report could win support.
Meanwhile, the Greens are very keen on a CGT, with coleader James Shaw arguing the Government doesn’t deserve to be re-elected if it doesn’t implement one.
Robertson told reporters that Peters, his party and the Greens were all ‘‘committed to working together with the Labour Party’’ to coming to a firm view.
‘‘All of you know it is the reality of MMP that in order to pass legislation, if that’s what ends up being the case here, we have to get the votes to do that,’’ Robertson said. ‘‘That’s the process we’re working through now and I can say the early discussions that I’ve had with Mr Peters and NZ First, they are engaging very constructively.’’
Cullen warned the Government that it may need to allocate extra resources to help Inland Revenue, including from overseas, given the tight timetable to pass the legislation.
Revenue Minister Stuart Nash said Inland Revenue had strong capabilities and the legislation would be passed as usual.
‘‘It’s not going to be done through urgency, it’s going to go through the proper process, if legislation is required.’’
The reference by both ministers to whether legislation is required opens the door to the possibility that the Government opts to make no changes. Minority view
Robertson was asked about the dissenting view of three members of the tax working group, which argued that the costs would outweigh the benefits, but made the case for considering a form of capital gains tax only on residential rental properties.
He suggested that the dissenting view could be seen as the unanimous view.
‘‘It’s probably worth looking at that the other way around, which is that the entire working group of 11 people have agreed to that proposal, to be extended to residential rental, that it’s an interesting recommendation and that we can take a look at.’’
National are dead-set against the changes, with leader Simon Bridges saying they amount to an ‘‘assault on the Kiwi way of life’’.