Tax re­form threat­ens ‘nest eggs’: Na­tional

Waikato Times - - Business - TOM PULLAR-STRECKER

"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.

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