Peter Dunne argues the tax system should be reformed with a focus on mitigating the adverse impact human beings have on the natural environment

By Peter Dunne*

The practice of politics is often best left to politicians, just as running professions is best left to professional bodies. When one tries to meddle in the realm of the other, the result is often not what was intended.

The Royal New Zealand College of General Practitioners is currently finding that out to its cost. In the lead-up to last year's election the College appeared to abandon its traditional role of staying outside of partisan politics in favour of subtle, but obvious, support for the Labour Party. Its reason was clear - it liked the idea Labour was promoting of reducing the costs to patients of visits to doctors.

It seemed to have assumed that Labour would do this by increasing the subsidy payable on a doctor's visit, a win-win outcome as far as the profession was concerned. However, it, and District Health Boards, have been stunned subsequently to discover that while Labour's commitment still stands, it has made no provision for increased funding and is instead relying on DHBs to achieve reduced patient costs within their existing budgets, none of which have yet been approved by the Minister.

A classic case of being more careful about you what might wish for! How this might yet play out is still to unfold and is a separate debate, but it raises again the issue of how a government manages the competing demands on public expenditure. And that, in turn, leads to the much bigger question of the adequacy of current revenue streams.

Our present system is based on taxing individuals and businesses on profit and income from what they produce. Of course, everyone - individual or business - thinks they presently pay too much tax, or at a pinch, about the right amount, and certainly cannot afford to pay any more, but that there is scope for getting more out of everybody else. This, in turn, leads to its own form of envy politics and social dislocation, constantly pitting one group against another.

Yet, the ever increasing complexity of our broad base, low rate tax system is becoming obvious, despite the considerable and noble efforts of successive governments to modernise and streamline it. This government, like its two predecessors, has begun its term by initiating a tax review, allegedly to find the holy grail, but really to provide political cover for some potentially unpopular measures they want to take, in this case the capital gains tax which dogged Labour throughout the last election campaign.

The fundamental problem, though, is that the current system is utterly flawed. The impact of income and profit based taxes is lumpy and uneven, no matter the various forms of social engineering designed to achieve balance and equity. The current debate about the tax treatment of multinational corporations which in today's internet world can be everywhere but simultaneously nowhere when it comes to tax liability has graphically proven that.

The reality is that the current system has had its day, and no amount of tinkering, however sophisticated, is going to resolve that. It is time to move on. The current system dates broadly from the early 20th century, as a then response to antiquated arrangements like the infamous hearth  or window taxes now regarded as utterly cavalier, haphazard and discriminatory. (One has only to see the windowless 18th and 19th century houses in cities like Dublin and elsewhere to see the folly and absurdity of that approach.)

At a time when, more than at any other time in human history, society's focus is on mitigating the adverse impact human beings have had on the natural environment, and the steps we need to be taking now to assure its sustainability for future generations, the opportunity is surely nigh to reform our tax system along the same lines.

We need to redesign our approach to focus on the consumption and consequent depletion of non-renewable resources by both individuals and corporations. Not only would such an approach be more equitable across the board, more difficult to evade, and therefore more sustainable, it would also have the advantage of disincentivising exploitative behaviour in the interests of the planet's future.

The hand-out approach of so much current spending would become rapidly checked if linked to our consumption of society's resources. It is often said, loftily and without much meaning, that taxes are the dues we pay to belong to civil society. A reordering of the tax system along these lines would give new reality to that statement.

If ever there was a cause looking for a progressive, genuinely environmentally friendly, but equally fiscally responsible, political party to embrace, this is surely it. Sadly, there seems to be no such party on our political horizon at the moment.           

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*Peter Dunne is the former leader of UnitedFuture, an ex-Labour Party MP, and a former cabinet minister. This article first ran here and is used with permission.

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16 Comments

Forward thinking like this article suggests does not come from a political party or movement. It comes from a person or people's ability to step out of today and look at things very differently. Humans or 'mankind' in general have a tough time doing this and the more suppressed they are the more reactionary they become. Maybe it is time for the '0's & '1's to be given a chance to analyze the issue. Feed the parameters in and lets see what comes out.

The most interesting paper I took at university was plant ecology. The lecturer had been involved in developing some software to model plant ecosystems. At some point I realised that any attempt to model an ecosystem was still going to be a best guess. Because just the very act of ringfencing a geographical area and calling it an ecosystem immediately creates risks around ignoring inputs from outside sources. Black swans and all that...

I was intrigued by where this article was going, but ultimately it led...nowhere. There are no brilliant examples to guide us. Nothing. Does it just mean higher GST and petrol tax, plus a revised electricity tax (there is already an element of tax since they are still largely government owned and regulated) and a water tax? Or something entirely new?

Where is the content? What might this new approach look like? The Tragedy of the Commons is with us still, and some fresh thinking would be delightful.

...why didn’t he just link us to TOP. And with respect to environment, take the cap of the carbon price and let it work properly.

There's a lot of words in the article but still no explanation for the author's actions while he was Minister of Internal Affairs. Like in the Fire and Emergency Act 2017 Section 161 that places Fire and Emergency New Zealand above the Law by indemnifying their actions. Why was this never debated? Why do the Police not have a limitation of liability to place them above the Law?

These are the real questions about changes undermining our democracy. An explanation and justification would make for a far more interesting article.

Quite right as per usual...Roger..

My thoughts..

Are we still listening to people who achieved nuffin...in their time in orfice.

These things should have been fixed years ago...I hope you do not pay him for content.

I know we did for many a year.

I know he was between a rock and a hard place, But surely something should have been sorted by now.?

I'm not liking this thinking for a vast number of reasons. And have to say that after reading this I'm glad Peter Dunne is gone from parliament.

People in the cities think their consumption of resources is low but never consider how exports are traded for the imports they use and yet a tax such as Dunne is suggesting will target exporters or export producers like those in agriculture over importers where the resource use occurs in another country.

Why not have a tax like an Automatic Payment Transaction Tax - everyone including those off-shore corporates are captured as they do business?

In NZ the current tax system is designed for legitimate registered business types. One only has to look around at the wealth some people have accrued and/or the lifestyes they lead to see that is beyond the scope of the incomes received from their jobs to know that large numbers of people are making cream over and above their salaries and wages. These people would more likely be tax captured with an APT Tax.

The current tax system is archaic like our education and health care systems.........while most people can try and avoid the latter two if you want to be in business you are forced into the incompetence of the hideous and unfair current tax system.

My first reading of this article made me think how could I avoid Dunnes resource tax if I were a high resource user and instantly I had a solution but one that wasn't good for the NZ economy, one that wouldn't grow jobs, one that wouldn't generate taxes annually..........one that could quite possibly leave starving people........

Well said. I'd go further and say using the taxation system for anything other than raising revenue for government is always a mistake, no matter how laudable the ulterior objective might be..

Taxes affect incentives and the economy in different ways. GST and income tax are actually quite economically destructive as they both disincentivise trade and work. There are taxes with positive effects on the economy, including pigovian taxes like carbon, alcohol and tobacco. Land tax is likely the best tax of all. Disincentivises unproductive landholdings, motivates development, reduces rents, reduces household debt, makes government projects that reclaim land far more affordable... Have a listen to Milton Friedman on the topic... https://www.youtube.com/watch?v=yS7Jb58hcsc

Does an APT differ from a financial transaction or Tobin Tax? As I read it Peter Dunne is trying to espouse a way to hold people accountable for their impact on the environment. This could even come down to being taxed for just breathing!

In part though I do agree with him that our tax system is archaic, unwieldy and clumsy, and needs up dating. Too many people and organisations get away with not paying. What I want to know is why not a FTT? Is there any research abut how much one would reap for our Government if we replaced the current system with one. What I have heard certainly seems to make one attractive.

Yes an ATP Tax does differ.
In simple terms FTT allows for certain tax deductions which creates distortions and unecessary book keeping.
APT Tax does not create distortions because it is on each and every transaction regardless of whether it is income or expenditure. The APT Tax is completed at the time of the transaction at the bank. So you buy or sell something the tax part is automatically redirected to governement account. There is no chasing certain tax advantages, entitiy types or piling into certain business types as every business is forced back to the basics but without the drudgery of complex taxation compliance and collection.

Tobin Tax is on International Financial Transactions with particular target on speculation in currencies. Who determines whether the purchase orders are speculative or not?

APT tax captures every transaction excluding black market or cash jobs. But these will always go on regardless of system in place.....

Your description of an APT is what I understood an FTP to be - a tax on every recorded financial transaction, and i might add even includes bank transfers etc. no exceptions, no loop holes. But what of my other question - has anybody produced an assessment of a comparison for NZ as to what one would yield for the government if we replaced the current system with it?

As climate change starts to really impact on our populations, governments will bring law changes that would seem utterly draconian to us now. One hopes that such changes will be very well considered but I suspect some will be panic reactions.

And if climate change is a hoax?
Funny that the banks worlwide keep lending on coastal properties! Don't think they believe in climate change......nor does Al Gore who owns significant sea-side property......somewhere safe to park his surplus.....

Individuals approve mortgages and individuals are prone to short-termism. That said, think it'll be easy to get a mortgage in South Dunedin in future?

Re the comment about GPs, if they favoured Labour it was probably because they perceived Coleman as disinterested. After all he failed to review the weeping sore that is VLCA (?). You always seemed interested and engaged Peter, Coleman, not so much.

Anyway to the point of tax. I think I agree. Introduce a land tax, a carbon tax, a financial services tax - e.g. 0.1% on all borrowing, raise the booze tax, tax water, etc. Then use the proceeds to cut income taxes in a progressive way. If that is your proposal then I wholeheartedly support it. One could even call it common sense.