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Tax Working Group divided on approach to CGT

There appears to be deep divisions among members of the Tax Working Group, and its final report is likely to include dissenting decisions from members. 

Monday, November 19th 2018, 6:54AM 2 Comments

Former IRD deputy commissioner Robin Oliver gave a candid speech to the recent SiFA conference where he outlined divisions within the group.

He says the report is already being written and on some issues it will have "options, not conclusions".

"We cannot agree," he says.  "People have different views."

"It's damn difficult to agree on anything, that's why we have options."

Oliver, who confesses he is not a fan of a capital gains tax, indicated that what was being discussed would be difficult to manage and would end impacting property investors and people with investment assets.

While the official line of the Sir Michael Cullen-chaired group is that it was trying to make New Zealand's tax system fairer, the reality is the group was set up to design a capital gains tax regime, Oliver said.

While some countries had taken a pragmatic approach to constructing capital gains tax the working group was looking at a purist approach in some areas.

"Reality and theory are not the same thing," he said. Sometimes things look good in theory but are impractical in reality.Oliver says because the group wasn't allowed to look at areas like the family home, which makes up 42% of New Zealander's assets, the reality was that any changes would be felt by property investors and those who held investments such as shares.

He said the whole PIE tax regime would need to be rewritten and that the group was looking at, and favouring, a Fair Dividend Rate (FDR) regime for New Zealand and Australian shares.

"I'm keen on FDR", he said. "People either love it or hate it."

While he is keen on the idea he said that it is a very hard concept to sell to people. 

He said Iwi weren't keen on a capital gains tax and he suggested they may end up being outside the regime. The argument being advanced by iwi was that their assets had been confiscated, and now they were being returned to them through the treaty settlement process. Any CGT regime would be another confiscation, they argue.

Oliver says it was an "extremely tight" timeline to review the whole New Zealand tax regime, write a report and pass new legislation before the next election.

"I’ve been surprised at the complexity," he said.

"I know quite a bit of tax" and have "been through seven of these (reviews)."

Tags: tax working group

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Comments from our readers

On 19 November 2018 at 9:52 am Pragmatic said:
Another silly working group, struggling to provide a solution to a problem that doesn’t exist. Perhaps next time, the incoming government could be better prepared to rule - irrespective of the odds.
On 20 November 2018 at 2:49 pm AndyB said:
The Iwi exemption is out and out racist. To suggest maori should be exempt by referring to the tax as 'confiscation' is ludicrous. Tax is confiscation by definition.

No way National will support it and I'd be surprised if NZ First supported it too. I am sure the Human Rights Commission would be sure to pour cold water over it too. A complete non-starter.

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