Quiet comeback for tax on wealth

Photo / Paul Estcourt

The Labour Party is quietly exploring the merits of including a capital gains tax or a land tax in its election manifesto next year.

Acutely conscious of the political dangers of even mentioning, let alone discussing, wealth taxes, the party is moving extremely cautiously and saying little publicly about the review of its tax policy.

However, what it is saying is being worded very carefully to ensure that it does not narrow its tax reform options by ruling out introducing one or other tax before the policy is finalised.

If it wins next year's election, Labour will have to find some means of broadening the tax base to provide alternative sources of revenue to pay for implementation of its policies because government finances will be so tight.

Labour leader Phil Goff yesterday would not rule out the introduction of a capital gains tax, but said any such measure would exclude the family home.

The possibility that Labour might opt for a new tax arose after the passage of a remit during the party's annual conference in Auckland at the weekend.

The remit suggested there should be public input on the possibility of a fairer tax system "where we tax all forms of income equally no matter how that income is earned".

It would help Labour's argument that the tax system be made fairer after National's income tax cuts which Labour says overly benefited the wealthy.

Such a tax could also be used as an incentive for people to channel savings into more productive areas of the economy, rather than speculative investments, such as property.

Labour's finance spokesman, David Cunliffe, yesterday said no decisions had been made on a revised tax policy.

However, he confirmed the policy was being developed within the context of tax neutrality and the need to broaden the tax base.

This year the Government's tax working group questioned the efficiency of a capital gains tax.

It said that while such a tax had attraction as a means of broadening the tax base, there were concerns about the application and administration of such a tax.

Most members of the group supported the introduction of a low-rate land tax as a means of funding tax rate reductions and improving the overall efficiency of the tax system, but acknowledged political difficulties.