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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