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Photo: NZ Labour Party
Photo: NZ Labour Party

PoliticsMarch 9, 2019

Amy Adams: Labour cannot outsource its tax advocacy to Cullen

Photo: NZ Labour Party
Photo: NZ Labour Party

New Zealand’s tax debate is not helped by Government hiring Cullen as CGT booster, writes National’s finance spokesperson Amy Adams.

New Zealanders deserve a robust debate about the taxes they pay when the Government is looking at re-engineering the tax system to reach further into their back-pockets.

But the Government is avoiding debate by saying it needs time to consider the Tax Working Group’s report. This is despite the fact that it was well signalled months ago that a Capital Gains Tax (CGT) would be included in its recommendations and Ministers having received the report for some weeks before it was published on February 21.

The lack of clarity from the Government hasn’t stopped many ordinary New Zealanders from raising their legitimate concerns. From small business owners to KiwiSaver members, to entrepreneurs and Māori landholders, farmers, investors, innovators and people living on lifestyle blocks, the message we’ve been getting is clear: New Zealand doesn’t need or want a far-reaching CGT.

The Opposition has engaged in the debate. We have read the TWG’s report in detail. Where the Government hasn’t provided information we’ve modelled the impacts ourselves and had those figures confirmed by third parties. What is clear is that the report’s central recommendation, the CGT, will hurt New Zealanders and the economy.

Despite the Government’s claims a CGT isn’t actually about fairness or the wealthy – it is middle New Zealand who have worked hard to try to build up a nest egg or build a business that will feel the impact of this tax the most. 

Whether it’s the modest lifestyle block that gets taxed, but not the multi-million dollar Auckland home, or the plumber’s business but not the expensive art collection, there is nothing fair about coming after people who have struggled and gone without while leaving big loopholes for those able to hire expensive tax accountants to structure their affairs.

A CGT also hurts our innovators and entrepreneurs, making it harder for them to raise investment to build their businesses. It’s already tougher to raise capital for a new business in New Zealand than overseas and this tax would make it tougher still. If we discourage innovators then we will ultimately see a slower economy and fewer jobs for all New Zealanders.  

In the absence of any costings from the Government on the impact of a CGT, we worked out that an average KiwiSaver member could be $64,000 worse off over the course of their working life under a CGT. Our math was greeted with howls of outrage from the Government. It claimed National was wilfully ignoring the range of options the TWG put up to offset the costs of a CGT.

We weren’t being wilful or ignorant. We put up the actual cost impacts of a CGT.  Until the Government commits to a fiscally neutral package we won’t accept them pointing to those possible offsets (which are unaffordable in their entirety and mutually exclusive in some cases) as a get-out-of-jail-free card.

Our job is to hold the Government to account, especially if it is intent on grabbing more tax. We’ve been open about our assumptions and calculations.

Anyone with a calculator will quickly work out that the only difference is whether you think the Government wants more tax or will embrace the ‘offsets’ and keep its package neutral. Pro tip: It won’t.

We also upset the Government by running the numbers for rural New Zealanders for whom the TWG’s report is a horror story. The family farm or a rural contractor’s business could be taxed on sale. In addition, the TWG proposes an animal emissions tax, a water tax, a fertiliser tax, a nitrogen tax, an environmental footprint tax and a natural capital tax. The average beef and sheep farm could face an extra $20,000 of taxes a year. A dairy farm with irrigation could be hit with $68,000 more tax.

Again, howls of outrage from the Government – the proposals ‘were just options’. They could be introduced progressively. National, it claimed again, was over-egging its numbers. Federated Farmers actually said our numbers were too conservative and the impact could be much, much worse.

The Government says it won’t officially join the debate until it responds to the report in April. And given the Prime Minister’s woeful performance in the House on this issue (including seemingly not even being aware of the taxes recommended in the report) we don’t blame her. But that hasn’t stopped the Government engaging in a political campaign by proxy through Sir Michael Cullen.

Having chaired the TWG to its natural conclusion, Sir Michael is now being kept on the payroll to ‘explain’ its recommendations for another four months. There’s irony in taxpayers spending $1000 a day on a former Labour Party Finance Minister to tell them why they should accept a CGT. Isn’t that why we pay Grant Robertson and Stuart Nash?

Sir Michael isn’t doing that though. He’s taking the opportunity to attack the Opposition at every turn. It has been his sole focus. Whatever your politics, it can’t be acceptable for the Chair of a Working Group to morph into a political operative for the Government at the taxpayer’s expense  for months as a booster for this deeply divisive tax.  It seems Andrew Dickens was right when he said the CGT has so few supporters the Government is having to use taxpayer’s dollars to pay people to promote it.

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