Update of the Tax Working Group

Update of the Tax Working Group

Update of the Tax Working Group

On 2 March 2018 Sir Michael Cullen, Chair of the Tax Working Group, spoke at the International Fiscal Association’s conference being held in Queenstown.  He announced that the Working Group would release a background paper on 14 March 2018, which would summarise the main characteristics of the existing tax system, and discuss challenges and possibilities facing New Zealand.  Set out in six areas these will be:

  • the future environment within the tax system that must provide adequate revenue to fund government programmes;
  • the purposes and principles of a good tax system;
  • the key features of the current New Zealand tax system;
  • the key results of the current system;
  • thinking outside the current system; and
  • specific policy challenges that the Working Group need to address under their Terms of Reference.

Submissions are invited on this paper through to the end of April 2018.  September 2018 is the target date for the first interim report to Government.  The final report is due by the end of February 2019 after further public, political, and professional feedback on the interim report.

Excluded from the review (as previously stated) include:

  • Inheritance tax
  • Any increase in the rates of income tax or GST
  • A capital gains tax (or further taxation) on the family home and land, and
  • Areas already under review as part of the Tax Policy Work Programme

While Sir Michael has indicated that these exclusions and limitations would not unduly restrict the Working Group’s mandate, I’m sure that there is plenty of wriggle room in there to enable scope creep to enliven the anticipated debates.  As you may already be aware, there is a Bill before Parliament that raises the residential Bright-line rules from two years to five years, expected to become law later this month.  Anyone who has examined the family home exemption will know that there are many situations where the family home is caught in the capital gains net.

The Terms of Reference for the group include examining improvements in the structure, fairness and balance of the taxation system in New Zealand.  They must also pay particular attention to the economic environment over the next five to ten years, what will drive those changes and whether taxing capital gains, land or other housing tax measures will improve the tax system.  Included in this mix is the role tax has in creating a positive environment and ecological outcomes.  Consideration will be given to a progressive company tax system.

This last one will look at the board approach being taken overseas, including Australia, where companies with smaller turnover have a lower tax rate, and the United States where their recent Tax Cuts and Jobs Act of 2017 offers a discount for certain types of taxable income for some taxpayers based on a combination of employee costs and capital investment. 

Membership of the Tax Working Group

The members of the Tax Working Group members are:

  • Sir Michael Cullen, former Deputy Prime Minister and Finance Minister in the Clark Labour led Government
  • Professor Craig Elliffe, University of Auckland
  • Joanne Hodge, former tax partner at Bell Gully
  • Kirk Hope, Chief Executive of Business New Zealand
  • Nick Malarao, senior partner at Meredith Connell
  • Geof Nightingale, partner at PwC New Zealand
  • Robin Oliver, former Deputy Commissioner at Inland Revenue
  • Hinerangi Raumati, Chair of Parininihi ki Waitotara Inc
  • Michelle Redington, Head of Group Taxation and Insurance at Air New Zealand
  • Bill Rosenberg, Economist and Director of Policy at the CTU
  • Marjan Van Den Belt, Assistant Vice Chancellor (Sustainability) at Victoria University of Wellington.

Other than Hinerangi Raumati from Parininihi ki Waitotara Inc (an organisation whose mission is “To be a successfully diversified and sustainable Taranaki Māori owned and operated business providing meaningful opportunity to our people”) we are disappointed that the Working Group does not have other Non-Government Organisation representatives.  The contribution of NGO’s to the economy of New Zealand cannot be underestimated.  And while virtually all enjoy tax-exempt status (i.e. income tax exemption) they are still significant taxpayers through GST, Payroll and ACC and have a large employee base.  Internationally, the tax-free status of NGO’s is under threat, and this is no different in New Zealand.  Given that NGO’s are a significant sector of society, contribute in areas not supported by the Government, and represent many in our society, their absence from the table is a concern.   

 

 

“How much better to get wisdom than gold, to get insight rather than silver!”  Proverbs 16:16

Posted: Wednesday 7 March 2018