Labour will make decision on higher top personal income tax rate after Treasury opens the books on Wednesday, Ardern says; Says tweak of Labour's Capital Gains Tax stance was her call

By Alex Tarrant

Labour will decide whether to go into the election proposing changes to income tax settings after Treasury opens the government’s books on Wednesday, leader Jacinda Ardern says.

Meanwhile, Winston Peters will not be Finance Minister (or Prime Minister) in any post-election deal with the Labour Party, she said, continuing the stance announced under Andrew Little that those roles can only be held by Labour MPs if the party leads government. Prime Minister Bill English earlier Tuesday would not rule out Peters getting the finance position in a deal with National.

The Pre-election fiscal update (Prefu) will indicate how much the tax take for the last fiscal year was above forecast, and update Treasury’s projections for the government’s operating surpluses (or deficits) over the next few years for whoever is in government after September 23.

Speaking on a live NZ Herald interview Tuesday, Ardern was pressed on Labour’s Capital Gains Tax (CGT) and income tax positions. On the prospect of a higher top income tax rate policy being announced before the election, she said Labour would digest Prefu and then let the electorate know the party’s position during the campaign.

Ardern kept to her position of maintaining the "right and ability" to introduce a more comprehensive CGT next term, if this was what a new Tax Working Group proposed. Labour’s position under Andrew Little was that it would take any recommendations to the electorate in 2020 before making changes. Ardern said the shift in stance was her call, and that she had consulted finance spokesman Grant Robertson on it, although not the rest of Labour’s front bench.

She spoke of the potential cost of sitting on the recommendation for a year or two while waiting for the 2020 election to come along - indicating the working group will be set up early next term if Labour leads government.

Even if changes were made before the 2020 election, voters would still essentially have the chance to then vote Labour out if they did not like the proposals, Ardern said. She argued that National did not campaign on changes to the tax system like lifting GST while cutting income taxes on the previous Tax Working Group’s recommendations in 2010.

Ardern – quite rightly – raised that National under John Key had introduced a CGT under the guise of the “Bright Line Test” where any investment property bought and sold within two years should attract income tax. Labour is proposing to increase that to five years.

Labour’s Tax Working Group might well suggest that move is sufficient, Ardern said. She maintained that no matter what is recommended, Labour would not include the family home in any CGT regime. Owner-occupied homes account for about two-thirds of New Zealand residential property.

Her comments came on the same day that the Green Party reaffirmed its policy to impose a “comprehensive” CGT – although don’t be fooled by the word comprehensive, as the policy was still followed with the addendum “(excluding the family home)”. Read TOP’s Geoff Simmons critique of that loophole here.

Immigration, R&D

In other comments, Ardern repeated on immigration that she did not want to be fixated on the numbers of immigrants that a Labour-led government might cut out – essentially continuing the softening of language on the issue compared to Andrew Little’s ‘turn off the taps’ stance. If a business had a genuine skills shortage, they would be allowed migrants in to fill that, she said.

The Labour Party leader also seemed to let out of the bag that Labour is indeed planning on bringing forward its three-years free tertiary education policy. While talking about upskilling the workforce, Ardern referenced the policy, saying “we’ve been looking at the way that phases in.”

The usual debate on reintroducing R&D tax credits was coupled with Ardern saying she was a fan of the UK’s seed investment scheme tax breaks for small businesses, to take away small business owners’ typical reliance of needing to borrow against their family home for start-up funding.


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61 Comments

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Playing the same game as Winston Peters...... no clear policy , no commitment , avoid hard questions ..........

CGT was there before the bright line test though. Isn't the CG taxed on any property asset that is purchased with the intention of selling for profit?

Sort of... If an item (real or personal property) is acquired with the intention of disposal (e.g. sale) then it is held on revenue account (i.e. it is trading stock rather than capital) and any income derived on disposal is taxable.

A CGT will tax items that are NOT held on revenue account (i.e. they were not acquired with the intention to make a gain on sale). Therefore, a rental property where the property itself is "capital" used to derive rental "income" is nevertheless taxable under the two year bright line test (hence a CGT).

It is these subtle nuances that support a broad based CGT to prevent tax avoidance e.g. Couple buy house in Ponsonby as intend to have kids, do it up and then one year later next door neighbor offers to buy it for $250k gain (after costs). Couple sell and buy house on North Shore which they do up and 6 months later husband gets job in Wellington so couple sell for a $300k gain. That gain of $550k over 18 months is tax free under current law (as a capital gain).

Haha ... well you see, every things is negotiable at the end of the day ....tough stances can soften under pressure so do hard core principles ... next week will be very interesting

VOTE NATIONAL OR LABOUR as you please - SCRAP THE MINOR PARTIES - DON'T LOSE YOUR VOTE ... LET's DO IT Properly!!

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National are getting the boot this year. So it's up to us to decide if Labour win with or without NZF or the Greens.

Agree this year is vote for change with winston or without winstion is upto people to think and vote so as not to split the vote.

Agree this year is vote for change with winston or without winstion is upto people to think and vote so as not to split the vote.

Agree this year is vote for change with winston or without winstion is upto people to think and vote so as not to split the vote.

Agree with you, EcoBird.

If Labour needs Winston to from a Governent, it will have to pay his price - or face another 3 years in opposition........

And I'd suggest that Winston would be happy to be Prime Minister. (He's never wanted anything else!)

Labour: a pig with lipstick
New Zealand First: a pig without lipstick

National: dead meat

Not dead meat at all , Winston is like a tough piece of old Jerkey that the dog has sniffed out under the couch, and Labour is the rancid ham in the sandwich between a green piece of stale bread and who knows what ?

dup

The way its going National will need him. Maori party are gone, united future gone. Those seats go to Labour... gonna get interesting !

Well, the tax accountants, tax lawyers, payroll software providers, and all of them other Non-Productive-Sector types are rubbing their hands together in anticipation of Mo' Moolah. Suitably described so as not to incur that Top Tax Rate, natcherally.

I'm waiting for the trifecta - we have two legs in the bag - progressive personal tax rates, and extended CGT.

What's the third? Diddling with GST (like none on 'food')? Sumptuary taxes?

Bring popcorn....

Labour are wheeling out the same policies they have wheeled out for almost the past 100 years , just repackaged with some lipstick and rouge .............more and higher taxes and taking and spending other peoples hard earned money .

They just want to force their snouts deeper into the trough .

It just has some lipstick , but Labour is what it always has been.

Bit rich to knock Labour's achievements over NZ's history though, given the role they played in getting you into a house of your own.

Your assumption is not strictly correct , we personally have never had the benefit of state assisted housing , but there were , to be fair , times when land was readily available, and schemes were in place to assist people to own a home.

I still hold the view that Labour dont have the solution to the housing crisis clearly set out , and all we have had so far from them is a raft of new or increased taxes .

If not directly (up to and including Housing Corp loans), arguably you had access to affordable housing - as did everyone - because of the earliest efforts by the first Labour govt. to break up large landbanks held by domestic and foreign landlords. That goes to the point of having access to land at all, rather than it all being in large holdings of the few.

In subsequent decades up to the 1980s though, affordable housing was the result of various government participation over multiple different governments. Including public-private partnerships, government financing, cheap government leasehold land, government ballots (folk I know benefited from this for their first), government builds, and Housing Corp efforts. These were factors in the high level of home ownership achieved by the 1980s.

I.e. a massive amount of effort went into fostering the supply of affordable housing. Anyone who bought early enough was able to benefit from these earlier efforts (access to affordable pricing) compared to the way houses have moved far out of reach over time since then.

If the supply is boosted by 1,000 houses, you might not buy one of them, but you still get the affordability benefit from them being in the market.

fair comment

UK top tax rate is 45 percent, Aussie is 48. Lowest tax rate in UK is 0 percent. I think nz has a lot of room to change income tax and introducing a higher tax band of around 40 percent for those earning over say 150k ( and for full disclosure I would fall into that band).

@ fatfreddy , why take more in tax when its not needed by the Government ........... its already in surplus, and has got more than it can spend to function properly .

Oh, it's going to be needed.
Just you wait.
At sometime we have to pay back the financial and infrastructural deficits that we have accumulated over the past 10 years.

@nymad ........They can take it when its needed , not before .

I see Phil Goff is planning a huge rates increase because Auckland is broke and cannot pay for the Len Brown train set .

Cant say we were not warned this would happen

It's needed now.
Auckland has a huge infrastructure deficit.
Public services are overloading - Schools, hospitals, etc.
Military spending is required to increase.
Pension funding needs to increase.

The money was needed 5 years ago when National stopped paying into the Super fund and let 70k people into the country per year. The country's infrastructure is slowly collapsing due to the non-existent funding.

An increase in national debt of $70 billion in 9 years isn't a surplus.

And where's the extra going to come from to support the rest of the Boomers when they retire?

Wildcard - up $50bln actually but more importantly, what's the NZ Govt's debt to GDP ratio (the measure that counts) compared to say the global power houses, the US, UK, Germany, Australia etc - please publish them here for us to compare our poor performance with theirs (or would you like me to do so to save you the embarrassment?)

No actually probably best I do but please let me know if I have a decimal wrong:

Debt to GDP ratios:
US 106%
France 96%
Canada 92%
UK 83%
Germany 68%
Australia 41% (and rising)
NZ 24.6% (and falling)

"No actually probably best I do but please let me know if I have a decimal wrong:

Debt to GDP ratios:
US 106%
France 96%
Canada 92%
UK 83%
Germany 68%
Australia 41% (and rising)
NZ 24.6% (and falling)"

(Just in case you change them)

What?
Are you talking gross or net?

By memory Australia is only like 18% net.
There's no way those countries have net govt debt to GDP ratios that high. Maybe the USA. But even then I doubt it.

Plus, why compare between "global powerhouses" and New Zealand?
What the hell does NZ produce relative to them?

Gee nymad I guess we learn something new everyday. Try this:

https://tradingeconomics.com/country-list/government-debt-to-gdp

Okay, you still don't answer my question - is that net or gross?

Do your own research nymad and if you can prove to me that NZ's Govt debt isn't one of the very lowest in developed countries please let us all know - its going to come as a hell of a shock to many institutions that have complemented it such as the rating agencies that have been maintaining NZ's credit rating in acknowledgement of it - gross or net? how desperate can you get when caught telling lies ?

Nzs govt debt is small by world standards. Lucky he didn't post Italy and Greece as well. We have no excuse not to spend more on those in our society who need it most.

We do have a very good excuse in that we can't borrow at rates as low as the countries Grant mentioned.

The private debt to GDP is more important. That can be obtained from the bank of international settlements here -> http://www.bis.org/statistics/totcredit/totcredit.xlsx

according to the P:A:M:770:A series (lent to private non financial sector - lent by all sectors - Market value - as%ofGDP - adjusted) These are the comparative numbers

New Zealand: 177.7
Australia: 204.2
Germany: 106.6
France: 185.9
Canada: 218.3
UK: 163.8

if you look at the sub category - "lent by banking sector" data (P:B:M:770:A) then NZ is right at the very top of the list. Here is the raw BIS data, an example graph, and some bad python code I wrote to look at it:

http://dropmefiles.com/yHZIn

Why not tax low income earners less and high income earners more? Help out those at the bottom end in a way that doesn't impact the business owner. I just think NZ needs to lean a little to the left after 9 years of heading right. Compared with Europe and UK we certainly could learn a little about taking care of our own.

It makes perfect sense, I'm happy to pay more, a hundred bucks a week or so makes not much difference to me, means I shop at New World instead of poncing around Farro thinking I'm loaded. We should completely scrap the low end tax rate.

earn, say, 230000 after expenses in NZ
Pay 30,000 gst
Then pay 57000 income tax (marginal rate over 70,000@33%)
+2000 ACC levy
=39% tax already
And pay GST on everything you purchase.

Increase it any more and people will avoid it.

Are you talking PAYE on a $230k salary or as a business?

Company tax is 28% flat rate.

self employed; increasing tax would sway one to pay to form a company etc etc, which was the point
You can nominally increase tax, but the govt may not get more tax.
It also discourages one from working. Under Muldoon the marginal tax of 66% kicked in @ 20000, so I'd work for 9 months till I'd earned 20000, the have 3 months off; as you were working for way under 33 cents in the dollar; as it costs quite a bit to travel to work.

Ah ok, but surely you can't include GST in your earnings? It's basically a tax in and out, goes from your customers straight to the IRD.

As does any other tax, so currently the marginal rate is nearly 50% if self employed and not doing the business fiddle or negative gearing etc

"It also discourages one from working". Really?

Norway is one of the most heavily taxed countries in the world with a total tax burden of roughly 45% of GDP– almost 4x Hong Kong and nearly twice the US. VAT here is 25%. Personal income tax rates border 55%. Corporate profits tax ranges from 28% to as high as 78%

Still working in Norway aint they? .

VOTE NATIONAL OR LABOUR as you please - SCRAP THE MINOR PARTIES - DON'T LOSE YOUR VOTE ... LET's DO IT Properly!!

Im voting NZFIRST.

The problem for me sometimes, is that I cant tell one party National from the other Labour. They have a few policies that are not the same, but they just seem to speil the same stuff.

At least Winston is dead against the numbers of immigration.

BOLLOCKS!

TOP is the only party committed to evidence based policy. End of party political broadcast.

(I've not voted for National or Labour since the introduction of MMP and I'm not going to start now - the bipolar system we have is flawed. The us and them, left and right bollocks has us lurching from one ideology to the other every 6 to nine years costing us a fortune in wasted opportunities. Madness.
In a well planned well structured governmental framework we would be all working towards our own ends and never mind the bollocks.)

I also understood CGT was there well before the Brightline rule - same as with shares. Its there in plain sight on the IRD website and has done so for some time. There is also no time limit for IRD to perform retrospective assessments! IRD can gather information from source (the bank) before coming to a conclusion on the buyers intention to sell for gain.

National supporters are now getting upset as are sensing now themselves that this year is going to be vote for change so please sympathies with them.

here in Hamilton i have sensed no mood for change whatsoever.Maybe i don't get out enough.
Could just be a media beat up.

I think the media want a change, the same old party and people don't get clicks. Labour winning will generate far more stories and different angles to take, than National. A National win will be in the media for a day or two and then it will be back to normal.

I'm a bit bored with the election. Not sure I really am in to the Jacinda thing- all seems a bit of media hype that will die in a few weeks. Am probably too old!

How many years have they had in opposition to get a tax working group to look at this? Why does it need to wait until after the election? There was tax working group that looked into it back in about 2010, and I recall they recommended a CGT, including on the family home, and National didn't agree to introducing this.
Are they just going to blame the working group for bringing in the policy, because it is 'recommended'?, and then say 'don't blame us, the experts say this is needed'?. They really need to say tomorrow what their policies with tax are, so the public can make a balanced informed decision, not after they are elected. But the fact is, that many voters couldn't give a toss about politics and policies, it is all the personalities and looks.

And the last sound bytes and scandals in the week before the big day..

Somehow I doubt this working group will come back and say an income tax increase isn't needed.

Its frightening that a new leader and their first decent poll for 9 years has given them the confidence and arrogance to propose a range of new taxes so soon. Just imagine the arrogance if they become government.

I'm concerned they might even have the audacity to try and reduce inequality. We can't stand for this!

Labours idea of equality is that everyone is equally poor.

That's seems reasonable...about as reasonable as saying any right-leaning party wants to put people in gas ovens.

I've never voted for Labour but they're in no way "reds under the beds".

No Labour's idea is there is minimal in-equality, and no poverty, only those on the extreme right seem to think either of these being as high as they are as long as "I am alright" is OK.

"so soon", Um no. For many years if not a decade plus public services have deteriorated. It comes down to the voter who cant continue to have their cake and eat it. So lets have some honest debate on these subjects and not name calling.

lets have some honest debate on these subjects and not name calling

Oh, we are way past that. An AI bot pass over these august threads would trim them by 90% if it applied three simple self-learning algorithms:

  1. Play the ball not the chap(or chapess)
  2. Stick to the subject
  3. Apply Godwin

How about it, DC et al?

Looking around New Zealand i would say its infrastructure could do with some serious attention , this requires tax revenues . There is an element in society who get a pretty easy ride , so who should or where should taxes be raised ? New roads tunnels bridges etc could create growth and improve our efficiency .