Thursday, March 28, 2024

ALTERNATIVE VIEW: Gains tax okay, rest is piffle

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For the record, I don’t have problem with a capital gains tax provided it is broad-based and simple to administer. By my research 20 countries have a CGT and New Zealand is alone in the Organisation for Economic Co-operation and Development in not having one. 
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Interestingly, the average CGT rate in the OECD is higher than that proposed here.

So, the wheels won’t fall off with the introduction of a CGT and we’d just be joining the rest of the world by having one.

That view is supported by the EY global chairwoman of tax and also entrepreneur Bill Gates.

What all the anti CGT rhetoric has ignored is that, in reality, we have a partial CGT now. All that’s being suggested is a broadening of the base.

If you make your money buying and selling properties you pay what is effectively a CGT on your profits and the same applies with shares.

In addition, it isn’t a tax grab as some opponents have labelled it but a broadening of the tax base. It is fiscally neutral so most Kiwis will be better off.

My issue with the Cullen report is that its proposals are unnecessarily complex and they’ve gone into areas where I’d suggest they are totally unqualified to be.

The make-up of the panel is interesting. You have your usual tax experts, accountants, lawyers and the like, an ecological economist who is a skeptic of economic growth as the primary societal goal and the chief executive of Business NZ. There’s also a person with a particular interest in iwi commercial activities and the economist and director of policy at the NZ Council of Trade Unions.

There’s not a farmer, agricultural academic or primary sector chief executive to be seen and it shows. 

Sadly, it didn’t stop the committee running free with ill-considered recommendations for the primary sector.

My belief is the committee made a raft of recommendations they are simply not qualified to make.

For example, why would you have a fertiliser tax? That is simply a tax on production and won’t achieve anything.

It is also unfair as there isn’t proof fertiliser pollutes but there’s a ton of available evidence that towns and cities do.

My view of a fertiliser tax is that it would be a punitive tax on farming.

The water tax options are also woolly, in my opinion.

Yes, farmers take water for irrigation and I’d like to see a lot more of it.

The water taken for irrigation would, however, be a small percentage of that taken to generate the power to support the Tiwai Point aluminium smelter. 

I’m assuming, of course, any water tax would be fair and equitable.

It would also inevitably increase the price of power for working Kiwis and the costs for our manufacturing and processing industries.

Is that what the Government wants?

What really got me going, however, was the natural capital enhancement tax.

It is, we are told, based on the idea of an environmental footprint tax and operates as a modified form of land tax.

My simple question on that tax is to ask who will decide what the tax is.

Will there be a universal rate for dairying, sheep and beef and horticulture?

That would achieve absolutely nothing.

Will we have environmental tax inspectors visiting farms and assessing their footprint?

I can’t see that achieving anything either.

They could just support a land or envy tax and be done with it.

There’s also the hardy annual of taxing agricultural emissions.

My view of that is the theory might be fine but the science behind it is distinctly dodgy. 

Again it would be a punitive tax on farming.

I know the little darlings at Landcorp are in favour of a fertiliser tax and made a sneaky submission to the tax committee supporting it.

The committee would be infinitely better informed talking to successful farmers, those who generate a good return on their capital. Landcorp doesn’t.

As I said at the start I don’t have a problem with a simple, broad-based CGT.

I do have a problem with the approach taken by the taxation working group and the blissful ignorance shown of all things farming. 

Finally, I am heartened by the fact we have an MMP electoral system.

A CGT at any level or punitive taxes on agriculture won’t fly unless NZ First agrees to it.

That party has spent a considerable effort supporting provincial NZ, infinitely more than the previous Government did.

Will they let the Government, supported by the anti-farmer Green Party, cripple the rural sector with punitive taxes?

So, the harsh reality is the Tax Working Group has come out with its recommendations. Now it’s the politicians’ turn and that will require the agreement of the majority Labour Government, the Greens and NZ First.

For that reason I’m relaxed.

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