Wednesday, January 20, 2010

ZenTiger Tax Working Group Report

The VUW Tax Working Group Report is out. Looks like they worked hard on it. They have correctly identified many of the anomalies and inconsistencies in the tax system. Here's one that Labour infamously promised wouldn't happen under their watch:

The top 10% of income earners now pay 44% of all personal income tax (if the impact of WfF, New Zealand Superannuation and other benefits including the unemployment benefit are included, the top 10% of taxpayers now pay 76% of net tax).

Ouch.

They also want to ensure the Government always gets the money they think they deserve:

A good tax system should minimise uncertainty over future tax rates and the future application of tax bases. This requires that there is a degree of assurance that the tax base will provide revenue adequacy now and in the future

Which can be taken several ways. I didn't see any reference to "locking in CPI increases on tax thresholds" and so forth, but I've only skimmed the report at this stage.

They naturally came up with some recommendations, and my crystal ball wasn't too far off the mark, I had been expecting most of these pronouncements (probably due to all the spoilers sneaking into the press):

1. Align the company, trust and top PAYE rates.
2. Drop the company tax rate.
3. Keep the imputation system
4. Drop the top personal tax rate.
5 Introduce (and look for) new taxes to broaden the tax base.
6 Introduce a comprehensive capital gains tax (CGT) [Family Home?]
7 A special tax on residential investment properties.
8 A land tax. [On the family home?]
9 Reducing or removing tax offsets on depreciation
10 Ensuring GST applies broadly, with no exemptions
11 Increase the GST rate to 15%
12 Review the welfare policy
13 Increase "institutional awareness" to make tax fairer.


Obviously, items 1-4 need to be taken together, and would indicate a target top tax rate of 27-30%.

Item 5 must mean they think they may have missed a few things. Breathing, dying, CO2, H20, having children, and IQ testing spring to mind as possible candidates.

Item 6 was fun, in that they may wish to include the family home in the CGT net (must check the dictionary for the meaning of "comprehensive"). I doubt that would happen, even if they do make the recommendation - John Key would not want to commit political suicide in his first term. It takes three terms to build up that level of confidence and arrogance.

Item 7 seems to be a "double plus good" type of tax, and sounds all very good to get those rich property bastards to invest in shares instead, but ultimately rents (renters) will wear the cost.

Item 8 - Well I told you so. Bad idea. Starts low, and creeps up and up and will please communists and the filthy rich no end, and retires will find it less stressful if they die young. Iwis walking into big land settlements will be back in court demanding exemption from the colonialists tax I suppose.

Item 9 - I've mixed feelings about this. Given one can claim directly on maintenance costs, removing a depreciation allowance is not the worst thing in the world. It just highlights to me the government taxes and credits far too much and generates these kinds of issues through their constant intervention (I hate the depreciation rules in general but that's a different issue).

Item 10 - Well I agree, but it's there to stop the inevitable suggestions to exempt food from GST to help the poor. I'm almost with the poor on this, but then it defeats the simplicity of the GST system. They'll need to find another way. Expect the debate to be made though.

Item 11 - Whilst PAYE remains - I am not in favour of this. Scrap PAYE completely and then lets talk.

Items 12 ans 13 are fairly wishy-washy and I hope in the detail they make much more concrete statements. My skim read they certainly go on about WfF but the analysis seems to stopm after that point, and I didn't see any detail about CPI protection of margins, about limits imposed on tax raises and how they could legally stop Labour raising all the PAYE rates back up again, like they did first time around. They do at least acknowledge the danger of this.

I'll have a think and comment in full later.

2 comment(s):

Gooner said...

It'd be interesting to see the comparisons between this report and the McLeod report of 2001 which Labour honourably ignored. I'm fairly sure it contains the mostly the same recommendations.

That was 10 years ago almost.

And the baby sleeps.

PM of NZ said...

I dialled up the McLeod report a couple or three hours ago via Google. At a cursory glance, thought there was no difference between the two. Same old same old. I will very surprised if the government will have the balls to implement any of it bar maybe increase GST to cover the deficit in tax income. It will be easy to implement, hard to resist the extra take. The other recommends all involve too many permutations and possibilities for loopholes.

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