Main features are:
- Alignment of company, trust and top marginal tax rates – financed by:
- increases in GST (to either 15% or 17.5%)
- possible land tax (though not all members of the group agreed with this recommendation)
- removing tax depreciation on buildings,
- removing the 20% depreciation loading on new plant and equipment,
- a risk free rate of return method for rental property and changes to thin capitalisation rules.
At this point, Labour’s stance is to carefully consider the report’s recommendations and their implications for ordinary New Zealanders, develop scenario analyses around the recommendations, and wait and see what recommendations the government adopts before commenting on specifics.
We are, however, concerned that at this stage the recommendations seem to deliver big tax cuts for those earning substantial incomes (for example, if the top marginal rate was reduced to 30% without any adjustment to other rates, someone on $100k would get over $500/month tax cut and someone on the average wage nothing). The potential increase in GST would also have a much larger relative impact on those on lower incomes, superannuation, benefits etc than those in the top income brackets.
Labour’s bottom line is that any tax changes have to address structural issues in the context of broader economic and social goals.
The allocation of scarce resource (in this case government revenue) is always about choice – how and where to direct money and who will benefit and who will miss out. In a fair and equitable society, those in the positions of greatest privilege should not receive more government gain and benefit than those less fortunate.
Very interested in peoples’ thoughts on the tax working group’s recommendations and how they may impact on all New Zealanders.