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21/9/2018 — Economics, Politics and Government
Tax Group fails to live up to hype
By Dene Mackenzie

The Tax Working Group's report released yesterday was disappointing and failed to live up to its hype, according to Deloitte Dunedin tax partner Phil Stevenson.

The report made few recommendations for change for the tax system.

Stevenson was not surprised by the lack of recommendations given the interim nature of the report. Also, it was the third such working group since the turn of the century, all on similar themes and each building on the previous one.

“There are no particularly earth shattering or new revelations in the report.”

Many of the working group's comments either addressed matters more remedial in nature. The more difficult ones were kicked into the long grass.

For the working group to be judged a success, the issues it raised in yesterday's report would need to be resolved in the final report next year, he said.

In the report, chairman Sir Michael Cullen avoided the words “capital gains tax,” something many New Zealanders find abhorrent. Instead, the former Labour finance minister talks of the taxation on capital income.

The interim report set out two potential options for extending capital income taxation.

They were extending the tax net to include gains on assets not already taxed and taxing deemed returns from certain assets - known as the risk-free rate of return method of taxation.

The group was not recommending the introduction of wealth taxes or land taxes, Sir Michael said.

However, National finance spokeswoman Amy Adams was not convinced a capital gains tax was off the table.

“The report will do little to reduce fears more taxes are going to be imposed on New Zealand households and businesses,” she said.

Costs of living were already going up through higher petrol prices and rents which had both outstripped wage growth in the last quarter. New Zealand families and small businesses deserved to know if the Government was softening them up for more taxes like a capital gains tax, she said.

The report missed out an opportunity to consider better ways to have the tax system incentivise savings and investment, lift productivity and help small business grow.

It was not good enough for the Government to say any recommendation it accepted would not come into forced until 2021 - after the next election, Ms Adams said.

“Taxes already take more of our income than in almost any country outside of Europe, amounting to $50,000 a year on average per household.”

Tax was already set to double by 2032 even before new taxes were added, she added.

*Dene Mackenzie is a Dunedin-based business and political commentator.

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