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:
- 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.
- We should not introduce a land tax.
- Incentives for small business could include:
- No tax on gains made on the sale of small businesses, whether incorporated or not.
- 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.
- 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.