Tax Working Group report preview

Written By: - Date published: 9:59 am, December 1st, 2009 - 25 comments
Categories: tax - Tags:

Let’s hope the Tax Working Group’s report out today is more worthwhile than the effort of the 2025 Taskforce.

The basic idea that has emerged from the interim reports is that we should try to take tax off income and put it on land. If you tax stuff that can”t moved out of the country, rather than stuff that can be you’ll have less negative effect on the economy from taxation.

Of course, John Key has already ruled out a capital gains tax, and he doesn’t seem too keen on a land tax. So, closing the tax loopholes may be the only open avenue.

What taxation to put on land is only half the story. The other half is how income tax is cut. Will it be just a big tax cut for the rich or a smaller one for everyone? There is no reason that any changes should be in the form of cutting the top rates, which benefits hardly anyone, only those who are already well-off. A tax-free bracket on income tax is the best and fairest way to distribute revenue from new property taxes.

To be credible, the report will have to show who will pay more tax and who less as a result of the changes it proposes. If it just cuts taxes for the rich it will amount to a covert transfer of wealth from working Kiwis to the rich and that will be a disgrace.

25 comments on “Tax Working Group report preview”

  1. TightyRighty 1

    Don’t the rich work Marty? or do they work and make wealth work for them through more hard work? a moot point really.

    I support the idea of a tax free income bracke.t it is the most sensible and equitable way of providing a tax break. it is also proportionately the fairest to the lowest earners, whilst having a meaningful impact for all workers. it would either drive demand or increase savings depending on an individuals preferences. and in addition, it would start to remove some of the discrimanatory impact of WFF.

    • prism 1.1

      What would happen with a tax free bracket for low income people is that they would be the subject of labels such as bludgers, you aren’t paying your way, not contributing etc. It is better if everyone pays something and is not put in this invidious position. I think that 10% tax for everyone to say $10 – $20,000 would be fairer, and would reduce income tax to the low strata. They would then be paying 22half percent as most of their income would be spent on GST- gathering expenditure.

      The 10% tax would also apply to interest on savings and dividends up to that amount.
      That would be helpful in encouraging people to save and invest wouldn’t it! How about that for an idea. Some tax would be given up, but it would be a powerful incentive to invest in NZ by NZs.

      Don’t take away the status of tax-paying good citizens from low income workers. That might seem a reasonable approach to someone who is in a higher status position. But it is sickening how people on higher brackets disdain or even despise low income people in their thinking. You have to be on the receiving end of it to really notice it and there should not be further avenues opened to increase it.

      Unskilled or semiskilled work is not recognised as being worthwhile, the comment often made is that people should educate themselves so they can get a better job. Not everybody can, but if they did, who would do their vital jobs? Part of the free market is choice and people might choose not to do these jobs that are given low wages and low status. The societal jigsaw would have pieces missing, and that loss would become increasingly obvious.

  2. quenchino 2

    Don’t the rich work Marty?

    Not unless you count clipping tickets.

    • TightyRighty 2.1

      yes clipping tickets is a sure fire way to wealth. good on you for discounting all the risk that may have been laid on the table to acquire wealth. if it was as easy as clipping tickets, australia would be eating our dust.

      • quenchino 2.1.1

        good on you for discounting all the risk that may have been laid on the table to acquire wealth.

        Most capitalists make their money by privatising the profit and socialising their losses.

        Most wealth in this country is not made from business cash flow, instead they sell for the lowest price, pay the lowest wages… and make their real money when they sell up the business assets for a capital gain.

        Most wealth in this country is made by insiders pumping cash out of ordinary investors and then dumping them when they’ve been sucked dry.

        Sod all risk really.

        • infused 2.1.1.1

          Where the hell did you pull such shit from? Seriously. Shows you’re a total tool and know zilch about business here in New Zealand.

  3. Zaphod Beeblebrox 3

    Marty,
    I think the idea is that we- 1.Need to broaden the tax base so that we are not dependent upon an ever decreasing number of taxpayers for revenue. This will allow us to protect revenue streams to things like education and the super fund as we go on. 2. We tax all income equally. ie capital gains the same as salaries.

    Not sure that going off on a rant against rich people really helps the argument as a lot of wealthy people also want good schools and universities and good local environments and communities and would be quite happy to pay their fair share as long as they don’t see large amounts of evasion or welfare going to those who don’t need it. Similarly an awful lot of low wage salary earners would like nothing more than to see the welfare state dismantled.

    Personally I would like to see some common objectives to the tax system spelt out then go from there. I think everyone (whether they be high or low income earners) agrees that the current system is not working and will not provide us wth enough future income and encourages non compliance- but I would prefer to concentrate on functionality as well as fairness. Remember pretty well all the tax is paid by 40% of citizens only.

    • Draco T Bastard 3.1

      We tax all income equally.

      Great idea – would love to see businesses and trusts on PAYE. Of course, to do that then PAYE would have to include all the tax dodges that only business presently get and, to stop double taxing, dividends paid out by a business would be taxed only under the receivers IRD#.

      Would get rid of all the financial instruments that only the rich can get ATM that minimise the their taxes.

      • Zaphod Beeblebrox 3.1.1

        I’m not sure that the business tax regime can be changed a lot, except maybe stronger compliance on things like private vehicle use for business not attracting appropriate FBT.

        The big problem as I see it is personal income minimalisation. The trust structure and the failure to tax capital gains on non productive enterprises like property provide the perfect vehicle for this.

        Personally I think something like a Land Tax (in addition to council rates which is already a land tax) would help reduce this, as well as re-direct a lot of investment capital back into the more useful tradabale sector. It would also allow us to tax foreigners who are seeking a quick buck buying NZ property- thereby widening the sources of revenue

        • prism 3.1.1.1

          Are rates really a land tax? Aren’t they really a calculated charge for services allocated on proportionate base according to the value placed on the land by a respected valuing body reflecting market movements but general in nature?

          • modern 3.1.1.1.1

            Prism:

            Both, and neither (what a frustrating answer!).

            If the rating base used by the council in question is Site Value (SV*), then rates are a land tax. But only a few councils (as I understand it) use SV, with most preferring Capital Improved Value (CIV*): ie the value of land plus improvements (buildings etc). In this case rates are a land tax plus a tax on improvements capital (which tends to deter capital investment in buildings etc, naturally)

            (*Names and acronyms might differ in NZ, SV and CIV are Australian usage, the principles are the same though)

            Rates are – disputably – a tax, because they have only an inexact relation to the public services they finance (hence are not exactly a ‘user charge’). However because the services provided by public expenditure raises the rent charged to users of the land (since the services increase the desirability of an area and hence increase the willingness-to-pay to live there), the value of the services tends to be capitalised into the land value, so that the landowner (not the landuser) can be seen to be the ultimate beneficiary of the expenditure.

            So rates are a tax, but they are a tax which is well aligned to the benefits received by each taxpayer; they are a tax levied according to the ‘benefit principle’. In a deep sense they are also a user charge: landowners ‘use’ a common resource (since by occupying land they withhold the flow of services associated with a particular plot of land from use by others), and rates are a charge on this use.

            Messy, isn’t it. But interesting. Rates are both user charge and tax, depending on perspective. And rates are both a land tax (in some jurisdictions) and a land+capital tax (in others).

        • Draco T Bastard 3.1.1.2

          The big problem as I see it is personal income minimalisation.

          If all income is subject to PAYE including capital gains then income minimalisation doesn’t apply. The tax deductibles would have to be looked at carefully but that’s something that should happen regularly anyway.

  4. Pat 4

    If incomes increase then tax revenue increases. Simple really. Find ways to create greater revenue streams i.e. grow the pie.

    Mining, mining, oil and mining.

    • Zaphod Beeblebrox 4.1

      The idea is that we catch up with Australia NOT make Australia richer. Last time I noticed Rio, BHP and Western Mining were Australian owned.

      • Pat 4.1.1

        Deflection. The first step is to acknowledge that tapping into mineral wealth is the way forward. Then the nuts and bolts can be worked out e.g. government involvement, ownership, royalty levels etc. For example, maybe the overseas mining companies should be required to list on the NZ stock exhange for their NZ subsidiaries.

        But I haven’t seen any other ideas on these threads on how to Grow The Pie. The Greens actually want to Shrink the Pie (20% de-stocking).

        • Zaphod Beeblebrox 4.1.1.1

          These mining companies are ruthless. They hate unions and care little for the environment. They even screwed over the Chinese.

        • Draco T Bastard 4.1.1.2

          No, the first step would be to acknowledge that foreign ownership is bad for the economy.

  5. Pat 5

    Clearly Key is a Grow The Pie type of guy, and not from the “let’s see how many pieces we can cut the pie into” school.

    There is the clue to the big Taskforce Conspiracy Theories. Key will use the unpalatable options proposed in the reviews, to push for a Grow The Pie approach.

    If you want to lead clean green Kiwis down the mining path, first you have to show them what the alternative looks like. Brash’s world, more taxes, or the odd mine hidden in the hills.

    I’m picking the mine will win. The pros outway the cons. And the Left are helping Key win the argument by not having a feasible alternative as to how to stop NZ bleeding $250M a week.

    • Pascal's bookie 5.1

      drill baby drill you reckon?

      Good luck with that. Not even the yanks bought it.

      • Pat 5.1.1

        Yep. Drill baby drill.

        Watch all those Kiwis come home to work in the Coromandel instead of Kalgoorlie. Watch the Pie get bigger and the climb up the OECD. .

        Then you can pile the dosh into KiwiSaver and the Cullen fund to your hearts content. Might even give doctors and nurses a decent pay rise. A bit of light rail here, some broadband there, and free education in between.

        Got any better ideas yet?

        • felix 5.1.1.1

          Yeah, they’ll all come home to work for less money.

          And they’ll pay heaps of tax while requiring no services from the state, leaving a big pile of dosh for the rest of us to roll around in.

          Extra fries to go with that fantasy happy meal, Pat?

        • BLiP 5.1.1.2

          Your faith in the likely arrangement for whatever profits might be derived from mining New Zealand is touching.

    • Draco T Bastard 5.2

      Clearly Key is a Grow The Pie type of guy

      No he’s not, he’s a speculator that got very well rewarded for doing nothing of any value.

  6. randal 6

    well in the dimpost this morning professor buckle says that the present system is unfair, unsustainable and lacks integrity.
    so, why didnt you lot do something about all this beforehand and where is the popular support for your assertions.
    for instance where is the unfairness?
    and furthermore if you make assertions like this then where is your evidence or is your word simply good enough?

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