Chris Hipkins says Cabinet considered ‘range of issues around tax‘ after National claims capital gains tax discussed

Prime Minister Chris Hipkins in conversation before he promised no CGT in the Budget. Photo / Jason Oxenham

Prime Minister Chris Hipkins suggested a tax on the wealthy was considered by Cabinet as part of “a range of issues around tax” this year, after accusations from the National Party at the weekend over a potential capital gains tax.

National’s finance spokeswoman, Nicola Willis, told TVNZ’s Q + A that she understood a proposal on taxation had gone to Cabinet earlier this year.

“As I understand, what it amounted to was a tax on unrealised capital gains,” Willis told the Herald.

When asked whether any tax on wealth or capital gains had gone to Cabinet this year, Hipkins said the Government had considered a range of tax proposals during Budget talks.

“We consider a range of issues around tax as part of the budget process and we’ll be releasing all of that as part of the post-Budget information release,” the PM said.

Both Hipkins and Finance Minister Grant Robertson had openly considered tax changes in response to the cost of Cyclone Gabrielle and the Auckland floods.

But Hipkins ruled a cyclone levy out of Budget consideration last week, along with a capital gains or wealth tax, or any other “major” tax change.

In a speech, he said none would be included in the forthcoming Budget, but the door is open to tax changes in Labour’s 2023 election manifesto.

Hipkins would not say what non-“major”, if any, tax changes would be included in the Budget.

“I made it very clear where we stand between now and the election and then the Labour Party will release its tax policy prior to the election,” Hipkins said.

“I’m not going to get into what was and wasn’t considered as part of the Budget process,” he said.

It is standard for Budget papers to be released in the months after the delivery of the Budget.

“We don’t talk about what the Cabinet did and didn’t consider as part of the Budget,” Hipkins said.

Willis said the Government needed to be clearer on the issue.

“What I understand is a proposal went to Cabinet for a form of capital gains tax that discussions were had about that and for whatever reason they are not proceeding with it at the Budget,” Willis said.

She said Hipkins needed to clarify Labour’s policy on tax increases, not just at the Budget but for the next term of Government too.

“The question the Prime Minister needs to come clean on is not what he is doing in the next three weeks but in the next three years,” Willis said.

National has promised to index tax brackets for inflation to the end of 2021 and to keep the 39 per cent tax rate and make a number of tax changes to the treatment of rental properties.

While its current tax policy is more detailed than Labour’s, it too has not released a full election tax policy.

The tax speculation was fuelled by an Inland Revenue report published last week that found the wealthy pay tax at half the rate of middle-income New Zealanders if you include all income, both taxable and what is currently not taxed.

An IRD study into the tax rate paid by a sample of 311 wealthy New Zealanders found they paid a median effective tax rate of 9.4 per cent.

Treasury reckons a comparable tax rate for a “middle-wealth” Kiwi was 20.2 per cent - that rate includes GST they pay and any benefits someone might receive like Working for Families. If you leave those out, their tax rate is even higher.