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Labour's deputy leader and finance spokesman Michael Cullen says the party proposes a comprehensive review of the tax system. It will look at issues such as capital gains tax, the appropriateness of the current taxed/taxed/exempt (TTE) regime, the taxation on life insurance and savings proposals (TOLIS) will be revisited, and it will find ways to tighten the anti-avoidance provisions.
Cullen says any plans to introduce a capital gains tax would have to be mandated by the electorate at the 2002 election.
He says there will be no CGT in the next three years: "We are not about to ambush the country with major structural changes without forewarning," he told an advisers conference organised by Tower Managed Funds recently.
Cullen says he is not convinced that the TTE regime should be maintained.
While Labour is getting some flak over its proposal to raise the top tax rate to 39 per cent for incomes of $60,000 or more, Cullen predicts the long-term trend for corporate tax rates is downwards.
He says that for reasons of competitiveness New Zealand's tax rates will kept in line with major competitive countries.
PricewaterhouseCoopers tax partner John Shewan disagrees with the Labour tax hike proposal but says it will have benefits for super schemes.
He says that high-income earners will be encouraged to put money into super schemes as they are taxed at a lower tax rate than the top personal tax rate.
Also, he says high-income earners will be able to take advantage of the 19.5 per cent spread between the top and bottom tax rate.
They will be able to save $19.50 for every $100 of investment income split to low income relatives, he says.
Sherwin predicts if Labour won a second term capital gains tax will be introduced (he says the design of a scheme is underway already and it would be done on a valuation basis), and there is a possibility of tax incentives for savers.
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