National’s 100 days action plan is frankly performative nonsense.
They were elected on a platform of helping the squeezed middle. So far they have studiously avoided them.
The topics for urgent action in Parliament were to get rid of fair pay agreements, something that could have helped the squeezed middle, introduce fire at will for all companies which will do wonders for workers wanting to keep their new jobs, change the Reserve Bank mandate so that unemployment is not so much of a concern, and roll back changes to the RMA and sneakily include a Henry VIII powers to the Government to change laws by regulation. This last change is something that I will analyse in more detail separately. But I agree it is terrifying.
The last thing that National smashed through under emergency was to repeal the Taxation Principles Reporting Act. You may ask why there was som much emergency attached to the Act’s repeal.
As Deborah Russell said during the introduction debate for the Bill about the Act:
[The Taxation Principles Reporting Act] does not collect more tax. It does not change how our tax is calculated in any way. But what the Taxation Principles Reporting Act does is it gives us information about our tax system. It tells us how well our tax system is doing. Now, that’s incredibly important in a democracy. Every three years we vote—that’s part of our democracy. We spend time lobbying the Government, we spend time making presentations to select committees, we spend time on petitions and on demonstrations, we engage in our governance at all sorts of levels. That’s our democracy. It’s a complex and multifaceted beast.
But one thing that makes our democracy function better is information, so that people have a good understanding of the issues in play. Now, here’s the problem: tax makes up half the Budget. It’s an incredibly important part of our annual Budget process. It’s something that people need to understand. It’s something that people need to have good information about. Yet most people find it quite mysterious, and it’s actually hard to find information about our tax system.
The Act requires reporting of important information including analysis of income distribution and income tax paid, distribution of exemptions from tax and of lower rates of taxation, perceptions of integrity of the tax system and compliance with the law by taxpayers. The principles that were to be reported against include horizontal equity, efficiency, vertical equity, revenue integrity, compliance and administrative costs, certainty and predictability and flexibility and adaptability.
The Act was the brain child of David Parker who wanted to achieve something that is very difficult, fairness in the tax system.
As he said during the debate on the introduction of the bill:
Over the years. Governments of all stripes have set up working groups and review committees to pursue the Holy Grail of an efficient, fair tax system. The most recent was the 2019 Tax Working Group, chaired by the late Sir Michael Cullen. Before that, there was the 2010 Victoria University of Wellington Tax Working Group. In 2001, we had the McLeod Tax Review. Before that, there was the Valabh committee, and before that, the Richardson committee. These inquiries in New Zealand, and others overseas, have all described the main principles of a good tax system.
Yet here we are, after all those reviews, still striving for fairness. In the absence of facts about actual outcomes, half-truths can be too easily manipulated to suit political objectives and vested interests. That’s why we commissioned the Inland Revenue to research the effective tax rates of high-wealth individuals. We wanted evidence based on real dirt—data—not surveys alone, which are inaccurate at the top, in order to assess the fairness of our current tax system. Now we have that evidence. Inland Revenue’s internationally ground-breaking study shows beyond doubt that New Zealand’s wealthiest citizens pay tax on their economic income at a rate that is less than half of what other New Zealanders pay on theirs. Now, it was not surprising that some gap existed, for the obvious reason that very wealthy people earn a higher proportion of their income from sources like gains on investment that are not taxed. Most New Zealanders make do with their regular pay packets, which are all subject to income tax.
But what was surprising is the extent of the gap, and it turns out that an average of 93 percent of the income of the high-wealth group comes from returns on investments. It’s now been well-reported that a person whose income is an $80,000 salary or wage pays an effective rate of 30 percent when you include their income tax and GST. By contrast, the high-wealth people in the Inland Revenue study pay an effective tax rate of just 9.4 percent including the GST they spend on their GST-inclusive purchases. Their average assets were $276 million. Rather than trickle down, it’s been gushing up for this group, and the Inland Revenue study shines a light on how extreme the wealth disparity has become in New Zealand and how lower effective tax rates have contributed to that.
National and Act bitterly opposed the bill but it was passed after a select committee hearing.
The first report was due at the end of this year. No doubt it was at a very very advanced stage of preparation and also we will see a draft of the report.
The questions will then be asked why repeal the requirement to present a report, and even more importantly why smash it through under urgency.
The policy was not campaigned on. You get the feeling that some of the right’s funders may have insisted on this being part of the policy mix and this is pay back time. Multi million donations are not made with no expectations.
And it did not appear in the National Act coalition agreement, the National NZ First coalition agreement or National’s 100 day plan.
So you have to wonder about the urgency and the haste. Maybe ministers had a peek preview of what the report would say and were shocked that IRD would say that the tax system was unfair and wealthy people were not paying their fair share.
Time will tell. Either the OIA will result in the release of the draft or it will leaked but I am certain we will see it. And then we can wonder what it was that National was trying to hide.
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