Tax group expected to suggest wider net

Scott Mason
Scott Mason
A wider tax base, rather than a capital gains tax, is likely to be recommended by the Government’s tax working group when the report is released, probably later this week.

Crowe Horwath Australasian tax principal Scott Mason told the Otago Daily Times he did not believe there would be a separate CGT.

Instead, the tax net was likely to be broadened.

"Accordingly, it is a redefinition of what is income to capture more transactions across more asset classes. 

"This is potentially positive in there are no separate tax returns. But the down side is all income is taxed at marginal rates — up to 33%, which is higher than other countries — and no discount for inflation."

Asked who would be captured by the wider tax net, Mr Mason said everybody would be included, with a small hole at the bottom for the family home.

New assets into the tax net were possible on all shares (not just traders), all land (except the family home) and business goodwill would be captured at the higher marginal tax rate.  In other countries, such as Australia, there was an allowance for inflation on the rise in value on an asset, he said.

If someone bought a house, holding on to it for 20 years, inflation in 20 years was likely to be 50%. The wider tax net would mean the tax on the capital gain would be on all of the gain, with no allowance for inflation.

However, there was a long way to go before the final draft of any legislation would emerge, Mr Mason said.

Labour would have to provide concessions for both New Zealand First and the Greens, and there might be a sustainable economy or environmental protection clause in the final deal.

"The Government needs support from the Greens and NZ First. There is a lot of horse trading to happen yet behind closed doors."

National Party finance spokeswoman Amy Adams said before the election, Labour had talked a big game about a capital gains tax, essentially a tax on people who had worked hard all their lives to set aside enough to put into a house or retirement fund.

It seemed the working group might be going to say what National had been saying all along — the tax was unnecessary and harmful.

"If you want more houses, then you get the settings right so more house are built. You don’t impose further taxes on property ownership and investment."

Families and businesses were facing years of uncertainty with a working group whose sole purpose was to give Finance Minister Grant Robertson the cover to introduce a capital gains tax.

Although it looked unlikely the tax would be introduced, the uncertainty of future tax settings remained, Ms Adams said.

Comments

There will always be countries with higher and lower tax rates. To compare tax rates across countries in isolation, only encourages the unsustainable race to the bottom, where no tax is collected and big companies win.
It would be far more worthy to assess New Zealand as a desirable place to do business and live, due to our stability, lack of corruption, ease of doing business and lifestyle, and therefore concluding that we can afford to manage higher tax rates than some other countries.

 

 

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