Tax reform threatens ‘nest eggs’: National
"It’s hard enough for mum and dad investors to get a small nest egg together … without it being subject to even more tax."
National MP Amy Adams
The Tax Working Group says it remains open-minded on the future of the tax system as the National Party questions the need for change. …
The working group, chaired by Sir Michael Cullen, is charged with coming up with ideas on how the tax system could be altered after the 2020 election and has now released a ‘‘background paper’’ to encourage public submissions.
Cullen has not played down expectations that the working group may recommend a broader capital gains tax on the likes of investment property and shares, though during a speech in Queenstown he said a wealth tax and a land tax would also be considered by the working group.
Discussing those three possible taxes yesterday, Cullen said ‘‘some members of the panel would argue that they are to some degree alternatives’’.
The working group could come up with a choice of options for consideration by the Government – such as a broader capital gains tax or a wealth tax – instead of a single recommendation, he agreed.
‘‘We are a very diverse group and it is not likely we are going to be unanimous on all matters. That leads to the possibility there might be – on some matters – majority and minority recommendations.’’
National Party finance spokeswoman Amy Adams said tax revenues were rising because of the strong economy and that adding new taxes would discourage savings and investment.
The public would be worried about the direction that the group appeared to be taking, she said.
‘‘It’s hard enough for mum and dad investors to get a small nest egg together over their lifetime without it being subject to even more tax.’’
Cullen said the group was not being asked how to raise more revenue for the Government, ‘‘but we are being asked how to maintain the current level in the face of some major future challenges such as an ageing population and new technologies’’.
Adams responded that if the Government was serious about being revenue-neutral then the background paper ‘‘would focus more on proposals to reduce the tax take in other areas’’.
‘‘Three years ago the Government collected $66.6 billion in tax. It’s forecast to be $78.2b this year and $93b by 2021. That’s more than enough of an increase,’’ she said.
The working group will consider environmental taxes, and the role that ‘‘hypothecated taxes’’ or levies could play in funding particular spending initiatives.
The deadline for submissions is the end of April.
The paper said that – in proportion to the size of New Zealand’s economy – the amount paid in income tax, company tax and GST were all high, relative to other countries and that the tax system could not ‘‘stand still’’.
The Government has ruled out an inheritance tax or taxes on the family home. Cullen has confirmed that means that if the group did recommend a wealth tax, family homes would not be included in the assets subject to the tax.
The working group heard largely from particular interest groups and did not have a good feel of what ‘‘ordinary people’’ thought about the tax system, he said.
Given the likely volume of responses, the working group would be relying on officials to summarise submissions, he said.
Sir Michael Cullen says the Tax Working Group’s goal is not to raise the tax burden, but to change the mix of taxes.