Interim Tax Working Group report shows signs of extending the tax net

The options put forward for taxing capital income in the interim report delivered by the Tax Working Group (TWG) today show good potential for extending the tax net, says the PSA.

"However this alone doesn’t sufficiently address the need to grow a broader tax base to sustain decent public services for the public good of all New Zealanders,” say PSA national secretaries Glenn Barclay and Erin Polaczuk.

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https://taxworkinggroup.govt.nz/resources/future-tax-interim-report

“In addition we note that the scope of the TWG has continued to shrink – with no further work to take place on GST coverage, wealth tax, land tax, changes to petroleum and minerals royalty regimes or a financial transactions tax.“We have a concern that the opportunity for genuine tax reform is being constrained by the requirement placed on the TWG by the Government to deliver a revenue-neutral package, with the added backdrop of a stubborn refusal to relax the Budget Responsibility Rules.

“It was positive today to hear the TWG chair Sir Michael Cullen speak about the prospect of a ‘comprehensive, targeted capital income tax regime’ as a driving force. We strongly support taxing capital in order to improve the fairness, balance, structure and equity of the tax system in New Zealand.

“We agree with the question posed by Sir Michael at the TWG briefing today about capital gains taxation, namely if other developed economies can do this, why can’t we?

“It was good to hear that when it comes to its final report on the form of capital income tax options – one being to tax gains as their value appreciates, even if they aren’t sold, or to tax gains at the time they are realised or sold – the TWG may prefer a combination of the two options.

“On the other initial findings of the TWG revealed today one of the areas we support includes the options for encouraging greater saving through the KiwiSaver scheme for retirement savings.

“It is positive to see the TWG’s proposal for a targeted removal of the employer superannuation contribution tax to benefit employees earning $48,000 per annum or less. We agree this, although a modest incentive, could help as a step to reduce gender gaps in saving.

“The PSA will now be carefully considering our response to the options that have been put forward on what form of ‘capital gains’ tax would operate - and to the report’s other 57 recommendations - before the deadline for feedback in six weeks’ time”.

Note: As well as its submission to the TWG in May this year the PSA has published the booklet Progressive Thinking: Ten Perspectives on Tax, available at psa.org.nz  Additonally in May this year a UMR survey commissioned by the CTU showed 92% of New Zealanders agree public services like hospitals, schools and the transport system need more government funding, with Almost two-thirds saying the government should increase tax to at least maintain public services at their current levels into the future.