"What they report on is not the relevant thing. How the Government reacts is the most relevant. What the working group will say is not too important; it's just a body of opinion. We will be watching how the Government positions itself."
The group, which included high-profile private sector businessmen Rob Cameron, Arthur Grimes, Gareth Morgan, John Shewan and NZX boss Mark Weldon, was likely to recommend an increase in GST, introduction of a capital gains tax and a broad low tax rate, he said.
Mr Turner was sure there would be political management of the issues, with the Government making encouraging noises about the report but claiming that it was the tax group, rather than the Government, making those recommendations.
The group's report would allow non-politicians to have an input into the tax debate, but it came down to political will whether or not any changes were introduced.
Prime Minister John Key had already ruled out a capital gains tax and while a broad tax base was "ideal", it was not the right time fiscally for its implementation, and increasing GST affected lower-income earners more than top earners.
"All of those are hard to sell in the current environment, even if it means a more effective tax system. Mr Key is astute and it wouldn't surprise me if he takes the heat out of things by lowering the middle tax rate," Mr Turner said.
Mr Key had previously told the Otago Daily Times he favoured tax cuts being introduced again as part of National Party policy but that they had to be fiscally neutral.
He said yesterday he would like to announce tax cuts before the next election.
Mr Turner said there was about an 18-month window for changes to be introduced before the next election but, really, the Government only had about 10 months to introduce tax changes and have them bedded in before the election.
The report out today would be lengthy and well-researched, but no-one should think the Government would pick it all up, he said.
There were political risks around some of the controversial aspects and Mr Key would want to manage those carefully.
Deloitte Dunedin associate tax director Peter Truman predicted the Government would take action on at least two of the expected recommendations - the tax rate alignment and changing the tax treatment of residential investment properties.
"We expect the group to support the Government's objective of an aligned tax rate of 30% for individuals, companies, trusts and PIEs [property investment entities].
This is subject to the Government's fiscal position being able to accommodate this, meaning it will be a medium-term objective."
Non-aligned rates led to inequities and distortions because many individuals could structure their activities to divert income through trusts and companies and pay lower rates of tax, he said.
There was widespread consensus for changing the tax treatment of residential investment properties.
There was more than $200 billion invested in such assets but they resulted in a $500 million revenue loss to the Government, Mr Truman said.
On the assumption the Government did not support a capital gains tax, he expected the working group would recommend one or more of the following: No tax depreciation allowances for residential buildings; limitation on rental losses being offset against other income; claw-back of interest deductions to the extent that a gain is made on the sale of properties; a specific capital gains tax if the property is sold within a specific number of years.
The introduction of a land tax would be a good idea but too difficult politically to introduce, he said.
Much valuable land was owned by farmers, a key support group of the Government.
Also, golf clubs were sitting on valuable land assets but taxing the clubs 1% of the value would be a "big number".
