The New Zealand government is currently considering major reform of the country’s tax system and recently set up a Tax Working Group to make recommendations.
 
 
 
 
 
 
 
 
 
  • Should we have a capital gains tax?
  • Should we have a land tax?
  • What should be done to incentivise small business?
  • What should be done to protect the environment?
  • Should fruit and vegetables be excluded from GST?
  • Should there be a tax on sugary drinks?
Michael’s recommendations are:
  1. If we introduce a capital gains tax, it should be as simple as possible.
A capital gains tax should not apply to the family home.
 
  1. We should not introduce a land tax.
 
  1. Incentives for small business could include:
  • No tax on gains made on the sale of small businesses, whether incorporated or not.
  1. We should introduce an emissions tax.
Emissions trading schemes don’t work.
A tax on emissions would be better.
It would have to exclude exports.
  1. We should not introduce any new GST exclusions
New Zealand’s GST is currently the best value-added tax in the world.  Problems with GST exclusions include:
  • They don’t make much difference to affordability.
  • The largest savings go to the richest consumers.
  • A subsidy would be better.
 
      6. We should introduce a sugary drinks tax
  • Medical opinion is unanimous on the harmfulness of sugary drinks.
  • A tax wouldn’t solve the problem but it would ameliorate it.
  • Should be charged on all fizzy drinks with more than 2% sugar.
  • Rate of tax: $1 per litre.
Ken Palmer thanked Michael for his very interesting presentation.  Ken commented that if a capital gains tax is proposed by the Tax Working Group on all property other than the main residence, it could become a big election issue.  National are opposed to a capital gains tax, as could be all property investors.  The position with farm land could result in a huge negative response from every farmer in NZ.  This could result in Labour losing the next election regardless of the fairness of the tax.
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