Abolition of gift duty tax cut for rich, says Goff

Phil Goff. Photo / Mark Mitchell

The scrapping of gift duty, announced by the Government on Monday, represents a tax cut by stealth for the wealthiest New Zealanders, Labour leader Phil Goff says.

"The abolition allows the very wealthiest New Zealanders to structure their affairs by transferring income and assets into trusts and to their children to reduce their tax liability," he said.

Officials estimate people spend $70 million a year in compliance costs to avoid gift duty which last year yielded just $1.6 million of revenue.

That was no reason for removing it, Goff said. "It just shows potentially how valuable this free lunch will be for the wealthiest Kiwis."

But PricewaterhouseCoopers chairman John Shewan said it simply reflected the bureaucratic impositions in a system that made gift duty reasonably easy to circumvent.

"We are fooling ourselves if we think people are not currently able to have lower rates of tax by virtue of funds being invested in lower-rate taxpayers' names or entities. They can do that now, and legally, through a variety of ways, such as ... depositing less than $27,000 a year [in the recipient's bank account]," Shewan said.

"I don't think it is right to conclude ... that the current rules are preventing significant avoidance. If that were the case the arguments would be much stronger."

Revenue Minister Peter Dunne said Goff should "put up or shut up".

"Yes or no, will Labour bring gift duty back and at what level?" Dunne said.

Labour's associate finance spokesman David Parker said the party had not taken a position on whether it would reinstate gift duty.

"To be honest we haven't even talked about it. We were somewhat surprised at the abolition. We won't be announcing our tax policy until closer to the election."

Labour regards the law change as making it easier for wealth to pass from one generation to the next and thereby contribute to greater concentration of wealth and to income inequality.

But Shewan said gift duty had originally been introduced, 125 years ago, to buttress estate (or death) duty, which in turn was intended to encourage people to spread their wealth among their children and not let it accumulate with one heir.