Stuart Nash
We made the right call on the capital gains tax proposal.
The Prime Minister has ruled it out now and for future terms of government.
Jacinda Ardern described herself as 'a pragmatic idealist' when announcing the decision. She's got it in one.
Many in Government, including myself, saw much in favour of a capital gains tax (CGT) and we share some disappointment that we couldn't make it work. But we are realistic.
What is great in theory has to also work in practice. We listened to a wide range of voices. It became clear that there was not a mandate for the change.
There are other ways to achieve fairness in our tax system and our economy and our social policies. That is what we are now working on. So what have we learned from the Tax Working Group's broader review, and what are the new priorities for improving the fairness of the system?
I have been responsible for Labour's revenue policies both in Opposition and in Government.
A CGT was never about cooling an overheated housing market. There are plenty of foreign examples of boom-bust housing cycles in countries with a CGT. Nor was it seen merely as a tool to raise revenue. It is seen as a way to enhance the integrity of the tax system itself. We remain focused on that.
Of course, New Zealand already has a limited form of capital gains tax introduced by the previous National Government.
They introduced the so-called 'bright-line test' on residential investment property. The bright-line is the two year timeframe for buying and selling property which would be subject to tax. We extended it to five years to more accurately catch those who speculate in housing for profit.
Anyone who has a business trading in property should be paying tax on profits. In the absence of a CGT, one area of tax law we need to tighten is compliance around the bright-line test.
Recent data from Inland Revenue showed about a 50 per cent compliance rate and so I have asked my officials to come back to me with proposals to increase compliance in order to ensure fairness for all Kiwis.
On the question of improving fairness, it might surprise some people to learn the Tax Working Group was not solely focused on a CGT.
The group's final report actually contained 99 recommendations. It found that overall our tax system is clear and simple but there is room for improvement.
There is some unfairness that we need to address. There is no need for a major overhaul of the system. We will preserve the key principles of our existing broad-based low-rate tax system.
For example, there were 19 recommendations that would ease the compliance burden for small-to-medium enterprises. There were other recommendations to drive productivity that I am very interested in exploring further.
The Tax Working Group also recommended that offshore retailers who sell low-value goods online into New Zealand should return GST on the purchases. This puts them on the same footing as our local high street retailers who have never enjoyed such a tax break, despite working long hours and supporting local communities.
We also have the big multinationals in our sights, who use aggressive tax planning to hide their profits in foreign jurisdictions. And the digital economy, where foreign companies earn an income from New Zealand users of their platforms, such as advertising dollars, is also getting our attention.
There are a number of ways that we can continue to drive efficiency and increase the integrity of the tax system without a CGT. It is only fair that everyone pays their fair share; nothing more or nothing less. That is, after all, what a fair tax system is designed to do.
*Stuart Nash is Napier MP and Minister of Police, Revenue, Fisheries & Small Business