Leighton Smith: I'm sick of hearing 'pay your fair share' of tax

Author
Newstalk ZB,
Section
Opinion,
Publish Date
Saturday, 9 February 2019, 11:00a.m.
Former Deputy Prime Minister and Minister of Finance Sir Michael Cullen. Photo / Doug Sherring
Former Deputy Prime Minister and Minister of Finance Sir Michael Cullen. Photo / Doug Sherring

COMMENT

I believe it was Zacchaeus who first introduced me to the world of taxation. Next was Robin Hood, after whom came William Tell. Zacchaeus was none too popular with his fellow citizens of Jericho, for he was a tax collector. Robin and William were tax rebels, fighting against injustice, which made him very popular with the locals. Tax is not given up willingly. It is, according to some, coerced theft. Some people tell me they are happy to pay their fair share, but words are cheap.

Why is it that tax systems must be rearranged so frequently? You would think that those "experts" with a handful of degrees in economics, history, physics, politics, and yes, communications, would by now have been able to establish a system reliable and flexible enough to last, if not forever, then for a lifetime or two. I know why not, but let's deal with the moment.

The Labour-led coalition appointed the previous Labour Finance Minister, Michael Cullen, to head the Tax Working Group to report and recommend changes to the tax system of New Zealand. The Committee has done its job. Details will be presented to Cabinet on February 18, and the Tax Working Group will hold a media briefing on February 21. I am beside myself with excitement.

There is a rule for interviewers that is considered golden. Never ask a question you don't already know the answer to. Transfer the principle and you get "appoint the members of the Tax Working Group" according to the results you are after. So with Michael Cullen always wanting a capital gains tax, you can bet the house on the recommendation. You can then count on social taxes like congestion charges, and emission tax upscale.

In a commentary, "The Jacinda Problem: Where she goes we go", Chris Trotter quoted Nick Hanauer, an American venture capitalist: "I have been rewarded obscenely for my success… yet the most important lesson that decades of experience at the heart of market capitalism has taught me is that morality and justice are the fundamental prerequisites for prosperity and economic growth. Greed is not good." Then he includes, "a fundamental prerequisite for a more just society is that the wealthiest should pay their fair share of tax".

Well, good for him but I am tired of hearing such commentary. What on earth does that mean, "pay your fair share"? It means nothing, and there is nothing stopping any individual, ultra wealthy or not, from giving Inland Revenue however much they want.

Then the question, what is greed? More than you need is a usual answer, or anything more than $10 million? $50 million? A billion? If you made it honestly, and you pay your legal taxes, it is yours to do with as you wish.

In the US the richest 20 per cent pay 87 per cent of all income tax. The bottom 40 per cent end up getting money from the government. It is not dissimilar in New Zealand. The above is only part of the discussion. The rest can wait for a future column.

To me, liberty is the foundation for everything else. That one simple, but crucial, word has such an extensive interpretation.

So, back to the question of governments and tax systems. The best is a simple, uncomplicated regime that is difficult, if not impossible, to avoid. With serious consequences for miscreants. The reason we don't have such a scheme, I suggest, is because of politics and greed. Governments have a voracious appetite for both money and power, and the former can buy the latter. Every election involves bribery. For hundreds of years, the aforementioned William Tell has been famous for his skill with a crossbow after shooting an apple on his son's head. In Switzerland he is more renowned for launching a revolt against the tax policies of the Hapsburgs in 1291.

The Swiss, as a result, developed what some say is the only real democracy in the world. It's a fascinating system because the Swiss voters are actually in charge. For example, the Swiss government must get approval from its voters by virtue of referendum to give themselves a pay rise or change tax rates. In 1975, the voters declined a government request for a tax increase. A prominent Swiss citizen, responding to a question of what happens next, replied "the government will have to live on what it has, like the rest of us." But it doesn't stop there. The Swiss have a separation of powers between taxing and spending, in the belief that temptation to overspend is omnipresent. Unfortunately, we in New Zealand could be returning to the ideology of the politics of envy. The introduction of any tax policy that enriches the accounting industry is bad policy.

A very large problem with our political system is the constant changing of administrations. And that is in addition to an increasing inability to elect a popular government. And it is getting ever harder to find someone who admits to voting for MMP. But, seeing that we are stuck with it for the foreseeable future, we must encourage candidates who are more credible and principled to elect to office.

• Listen to the Leighton Smith Podcast is at newstalkzb.co.nz, and nzherald.co.nz and on iHeart Radio.

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