The Inland Revenue Department’s tax policy work programme was released by Hon Peter Dunne on the weekend.
Reading through the Minister’s related speech, I couldn’t help wondering about the symbolism of its delivery just one month short of the Titanic’s 100th anniversary.
According to its own publicity, the IRD tax policy work programme places emphasis on achieving efficiency and fairness in the system. Worthy objectives indeed. And much of the work in the programme is worthy – plugging holes, and trimming sails to align with competitors - where it is to our advantage so to do.
But significant change appears to have been ruled out once more. A Capital Gains Tax that would push investment towards the productive sector, for example, will not be considered. The current tax system watches on as the Government shuffles deck chairs and sails towards a $12 Billion deficit. This is crazy. If you don’t change anything, nothing will change.
Our current tax system is in need of a serious overhaul. The tax policy work programme looks a bit like an exercise regime for a thoroughbred nearing a big race – light and steady. This would be fine if we owned a thoroughbred. We don’t. The Minister is refusing to admit his existentially-challenged Clydesdale needs anything more than a good make-over and a stiff crack of his whip.
The fiscal hole is getting bigger and the Government has no credible plan to address it. In my earlier post, I asked how the Minister of Finance could continue to credibly claim tax changes implemented under his watch were ‘broadly revenue neutral’ – when the Government’s own officials say otherwise. IRD officials have said that 2.5 percentage points of a 4% drop in revenue were due to Government policy changes.
We need jobs and a plan to address the structural issues that underlie our current account deficit. Tinkering with finer points in the tax system and changing who owns what through asset sales doesn’t begin to address the serious issues facing our economy. New Zealand debt is set to continue climbing under National.
On the matter of economic policy and tax settings: no amount of deck-chair shuffling will change things - if the ship remains set on the same course.