Panel: National's new tax plan vs Govt's capital gains tax

Author
Newstalk ZB,
Section
Audio,
Publish Date
Thursday, 31 January 2019, 8:24a.m.
Prime Minister Jacinda Ardern and National leader Simon Bridges.

With the battle lines being drawn over tax, two experts joined the Mike Hosking breakfast to discuss National's new tax plan and the Government's new capital gains tax. 

Yesterday, National announced that, if elected in 2020, they would adjust tax thresholds every threes, in line with inflation.

National Party leader Simon Bridges said that would prevent New Zealanders from moving into higher tax brackets even when their income isn't keeping up with the rising cost of living.

Speaking on a Mike Hosking Breakfast tax panel, PwC partner, Geof Nightingale and Business NZ economist, John Pask discussed National's tax policy.

Geof Nightingale said the current tax brackets are too low.

"Last year's budget...feared that in the next four years, the bracket creep would raise an additional $1.6 billion of taxes and that's as wages and salaries grow and people move into that $70,000 top bracket."

"That [top bracket] is quite low by global standards but also our top rate of 33 per cent is quite low as well, so it's a relatively flat tax system."

He said the tax brackets need periodic reviews to make sure they are in line with inflation.

"The tax working group actually looked at this and we didn't recommend automatic indexation as National has, but we did recommend periodic reviews."

He said the issue with inflation indexes is that it creates a lot more work for businesses.

"The problem is, if you inflation index it, then employers and everybody who drives off that tax system has to adjust all their calculations every year, which is a big compliance burden."

However, Nightingale said National had addressed that issue by making it every three years.

Turning to the capital gains tax, Business NZ economist John Pask said businesses are still about unsure about why it is needed.

"I think one of the issues is that you have got to use the appropriate tool to deal with an issue, and I think there has been a general concern right around the economy about the price of housing."

"But the question is, do you use a capital gains tax or do you look at the fundamental problems, such as land supply and the regulation of housing, those sort of broad issues?"

"So it's a bit uncertain as to what is the rationale for this tax."

Geof Nightingale said capital gains taxes can have potentially negative impacts on businesses, so it's important the government is aware of that.

The capital gains tax is likely to cover all asset classes other than the family home, which was ruled out in the original brief.