The Kiwi way – getting a fair go and paying your fair share

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Mercy on us.  A capital gains tax has been proposed for our benighted country and so far, the wrath of Jove has not smitten us from the register of global approval.  

Note to opposition leaders, even Stuff calls out figures that fall below a certain level of veracity and, for many of us in despair for decades over New Zealand’s sinful indexes of poverty, stagnant wages and teen suicides, the recommendations that the Tax Working Group gave to Jacinda Ardern’s coalition government this week do not constitute “an attack on the Kiwi way of life”. 

Broad, sweeping statements founded on winner-takes-all dogma no longer look so serviceable, especially since the recommended CGT tax rates are actually about in the global  middle, whereas our current zero-CGT puts us in a lonely, deeply-unfair bracket with Singapore and Hong Kong.

“The care of human life and happiness, and not their destruction, is the first and only object of good government,” Thomas Jefferson said. Reassuringly, now we’re on the right side of history, the human happiness measure crops up regularly in our current Prime Minister’s speeches.

The Kiwi way of life isn’t when you and the bank buy a ‘passive’ home-and-income property on the market for $800,000 and put it back for sale two years later at $1.4 million. At that moment, you may waltz off with a cool – tax free – half million but the country is left with another family and maybe two who may now never make the property ownership ladder or know the joy and juice of a stable and workable community life in which to raise children.

That’s a lot of the ‘kiwi way’ going missing, while, as an on-the-hop landlord, any rents you gather often come nicely topped up with an ‘accommodation allowance’, also courtesy of hard-pressed taxpayers. You’re profiting – coming, going and tax free – from a man-made housing crisis.

Sir Michael Cullen chaired the tax working group and says their proposals are fundamentally about fairness. The additional $8 billion that might be raised from the new tax over the first five years would allow tax cuts for the poorest New Zealanders, he said, and both he and Ardern are confident that most New Zealanders will be better off as a result of the extra tax-take which would be ring-fenced for that purpose.

The working group’s calculations show the top 20 percent of the population own 78 percent of the taxable assets, and would pay almost all of the tax. 

The small amount that wage earners without serious investments or rental properties might have to pay on their gains was expected to be more than offset by KiwiSaver tax breaks and the income tax cut.

It has been wrong that wage-earners are taxed on their full income while the wealthy “can earn income from gains on assets and not be taxed at all”, Cullen said.

Having sighted the document, I’m not so sanguine about its torturous process of extending capital gains to working businesses, but as Prime Minister Jacinda Ardern, says small business owners and farmers will be at the top of her mind when it comes to political final decisions.

Most New Zealand enterprises are small to medium size and pay full taxes – unlike many of their largest overseas-based competitors. They have shared their customers’ long bout of  ‘austerity’ and remain up against the buying power of multinational competitors. 

Australian experience indicates that the revenues from capital gains on a working business are neither easy nor large revenue areas and nothing is yet written in stone about the tax group’s recommendations.

The Tax Working Group’s recommendations now undergo parliamentary scrutiny for the next two months and good advice and overseas precedents may rule out some of the belt and bracing from the working group’s document.  

Life for the average post-Rogernomic Kiwi took a dramatic blow when the previous National government disbursed Helen Clarke’s budget surpluses as tax breaks for the country’s wealthiest who enjoy that bonanza to this day and will do continue to do so until the government rebalances the tax equation.  

Fairness, kindness and a better life for everybody. What’s not to like if we stick to that? • Liz Waters

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