Labour’s economic policy to be announced next Thursday will show the government’s tax take in the short-term would be similar to what it currently is, while over the medium-term it could possibly rise as the effects of changes to the tax-mix take effect.
Next Thursday’s announcement will be focused on reducing the Crown’s net debt to zero over the medium term, with a budget surplus track similar to National’s goal of reaching surplus in either 2013/14 or 2014/15.
A new tax package will outline a reorientation of who pays what, with lower and middle income earners set to pay less, and higher income earners more – a move that has already been foreshadowed by leader Phil Goff. It is expected the new top tax rate will kick in at about NZ$120,000. The tax package will include measures introduced to push more capital to the productive sector, Phil Goff said yesterday.
The introduction of some new sort of capital gains tax has been tipped in the media. Interest.co.nz understands Labour’s tax policy will include more new policy measures than just that – ones that have not yet appeared in media speculation.
A capital gains tax of 15% on investment properties is the lead policy doing the rounds, attracting strong criticism from Prime Minister John Key.
The tax package will focus primarily on the goal of reducing government debt. The fact the net tax take will remain close to what it is now in the short-term indicates new tax measures are not being introduced just to pay for new spending plans.
Labour has already announced its intention to introduce a tax-free threshold for the first NZ$5,000 of income – a move that would cost about NZ$1.3 billion a year. However, it is possible the threshold could be introduced in stages, or over successive terms in government, Labour finance spokesman David Cunliffe said in March as Labour looked at economic policies following the devastating Christchurch earthquake.
Raising the top tax rate from 33% to 39% for incomes over NZ$120,000 should bring in a bit less than NZ$1 billion a year.
Labour has also said it will push farmers into the emissions trading scheme from 2013 in a move it says will raise NZ$800 million a year to cover for the reintroduction of research and development tax credits. However National says the R&D plan is likely to cost more than that, giving a figure of NZ$1.55 billion as what the true cost of the policy would be.
Labour says its plan to take GST off fresh fruit and vegetables would cost NZ$250 million a year, although National says it could be as high as NZ$400 million.
Labour also has to find NZ$5-7 billion in a budget to cover National's move to book the expected proceeds from the partial privatisations of Meridian Energy, Genesis Energy, Mighty River Power and Solid Energy over a three to five year period. Labour is opposed to the policy.
11 Comments
Ho,ho, ho!
No Christmas present for the tax system here. We are told that the implementation of CGT in Oz did not produce the tax bonanza until 15 years from the start up.
So CGT has no immediate worth.
We need a broad based tax to fill the hole currently. Our only such tax currently is GST and that has been milked already.
The options?
1. Stop the last tax cuts for a start
2. Possible land or other asset taxation? That is as broad a brush as is possible and is revenue producing immediately.
3. Payroll tax? A substitute for the previous tax cuts if it applies only above a high threshhold like $100k+ remuneration.
4. Tax on financial transaction and foreign exchange?
There are always going to be objections to any or all options but most will come from the vested interests not from the public.
Debate is needed but untainted by political bias....
....and that is obviously impossible.
Boom, boom.
The devil is in the detail so your guess is as good as mine.
#4 is not my preferred option but has been mentioned frequently across the media. It does meet the criteria of spread and low rate perhaps.
Personally I see taxing a broad base as the only worthwhile way of going forward. No one would stomach GST at 25% and that level would cause its own problems in evasion.
Broad base + low rate = Low evasion and less fancy accounting
And on CGT on rentals.... Once all those evil landlords have sold their properties where do all the tenants live? Of couse! They buy the cheap houses because the prices have dropped enough for them to afford them. Do any of you really believe that??? Does every tenant really want to own their own home? And where does all the capital go..Oh, all those landlords will go and start up their own "productive" business (while working their regular 40 hr a week job) or invest in the stock market. I think not. Watch that capital head overseas into funds like OM-IP where there is no tax.
The tenants live in the 'same' houses, LAJ. Either as the tenant of another landlord ( who buys at a lower entry price to reflect the anticipated 15% loss of profit at the end) or as owner/occupier of that 'same' house ( one less tenant to compete in the rental market). As an owner/occupier they, of course, don't attract the CGT and that will encourage more single property owners. But, as you say, that's not for eveyone - so that's less demand to buy the renters coming to market. Most likely, the proceeds of the sale will just pay off debt, and that can then be re-allocated to another party who wants to do something productive with it.
I guess we''ll wait and see who is right. Personally what with depreciation not allowed anymore, CGT (there has been no capital gain anyway for years), earthquakes and the extra risks they involve, and the way the tenancy tribunal is blatantly pro-tenant means there is no upside in being a landlord and lots of downside. Not to mention the amount of work that is required to run them properly. As the current landlords take their money and move on I'd be surprised if there are a lot of new ones coming in to take their place. BH and his gang have scared them all off. Meanwhile the rents on the remaining houses will go up as supply is reduced. The taxpayer will be obliged to provide housing for the displaced. Currently a lot of rentals are run negatively geared - the private landlord is subsidising the tenant. When the government takes over they will have to either subsidise the rents (neatly cancelling the effect of removing the depreciation allowance) or put up the rents. A totally predictable unintended consequence.
We have 15 flats destroyed by the earthquake in Christchurch and have to decide whether to rebuild or take the money and invest elsewhere. ( No we wouldn't be paying off much debt, we have capital to invest). It's a decision many landlords have to make. What would you do?
By the way, why do you consider providing a home for someone is non-productive? Is running a motel providing holiday accommodation productive by your definition?
Off to Melbourne then - at least its not shakey! The whole of NZ seems to be on the brink of a catastrophic geological or financial event so perhaps it is time to go. Or another alternative would be to actually enjoy all the money I've saved over the years by buying an extremely expensive house to live in myself which won't be taxed. Better than living in a small cheap house and not spending much in order to be able to supplement my retirement income. Or I could buy lots of those consumer items which are made by the "productive sector" which will ultimately ruin our planet.
Hello
NZ biggest problem is getting 500 thousand unemployable people to pay tax .This is Labours growing group that will never get a job an have no money.Labour does not realise that people who do get out of bed in the morning do not need to be taxed more.People would buy rentals for there future,to have more income in the retirement years.People in my street have been in statehouses for over 40 years,an never worked.No worries about saving for there retirement,the suckers who work will be taxed more to pay for it.We need people in this country who can make money,pandering to people who can't has not worked in the last ten years.
The country needs can do people who can make money.
My 3 sons want to make big money,they do not see a future in NZ with this welfare carry on.
It would better to have less tax,an people who do work earn more.
Hopefully National sort this out.
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