Labour explores need for tax rises

Labour is planning to announce tax increases before the next election to help fund its spending plans but will leave the detailed work until it is in government.

In a pre-Budget speech to a business breakfast yesterday, Labour finance spokesman Grant Robertson said a Tax Working Group would be set up after the election to develop ways to correct the imbalances between the productive and speculative parts of the economy.

‘‘While we want a comprehensive review there will be some interim steps that we will announce before the election . . . to ensure that we have the revenue to address pressing issues, particularly in health, education and housing,’’ he said.

‘‘I think it’s only fair to New Zealand we go to the next election with some sense of the direction of our tax policy. We want the Tax Working Group to do the detailed work but I think it’s only fair for New Zealanders that they see the path we are on.

‘‘So we will have some specific things to say about the tax system before the election.’’

Robertson would not say what those changes might be, but it is understood taxes on property speculation could feature.

The working group would look again at a capital gains tax (CGT), dropped from Labour’s platform when Andrew Little took over as leader in late 2014, and a land tax.

A capital gains tax would not be part of the party’s platform in 2017, but it was not off the table for the working group.

‘‘Very little will be out of scope for the working group. We want that to take a broad approach.’’

‘‘We do need to look at the range of options. There are issues with the CGT, as we brought it forward, that we need to explore but clearly that has to be one of the options a tax working group would look at.’’

Its mandate was to ‘‘rebalance’’ the tax system.

Robertson said it may be a case of updating the work done by the working group National put in place when it came to power, which saw the Key government increase GST but cut other taxes in a so-called ‘‘tax switch’’.

‘‘We want it to look at the overall balance and fairness of the tax system. We do want that to look at how we are treating multinationals and I am very interested in investigating the idea of a diverted profits tax.’’

He said moving the tax thresholds to account for taxpayers moving into a higher tax bracket as their incomes increased – identified as a priority by Finance Minister Bill English – would also be on the table. But Robertson said the $3b of tax cuts, mentioned as a possibility by Prime Minister John Key, would not be affordable given the pressures for spending on health, education and housing.

He said an ‘‘enormous . . . multibillion-dollar’’ surplus would be needed for $3b of tax cuts given all the other cost pressures in the economy.

He called on the Government to ‘‘come clean’’ about its tax cuts plans. He said an extra $600m needed to be allocated to health in the Budget just to stand still.

He also signalled Labour would step up its KiwiBuild policy, which in 2012 saw it pledge to build and on-sell 10,000 houses a year for 10 years.

Robertson said the problem had grown since then.

‘‘We’ll be looking again at the KiwiBuild policy to see what we need to do to see those houses built.’’

There was not just a need for affordable homes that people could buy but social housing development alongside that.

Robertson said he expected the Government to post a small surplus in this week’s Budget.

‘‘A surplus was National’s selfdeclared marker of financial competence, but I actually agree with Bill English that when we are arguing at the margins it is somewhat irrelevant.’’