Voters deserve better on Labour tax plan
There’s a case for capital gains tax — Labour should make it
Jacinda Ardern’s first captain’s call on capital gains taxes came dangerously close to steering Labour onto the election rocks. Ardern had reserved the right for a Labour Government to implement substantive tax changes without first gaining an electoral mandate.
Under the guise of “transparency” and an exhortation to take notice of Labour’s “direction of travel”, the putative Prime Minister made it clear she was calling the shots when it came to urgently introducing legislative changes in her first term in government, to deal with the housing crisis.
But the tide started to go out on Labour when voters who were concerned at the potential impact of new taxes on their own circumstances started registering their distrust.
Now Ardern is claiming it was she who made this week’s captain’s call to abandon her plan to implement major tax changes in Labour’s first term ( if the policy stacked up). This is outright political tosh. Enough people saw Ardern’s transparency claim for what it was: a cynical attempt to pull a snow job on the electorate instead of making a principled case for the introduction of broad- based capital gains taxes.
It’s a policy which Labour has taken to previous elections and obviously intends to introduce from the statements and rhetoric in its election policies.
Ask yourself this question: why set up a taxation working group and outline an implementation agenda unless you are prepared to act on its recommendations?
Ardern’s captain’s calls came straight out of the playbook of former Australian Liberal leader Tony Abbott. Abbott established a practice of going over the heads of his Cabinet and making his own major policy announcements. His political execution came later.
This is not going to happen with NZ Labour. Ardern’s colleagues know that if they do ultimately win the September 23 election, they will have ridden to power on her bandwagon.
But they advised her to change course when it became clear that the lack of transparency on Labour’s tax intentions had become an election liability.
Notably, it was Labour’s finance spokesman Grant Robertson who announced that Labour had “heard the call for New Zealanders’ voices to be heard”.
It’s worth looking at what Robertson went on to say: “we will involve the public at every stage of the working group, as well as Cabinet and Parliament’s consideration of any changes that arise from it.
“We know it is important to get this right, so we will balance the need for certainty and urgency by ensuring that any potential changes will not come into effect until the 2021 tax year.
“This gives multiple opportunities for public input, and a general election before any new tax would come into effect.
“To avoid any doubt, no one will be affected by any tax changes arising from the outcomes of the working group until 2021.
“There will be no new taxes or levies introduced in our first term of government beyond those we have already announced.”
In reality, Labour aims to have legislation for the new tax regime through Parliament by July 2020. The new taxes will come into effect on April 1, 2021 — and unless Labour loses the 2021 election, they will become reality. This is how the mandate will be pursued.
Labour’s policy says the terms of reference of the working group will be to consider possible options for further improvement in the “structure, fairness and balance of the tax system”.
It says the working group will have a primary focus on measures that will address the imbalance in taxation on gains from speculation in property and income from other sources.
“A tax system should serve New Zealand’s broad social and economic objectives. The tax system should be progressive, with those who are more able to pay tax contributing a greater share, and it should be fair and balanced across income, consumption and wealth to pay for the needs of our society,” the policy says.
The weakness of Labour’s policy is that it does not specifically mention that “income from other sources” will include capital gains on businesses and farms. Robertson has also refused to be drawn on this matter.
In my view, this also needs to be clarified before next Saturday’s election.
New Zealanders who own businesses or farms deserve much more clarity than Labour is giving.
The brutal truth is that there is little evidence that introducing a capital gains tax on property outside the family home will stop the housing crisis from getting worse and worse, as Robertson intimates.
It hasn’t stopped house price escalation in other desirable parts of the world.
Tackling the issue of housing affordability requires a suite of measures.
The real point of a capital gains tax is fairness and structuring the economy so that businesses ( including farms) become focused on productivity and profitability.
The principled position would be for New Zealand to introduce a broadbased capital gains tax — one that also includes clipping the capital gains on businesses and farms — when they are sold.
Labour should just come out and say so.
The tide started to go out on Labour when voters who were concerned at the potential impact of new taxes on their own circumstances started registering their distrust