The parties' tax policies explored

Peter Truman.
Peter Truman.
No political party has put out a tax policy surprisingly different than expected in the election campaign, although Deloitte Dunedin tax partner Peter Truman was slightly surprised by the Greens.

The Greens want a top tax rate of 40% on income earned above $140,000 and all of the money to be used to help reduce child poverty.

For Mr Truman, the surprise is the top tax being called for is above the 39% in place when National was first elected to government in 2008 and above Labour Party policy of a top tax rate of 36% above income earned above $150,000.

The Green policy would affect only 3% of the population but claims have been made that some of New Zealand's ultra-rich hide enough of their income to not be affected by an increase in the top tax rate, no matter which party is in power.

Mr Truman said some asset-rich people did not have taxable income of $140,000, as their money was invested in property.

That opened the debate about a capital gains tax.

If investors had geared up their asset base in commercial property, the gains made there were not taxable under some circumstances.

A capital gains tax might catch them, he said.

''There is no doubt the $140,000 limit does affect higher-paid executives, politicians and plenty of people with that sort of income who don't have any way to avoid income tax at this level.

''The Greens and Labour also talk about the trust rate being lifted to same high rate to give protection from people trying to work their way around it.''

However, leaving the company rate at 28% might encourage people to retain earnings within their company to avoid the higher tax.

Once the earnings were dispersed as dividends to shareholders, they were taxed at the recipient's usual tax rate, Mr Truman said.

Asked about the benefits of retaining money in companies, Mr Truman said the economy was better if off if earnings were reinvested in business operations than spending it on lifestyle.

There were clear divides between the Right and Left political spectrums on tax, he said.

National viewed lower income tax rates as a way of encouraging people to become more productive and keep more of their own money.

Labour and the Greens aligned tax policy with the wider social framework, helping those less fortunate.

Social policy was already being delivered through the tax system by working for families and tax credits as it was more efficient using the tax system than having people file a tax return each year or apply to Work and Income.

''As you know, most families working and receiving working for families pay no net tax. That is social policy being delivered in the most efficient way.''

Asked whether he and his fellow tax practitioners looked at the tax policies and decided what they needed to do before an election, Mr Truman said it was never too early to be aware of what was being proposed and what impact a tax change might have on an individual.

There was always the risk of higher rates encouraging individuals to try to find ways around paying tax.



At a glance


• The National Party has not signalled any material change to existing tax policy. Significant reform occurred with its first term.

• Capital gains tax key policies of Labour, Greens and Internet Mana.

• No tax on income for the first $20,000 earned by individuals from Internet Mana, Conservative Party and Maori Party.

• GST policies range from full abolition (Internet Mana) through to removing GST from some items (New Zealand First and Maori Party).

• Introduction of a financial transaction tax from Internet Mana and Maori Party.

• Increased focus on tax avoidance, particularly corporates - Labour, NZ First and Internet Mana - and use of trusts from Internet Mana.

• Reintroduction of inheritance tax from Internet Mana.



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