Finance Minister Bill English and Revenue Minister Peter Dunne have announced the creation of a Tax Working Group to look at the structure of the tax system (income, corporate and GST), and the fiscal outlook over the medium term. The Working group would issue papers and provide advice to ministers between June and November to encourage a public debate about the longer term issues around taxes and government, they said in a statement. "It will consider the government's medium-term fiscal position, the pros and cons of possible reform options and whether or not any of these should be dismissed as unworkable," they said. "The aim is to identify issues that need to be considered when reviewing medium-term tax policy, rather than to make specific policy recommendations. Topics to be considered include the fiscal framework, and the structure of personal income tax, corporate tax, GST and tax integrity." Here is the full statement below
Finance Minister Bill English and Revenue Minister Peter Dunne today welcomed the establishment of a Tax Working Group, which will assist the government in considering the key tax policy challenges facing New Zealand. The Tax Working Group, co-ordinated by Victoria University's Centre for Accounting, Governance and Taxation Research, will bring together invited private sector and academic experts, as well as Treasury and Inland Revenue officials. It will consider the medium-term direction of the tax system, including assessing policy options. "A strategic review of the tax system is necessary - particularly in light of the challenges posed by the current economic and fiscal environment and our medium-term goal of a 30 percent top personal tax rate," Mr English said. Mr Dunne said there was an opportunity for the group to make a highly useful contribution. "We look forward to considering the interesting ideas that will no doubt emerge from the Tax Working Group.". Between June and November, through a series of meetings and papers, the working group will provide informed tax policy discussion that can feed into advice to ministers and wider public debate. It will consider the government's medium-term fiscal position, the pros and cons of possible reform options and whether or not any of these should be dismissed as unworkable. The aim is to identify issues that need to be considered when reviewing medium-term tax policy, rather than to make specific policy recommendations. Topics to be considered include the fiscal framework, and the structure of personal income tax, corporate tax, GST and tax integrity. The Tax Working Group will be chaired by Victoria University Pro Vice-Chancellor and Dean of the Faculty of Commerce and Administration, Professor Bob Buckle.
What I think New Zealand needs a much simpler and flatter tax system that frees up taxpayers to focus on being more productive and building more wealth for everyone. We should have a flat income, trust and corporate tax rate at 25% with a NZ$25,000 threshold and a 15% GST rate. We need a 25% tax on capital gains for all assets, including property investments (as opposed to our own homes). We should avoid exemptions and all the other subsidies and attempts to pick winners. This would free up thousands of intelligent and otherwise productive accountants, lawyers and tax collectors to do something useful. It would remove all the distractions of trying to avoid or minimise tax and would be simply much fairer. This would mean removing Working for Families, but would also remove the ruinously high marginal tax rates created by the scheme and free up hundreds of paper pushers. I have been told the IRD has estimated a flat tax rate at 23% would be revenue neutral. This solution would make about 60% of taxpayers worse off in the initial few years until it settled down. But it would accelerate growth enormously and simplify so much of the noise in our economy. It would also refocus savers on productive rather than speculative assets and encourage the development of our capital markets. All this would require consensus (or maybe some sort of Fiscal version of the Reserve Bank Act) about how much of the economy would be dominated by the government. I reckon government spending should be limited to 30% of GDP. That would be plenty enough for education, health and social services. Your view?