By Peter Dunne*
The report of the Tax Working Group heralds potentially one of the most significant shake-ups of our tax system in the last thirty years, whatever one may think of its individual recommendations.
Yet it was surprising and disappointing that with the report's likely conclusions having been canvassed openly in the media for some time before their release, and the prejudices of some of the group so well known in public for so long, that the responses of the political parties were universally trite and banal.
The Labour Party had commissioned the Tax Working Group, headed by its own former Deputy Leader and Minister of Finance, to get it off the hook the Prime Minister's "captain's call" during the last election campaign that in its first term Labour would introduce a comprehensive capital gains tax if it came to office had so very nearly impaled it upon. Yet, when the report was released recommending such a tax, the Prime Minister and the current Minister of Finance could not move into full back-pedal mode quickly enough. The Prime Minister's opening effort was simply pathetic - that most people would not be affected, and the government had made no decision to proceed. If that was the case, what was the point of having the inquiry in the first place, especially given the almost moral laxative tone to Labour's previous language that such a tax was absolutely vital to curb the evil of property speculation so rife in the average population and which was at the heart of the housing crisis?
But National's response was no better. One would have expected, after so many months to get ready, a far more damning and piercing critique of capital gains taxes, and their complexity and uneven incidence, than the foolishly overly dramatic line that the report was an attack on the "Kiwi way of life". To make matters worse, National's spokesperson was quickly identified as owning a number of non-residential properties, (of itself not an issue of great importance) but one which immediately stoked the latent fires of envy and claims of self-interest.
Moreover, it is not 100% clear from these comments that National will commit to repealing every extension of capital gains tax rules that Labour may introduce. They have said they would repeal the Working Group's recommendations if they were implemented, but their position appears a little more ambiguous than it should be on the question of their approach to a very watered down response from Labour. While they will undoubtedly oppose that as it goes through the House, it is not altogether clear as yet if they would actually repeal it when next in government.
National should be unequivocal and commit to repealing any form of capital gains tax, however wide or narrow, introduced by Labour, within its first 100 days of taking office. That is a much clearer position for the public to understand and evaluate than waffly statements about the "Kiwi way of life."
Greens' co-leader James Shaw used to appeal as a sensible and reasonable man. However, his comments on the issue of capital gains tax will cause a reassessment of that assumption. First of all, a few weeks ago, there was his extraordinary pronouncement that the government of which he is part would not deserve re-election if it did not introduce a capital gains tax. All that did was remind people that the wacky, watermelon Greens were back, and possibly drive a few more voters in the direction of the new blue-green party being touted.
Equally bizarre was his comment this week that the government was elected to tidy up the tax system. Without wishing to appear picky, the government was not "elected" to do anything - no government ever is under MMP. Like its predecessors, this government was concocted after the post election government formation talks. And the very nature of government formation means that the specific mandate claim becomes even harder to sustain. Again, like its predecessors, this government was formed to implement the policy agreements contained in the coalition and confidence and supply agreements of its composite parties. That is, after all, how multi-party government works.
All of which leaves New Zealand First. Loud in opposition to capital gains taxes in any form before the election, the party has been unusually, although not surprisingly, pretty quiet since the report's release. The way the numbers fall, New Zealand First knows that whatever it decides, the government will have to adopt. It also knows its support base would most likely oppose extending capital gains taxes, and that this could be the very issue to differentiate themselves, and possibly split from, Labour over, to boost its chances of surviving the next election. But it also knows the considerable risks in doing so, and, more importantly, that time is on its side. It does have to do anything until it is sure and ready. And what it decides will become the government's response. No wonder its Cheshire cat smile is broadening.
So, after the lengthy process of the Tax Working Group, the publication of its recommendations, and the less than stellar initial responses from the major political parties, whether or not, and when, New Zealand gets a capital gains tax will ultimately be decided, not through due Cabinet process, or full debate within the caucuses of the respective governing parties, but simply and solely through the Byzantine and labyrinthine processes New Zealand First's leader follows to make up his party's mind.
Such is the process of democratic government in New Zealand in 2019.
*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.