Labour has been laying further groundwork for its call for NZ's tax system to be fundamentally overhauled as Robertson and Wood raise inequalities in Parliament

Labour has been laying further groundwork for its call for NZ's tax system to be fundamentally overhauled as Robertson and Wood raise inequalities in Parliament

Labour has been laying further groundwork in recent weeks for its proposal of a “fundamental” overhaul of New Zealand’s tax system.

Grant Robertson (finance) and Michael Wood (revenue) spoke in Parliament’s House of Representatives Tuesday evening about tax settings on “wealth” and the “owners of assets,” and on income tax rates.

The comments follow a speech by Robertson last week where he referenced his announcement last year that Labour would re-form the Tax Working Group if elected on 23 September to focus on proposals to correct “imbalances that exist between the productive and speculative parts of our economy.”

The Group’s mandate would be to rebalance the tax system and look at how to support and encourage investment in the “productive system.” While Labour is not set to take a capital gains tax into the 2017 election campaign, the group would be allowed to look at the introduction of one, as well as a land tax, Robertson has said.

In his speech to the Accountants and Tax Agents Institute of NZ on 3 March, Robertson said the Group would focus on structural issues in the tax system. Labour has already announced it would extend the bright line test out to five years. He said Labour would look to expand flexible approaches to small business tax and abolish secondary taxation on top of further measures on multinationals.

Wealth & owners of assets

Then on Tuesday (7 March), Robertson addressed the second reading of the government’s Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill. He called for a “thorough, far-reaching review” of the tax system.

“We have reached the point now, where we have huge inequalities in our country, particularly in terms of wealth. The owners of assets – that’s where inequality is now residing,” Robertson said. “In our tax system we need to take another look at that to make sure that we actually achieve [Revenue Minister Judith Collins’] goal of fairness that she said was the bedrock of the tax system.”

Fairness on taxing wages vs alternative incomes

Meanwhile, Wood noted an overview of the Bill saying that it aims for the tax treatment of alternative forms of income and expenditure to be as even as possible.

“That is something that we on this side of the House support and in fact we want that principle to be extended in the future to ensure that across our whole tax system, we achieve balance,” the Labour revenue spokesman said.

There had been missed opportunities to ensure New Zealand’s tax system was “fair, progressive and driving the kind of productive economy that we would all like to see in New Zealand,” he said. “What we actually need is a more fundamental review of our tax system to ensure that it’s modern, fit for purpose and balanced.”

It was Labour’s belief that the system needed to ensure tax was applied fairly across taxpayers and the economy, and that “everyone pays their fair share,” he said. “Just rolling over the rates, or changing a few thresholds doesn’t achieve that.”

The government’s 2010 tax switch “resulted in 40% of the net benefit of that package going to the top 10% of earners,” Wood said. “That wasn’t an equitable outcome and any future changes to tax rates need to do a much better job of ensuring that New Zealanders who really need an income boost receive one.”

“Our tax system is important to how we incentivise growth and investment in our economy, and it’s also important to ensuring fair distributional outcomes. That’s what Labour will push for as we review those tax rates in the future."

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40 Comments

13
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Sounds like the right approach and similar language to Gareth Morgans Opportunities Party tax reform. Good luck to labor - I think we will all lose if we continue down the path where property owners become the haves and others become the have-nots. If that path continued all kiwis would end up paying the price.

Yes, good on Labour - major structural reform needed.

Tax land, not labour would be my preference. Very simple, unable to be avoided. Would significantly lower the price of largely unproductive land, I suspect. Both land banking and farming for capital gains would become far less attractive - and one suspects capital would therefore be better allocated to productive enterprise. All the TOP arguments - but I'm unsure why TOP went with taxing all capital assets, as opposed to just land - and their 'rate of return' idea just complicates things.

I agree...
and I also think it is a shame that TOP did not go down this path.

I apply the principle of "land tax' to all of a Nations Natural resources that may end up in private ownership thru Govt. granted licence.

A Nations natural resources belong to all, which includes future generations...

in the same breath I would have a referendum on how large we want the 'public sector" to be....
What % of GDP should it be..?? ( I include Govt. and local bodies and ALL govt agencies )
The public sector lives on the back of the private sector...

Smaller Govt... land tax.... very little income tax and NZ might discover a new zest for hard work and enterprise..
As far as I know the measure of a vibrant economy is work ethic + innovation .. ( This does not come form Govt. )
( AND...NZ is also blessed with abundant renewable natural resourses )

1. Labour obviously still don't get it that the top 10% of taxpayers are already paying most of the tax...so to target them is to bite the hand currently feeding us.
2. If Labour turned around the immigration tide which they intend to do it will be the top 10% people heading out the door first, leaving NZ to rely on gathering more tax from the group of people who currently pay a tiny fraction of the total tax take...sound sustainable?

10
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If National keeps running the tap wide open to both immigration and foreign purchases of NZ's land and housing stock then many of us will hit the door, that's for sure. And many of us do sit in the high income brackets.

Viability of home ownership is a massive issue.

No kidding - quite right - and who would blame you?

Wouldn't everybody in your new place of residence blame you?

Immigrants are extremely popular scapegoats.

It's alright, National and their friendly NZ Initiative / Iniquity have assured us that huge immigration volumes don't drive up house prices and indeed only improve things for everyone. So we'll rest assured we're not harming anyone else's chances by taking a job and accommodation in another market.

Indeed. I've looked at Adelaide (a city only slightly smaller than Auckland), where property purchase prices and rents are actually cheaper than Wellington in equivalent cases.

There's nothing wrong with taking a far stricter approach to both immigration and foreign property investment. This is one of the election issues which will propel the Winston Peters party perhaps to a higher representation in parliament. I'd rather a more reasonable political party took this issue up, in a less inflammatory and more sensible manner.

The argument about the top 10% of the taxpayers relates to income tax - and yes, it's likely true. All the more reason we need to tax land, not labour.

Exactly!

Good job. Tax needs more of a shake up than just changing income brackets and rates of PAYE.

Personally I am in favour of a decentralised taxation system, which would allow regions to determine their own taxation strategies to provide competitive advantage. Really can't see that ever happening though.

Me too. I would want regions to be able to tax to fund their own infrastructure.

A better goal, both in reality and for the election, would be to target home ownership rates. Its always easier to sell something positive! You could have a land tax with rebate for owner occupiers. This would achieve the target without burdening the elderly. By itself, a land tax is just an attack vector that plays into the hands of the mainstream media and National party.

11
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The votes are there for the taking by Labour. The Nats have had years and done nothing, so anything they put up now wil be teated as a desperate last grasp to hang onto power.

I expect Labour will dribble out more and more appealing policy...stuff that we have been ranting on about on this site for years. Labour have been patient....they understand if they release anything too soon, the Nats will counter with a similiar policy. Roll on Nov.

The bread and circuses crowd is growing and more of this will simply accelerate our decline. Before long we will have more than 50%+ of the population paying no tax at all (Labour's idea of "fairness for all") and we will have the govt go from 35% of GDP to over 50% of GDP like France, Venezuela, etc, and then the collapse into anarchy and chaos will begin. The characters throughout history change but the playbook and traits remain the same...

Finland, Norway, Sweden, Germany etc. Horrific places. Terrible societal incomes. Perfectly right, harrumph!

A rebalancing of less tax on income (and GST) and more on capital would help those at the bottom get closer to equality of opportunity. (Let's not kid ourselves about equality of opportunity currently existing, and claim the left is after equality of outcome.)

All those countries benefit from a lower exchange rate because of the PIGGS and France . We do not have this benefit nor the trade advantages for improved products

Uninformed alright. Hows does norway and swedens exchange rate get influenced by club med countries?

Labour are constant with their tax grabbing to pay out more to those who won't work, As usual your average Joe or Jane who regularly goes to work will pay the price.

No different from National with that respect. From the 2016 figures 50.5% of the social welfare budget goes to paying super. If Labour wants to increase tax to give the money to pensioners I can't support that.

So are you in favour of the switching from income tax to wealth/land tax? Should be a win-win, reduce tax on people doing honest work and increase it on people funding their lifestyle by collecting rent.

Wait, so you're in favour of the taxation changes? Since it'll be beneficial for those who work, moving more of the tax burden on unproductive assets (e.g. land).

The average Joe or Jane will see a benefit from this scheme.

Haha, own goal!

The savings of today are the capital of tommorow , we already discourage savings through low interest rates , so why would we do more damage to those who save and provide capital ?

Robertson should ask why our Banks , Insurers , and major businesses are all owned offshore , or why no one could afford to buy the Crafar farms ?

Quite simply previous lefty governments have taxed all the ability of those able to create Capital , taken it from those who worked for it and we are now not able to raise capital ourselves .

The first problem with socialism is that if everyone is the same or equal , we are all poor .

The second problem with socialism is that you eventually run our of other peoples money to spend

Of course we could afford Crafar..and Silver Fern Farms ..and so on. But no, we have been incentivised via the tax system to buy property off each other instead. Not sure why this is Robertsons fault?

Because Boatman only posts anti-labour and pro-national rhetoric?

Here we go again , while my views often align with National , I am not joined at the hip when it comes to voting for them .

I will vote for the party that can sort out the housing crisis, and the party that keeps taxation low and GDP and employment high .

Robertson dresses it up as diverting speculative capital to productive enterprise, cleverly linking it with a land tax. Objectives he knows many support.

But outside Labours low tax rate constituency, most will see the announcement for what it really is: the first chapter of an ambitious left wing agenda - state expropriation of as much private wealth as they can get their thieving hands on.

I don't quite understand your point of view here. Are you saying any change to current tax laws around property/land/capital is theft ? Paying more income tax is theft ? Attempting to bridge the inequality gap is theft ?
Maybe the Isle of Wight would suit you better.

I'm raising the likelihood this is the first glimpse of a hidden agenda to tax assets. Or in other words to confiscate part of their previously accumulated value. So yes, theft.

Tax on capital. Imagine a random person, millions in debt on a property portfolio, with insufficient income to wipe said debts nose. All carefully structured to generate a loss on ones personal tax at a level that's survivable - waiting for positive leverage to make them rich one day. How much of a change would having to pay a new capital tax from already depleted personal income have? Suspect it will be more than a few lattes worth.

More potential headwind for specuvestor. Whats the number of new listings wanting quick sale in Auckland up to now?

The discussion here is meaningless. Fundamentally Robertson is using lots of pretty words strung together in an interesting way. With no detail about how they will achieve this, they are meaningless. The opening comments strongly suggests that they will punish savers while rewarding spenders. How is this positive? Why will people save for retirement, own their own home, buy a car and so on. Smells too much like they are buying in to GMs TOP rubbish about taxing everything, and bank propaganda about debt being a good thing.

Does anyone know of/ have seen a good lecture of the effect of a LAND TAX and how it works ?

Labour believes in equality so they will increase tax to make everyone equally poor.

Generally Labour's voter base are the lower socio-economic population so naturally they would want to increase that voter base. They should instead be increasing incomes of the poor by investing in education and health however the risk is these people, once they become wealthier and feel successful might look beyond Labour and vote National.

Goodness me. No such thing as a 'fair, progressive taxation system', that will drive a productive economy. Progressive taxation is regressive as to a productive economy because it disincentivises productive individuals.

Given it's an election year, people like me are so un-represented in NZ politics. I'm a social liberal free market capitalist: there is no one representing that viewpoint. ACT are definitely classical liberals under Seymour, but a vote for them is a vote for National's dreadful social conservatives and I'm thinking this year I'll vote Greens to get in euthanasia and cannabis legalisation, thieving tax policy and their dreadful Big Brother state aside.

Have a land tax if you want but would be a nightmare to value and administer. If we replaced ALL taxes and exemptions with an FTT on all bank deposits so that everybody contributes to the running of a country then yes that would be a worthwhile discussion but otherwise you are all just p...s...g in the wind.

Yep more tax and restrictions on your population is all you need to make everyone more wealthy... labour have always been the envy party and the more you truck with housing the more trucked up it will become, free market has always been the best way to regulate anything

I agree. So why weren't National able to free the market to work properly, time for someone else to give it ago. As far as I can see building homes is still only profitable in a very limited circumstance. Which doesn't make any sense, given the obvious demand.