Minority report: Trio of dissenters speaks out
Three of the 10 members of the Tax Working Group have penned their own paper on why they think the rest of the group got it wrong on capital gains tax.
‘‘New Zealand’s current tax system is relatively simple and efficient’’, they said, arguing the extra hassle wasn’t worth it for the ‘‘relatively low’’ amount of revenue the tax would raise.
The dissenters are former Bell Gully tax partner Joanne Hodge, BusinessNZ head Kirk Hope, and former Inland Revenue deputy commissioner Robin Oliver.
Their ‘‘minority view’’ said in places that it represented BusinessNZ’s view, but this was supported by Hodge and Oliver.
It said that the compliance and administrative costs of a capital gains tax (CGT) and its impact on ‘‘efficiency’’ would outweigh any gains in terms of increased tax, ‘‘fairness perceptions and possible integrity benefits’’.
‘‘Business must take risks and be encouraged to experiment with new ideas and methods . . . New Zealand’s tax system should not impede this,’’ they said.
The comprehensive CGT the working group was proposing would be likely to ‘‘distort investment decisions’’, they said.
The dissenting view is likely to provide ammunition for political opponents to a CGT, such as the National Party, which will be able to claim that even experts do not agree.
The working group’s chairman, Sir Michael Cullen, said in September that he was ‘‘surprised and pleased’’ the group had been able to produce an interim report that month that they could all live with, saying few issues were ‘‘black and white’’.
While he warned again in November that unanimity was not realistic, he said objections among the minority who did not back its plan were ‘‘mainly about some aspects of how you do it, rather than whether you do it’’.
But the difference of opinion expressed in the minority report appeared wider than that.
Hope, Hodge and Oliver agreed there might be a case for taxing more gains from investment properties. But they said that was best achieved by tightening existing rules such as the bright-line test.
Valuing business assets that would be subject to a CGT would be costly, they warned. ‘‘It can be seen from the rules the group has designed that there will be complexity, high compliance costs and inconsistent rules.’’
Kiwis could be left better off owning shares in foreign firms than in New Zealand companies under the proposed rules, while ‘‘foreigners owning New Zealand shares would mostly have no tax increase’’, they said. ‘‘The outcome is clearly adverse.’’