Cullen to lead investigation of tax options

Former Labour finance minister Sir Michael Cullen will chair the Government’s controversial tax working group.

The Government has announced the working group will have a ‘‘wide mandate’’ to look at New Zealand’s whole 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 low value purchases but will have no mandate to consider the GST rate.

It could recommend that 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 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.

The working group would be considering changes that would ‘‘improve the structure, fairness and balance of the tax system’’, said new Finance Minister Grant Robertson.

‘‘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 to be reported back to the Government by February 2019. He reiterated a promise that no tax changes would come into force before the next election.

He said criticisms that the working group was a thinly-veiled ‘‘tax grab’’ in disguise could 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 include having a ‘‘sustainable revenue base to fund government operating expenditure’’ of about 30 per cent of GDP.

It would also report to the Government 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 Public Service Association has criticised the Government however, for the ‘‘narrow scope’’ of reform it had confined the working group to.

Inheritance tax and an increase in income taxes have been ruled out of scope, yet the PSA argued it played a role in reducing inequality.

Council of Trade Unions president Richard Wagstaff also rallied for union representation on working group.

‘‘Working people in New Zealand are the biggest contributors to our valued public services like schools, hospitals and public transport.

‘‘It’s vital that the Government actively seeks their views on whether New Zealand’s current taxation arrangements are fit for the purpose of providing quality, sustainable public services.’’