Latest / The SME Stream / Wealth or Capital Gains? What taxes should New Zealand be looking at

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Wealth or Capital Gains? What taxes should New Zealand be looking at · The SME Stream

• 0:05
  Speaker 1: Cure. I'm Susane Nordquist in for Chelsea Daniels and this
• 0:09
  Speaker 1: is the Front Page, a daily podcast presented by the
• 0:11
  Speaker 1: New Zealand Herald. We may be two years away from
• 0:19
  Speaker 1: our next general election, but the possibility of more tax
• 0:22
  Speaker 1: is already being debated. Labor is starting to warm the
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  Speaker 1: public up to the idea of a wealth or capital
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  Speaker 1: gains tax being part of their twenty twenty six manifesto,
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  Speaker 1: with leader Chris Hipkins saying it's necessary to deal with
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  Speaker 1: our aging population. The possibility of introducing ither tax has
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  Speaker 1: been debated by the left and rejected by the right
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  Speaker 1: for years, but is it time we have that conversation?
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  Speaker 1: Today on the Front Page, we discuss this with independent
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  Speaker 1: tax experts Robin Oliver and Jeff Nightingale. To start this
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  Speaker 1: discus off, what do you make of Labour's position about
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  Speaker 1: having a public discussion on tax?
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  Speaker 2: To you, Robin, I'm a tax person.
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  Speaker 3: I love public discussions on tax, but we need to
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  Speaker 3: be grounded in what's workable, what the impact on the
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  Speaker 3: economy of tax options are, and then have a rational
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  Speaker 3: discussion on that basis.
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  Speaker 1: Jeff, I'm going to ask the same question of you.
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  Speaker 4: Well, I agree with Robin.
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  Speaker 5: I think it's very important to have a rational discussion
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  Speaker 5: about tax. The funny thing is Labour's talking now about
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  Speaker 5: capital gains tax again. We've been talking about capital gains
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  Speaker 5: tax about as long as.
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  Speaker 4: I've been alive.
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  Speaker 5: I think the first time it was raised was the
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  Speaker 5: nineteen sixty seven Ross Committee and it's been considered and
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  Speaker 5: recommended and reviewed by many tax committees ever since. It's
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  Speaker 5: a good conversation to have, and it's an important one
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  Speaker 5: for a bunch of reasons. But it's a difficult conversation
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  Speaker 5: for New Zealand to have.
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  Speaker 3: The conversation is not just about capital gains tax. It
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  Speaker 3: should be about the basics of our tax system. Capital
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  Speaker 3: gains taxes a relatively minor issue on the side, and
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  Speaker 3: it's not just capital gains taxes. Michael Cullen desperately tried
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  Speaker 3: to point out, it's how much of the gains you tax.
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  Speaker 3: You can text some capital gains, not others, and what
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  Speaker 3: have you. But you know, it's not just limited to
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  Speaker 3: capital gains tax and the future of our tax system.
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  Speaker 3: The focus, i think is on what happens the demographics
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  Speaker 3: mean that the population is becoming older, especially on government expenditure,
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  Speaker 3: particularly on the health site, also used on super and
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  Speaker 3: how will we pay for that? A lot of that's
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  Speaker 3: expediture side. But yeah, I do concede that we should
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  Speaker 3: at least have a taxes to which is capable of
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  Speaker 3: raising more money than we currently do.
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  Speaker 1: Jeff is the timing right to have this discussion on
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  Speaker 1: taxes though? Is this a conversation that Kiwis want to
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  Speaker 1: have given the cost of living crisis and the fact
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  Speaker 1: so many people are already struggling to get by.
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  Speaker 5: I think it's a conversation that Kiwis want to have
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  Speaker 5: for a couple of reasons. One, as Robin rightly pointed out,
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  Speaker 5: our long term fiscal position is looking pretty dire if
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  Speaker 5: you look at the Treasury forecasts. If we change none
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  Speaker 5: of the settings, by twenty sixty will be running deficits
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  Speaker 5: operating deficits of about twenty percent of GDP, which is
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  Speaker 5: clearly we just can't get there. So tax is a
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  Speaker 5: very important component of that future. But it's also a
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  Speaker 5: very important component of the present, even even after the
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  Speaker 5: tax cuts that have come in recently. The combination of
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  Speaker 5: fiscal drag of creeping tax brackets and not adjusting tax
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  Speaker 5: brackets and raising incomes over the last twelve or thirteen
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  Speaker 5: years means we're taxing our sort of middle income and
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  Speaker 5: is pretty heavily in the middle of the cost of
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  Speaker 5: living crisis. So for both the short term and the
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  Speaker 5: long term, tax is an important conversation for the government
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  Speaker 5: to have all the people that aspire to be our
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  Speaker 5: governors to have.
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  Speaker 6: If we don't broad in New Zealand's tax base, that
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  Speaker 6: word and of all of that is going to fall
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  Speaker 6: on salary and wage journals and on GST, which is
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  Speaker 6: where the government gets most of its revenue.
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  Speaker 4: At the moment. We're unique around the world in that regard.
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  Speaker 5: It's the same economic strategy and plan and it's pretty simple.
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  Speaker 1: It's spend more, it's borrow more.
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  Speaker 4: It's tax more and worse outcomes. That's what it's going
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  Speaker 4: to be.
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  Speaker 1: Robin. Then you've got National saying that Labour's one solution
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  Speaker 1: to an issue is to raise taxes. Is that fair
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  Speaker 1: commentary from them?
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  Speaker 3: Well, I do think the fiscal position is very much
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  Speaker 3: depended by expenditure, and more discipline and fiscal expenditure that
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  Speaker 3: we've seen over recent years would be a good idea,
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  Speaker 3: and then recink things about New Zealand supervaluation and what
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  Speaker 3: have you. But the future, when you look at the future,
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  Speaker 3: it really is about the overall wealth of the country.
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  Speaker 3: You can only tax as much as the country produces,
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  Speaker 3: and so really everything's dependent upon us becoming a wealthier country.
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  Speaker 2: And you look to that into tax terms.
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  Speaker 3: We clicked about one hundred million dollars now luckily of tax,
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  Speaker 3: and if we increase GDP by one percent, it's one
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  Speaker 3: point two billion dollars extra tax. And you put that
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  Speaker 3: into context for capital gains tax recommended by color pretty
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  Speaker 3: severe internationally capital gains tax that raised about five billion,
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  Speaker 3: So a few percentage points in GDP makes all the
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  Speaker 3: different in tax terms.
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  Speaker 1: Rob And there are other ways you can grow well
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  Speaker 1: fo in a country right.
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  Speaker 2: Well, basically growing the economy is all about productivity. You
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  Speaker 2: get more production, you get higher wages. How do you
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  Speaker 2: get increased productivity to investment and using that investment wisely.
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  Speaker 2: And our problem as a.
• 5:36
  Speaker 3: Country is we're falling behind Australia and that has real
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  Speaker 3: consequences to people. It means that our medical people are doctors,
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  Speaker 3: nurses are skilled people go to Australia where the wages
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  Speaker 3: are higher, and that puts enormous pressure on our social services,
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  Speaker 3: and so everything comes down to, including your tax choices.
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  Speaker 2: Is what does it do grow our economy and our
• 6:01
  Speaker 2: income per Here.
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  Speaker 1: Jeff Robin made the point about this brain drain to Australia.
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  Speaker 1: What do you make of the points he brought up there?
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  Speaker 5: I completely agree with Robin. I mean, the fastest way
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  Speaker 5: to grow our tax revenues is to grow our economy,
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  Speaker 5: and so the very first thing government policies need to
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  Speaker 5: do is get economic growth going on a sustainable basis, obviously,
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  Speaker 5: and the tax revenues will follow. There is a secondary
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  Speaker 5: question though, so Robin quite rightly says, you know, we
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  Speaker 5: collect about one hundred billion dollars a tax now against
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  Speaker 5: our GDP of three hundred and something billion, and I'm
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  Speaker 5: not advocating for more taxes. I think we need to
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  Speaker 5: into the future, we'll need to trim expenditure in order
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  Speaker 5: to meet our revenue needs. So tax is a proportion
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  Speaker 5: of the economy has run at about thirty percent of
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  Speaker 5: GDP for years and I think that's a reasonable target.
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  Speaker 5: But who pays that tax is a secondary question, and
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  Speaker 5: how we collect that tax and bounded up in that
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  Speaker 5: is two issues one is efficiency, So are we taxing
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  Speaker 5: the right things? Are we affecting our economic development because
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  Speaker 5: we're not taxing land and we are taxing other things.
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  Speaker 5: And then there's an equity question is who are we
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  Speaker 5: collecting that tax from. Are we collecting it mainly from
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  Speaker 5: people that spend money through GST and people doing money
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  Speaker 5: through wages, or are we.
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  Speaker 4: Collecting it off wealth?
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  Speaker 5: And those questions also have to be resolved as well
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  Speaker 5: as the overall level of taxation.
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  Speaker 2: On that point.
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  Speaker 3: The problem is that if we tax on wealth on
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  Speaker 3: capital enter that discourages investment and that is an adverse
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  Speaker 3: to growing the economy. So we've got to raise tax,
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  Speaker 3: and we've got.
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  Speaker 2: To raise a substantial amount, no matter what's.
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  Speaker 3: Your views are, and we've got to do that in
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  Speaker 3: a way that is least costly as possible to the economy.
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  Speaker 1: Time though, for the burden to be moved from income
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  Speaker 1: tax to capital gains.
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  Speaker 3: Well, I mean there are issues for it against capital
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  Speaker 3: gains tax, but I keep on saying it's not the
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  Speaker 3: real issue. Fundamentally, whatever we do, we have to tax
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  Speaker 3: people on the income and the facts are that we'll
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  Speaker 3: always tax the middle income earners because that's where the
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  Speaker 3: big amount of money is and that's where.
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  Speaker 2: The bulk of the people are.
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  Speaker 3: So if you take our current tax system on individuals,
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  Speaker 3: we talk about taxing aboute hundred billion. About half of
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  Speaker 3: that comes from tax on individuals, and about half the
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  Speaker 3: tax on individuals is collected from those people earning between
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  Speaker 3: seventy and one hundred and eighty thousand dollars a year,
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  Speaker 3: and that's about eighteen percent of the population of the
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  Speaker 3: individual tax backs. So the bulk of our money comes
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  Speaker 3: from that seventy to or hundred and eighty thousand dollars level. Yes,
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  Speaker 3: there are people at the top, the top two percent.
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  Speaker 3: They paid twenty two percent of our tax, but there's
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  Speaker 3: only eighty eight two percent of a population is in
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  Speaker 3: that category. There's just not enough people there to raise
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  Speaker 3: much more money.
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  Speaker 1: Jeff, what's your response to Robin's comments there?
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  Speaker 5: I would just raise a couple of points. The first
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  Speaker 5: is on the productivity point. I think that in a
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  Speaker 5: number of people think that New Zealand is by and
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  Speaker 5: large of overinvested in land assets and underinvested in financial assets,
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  Speaker 5: and part of the reason for that may well be
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  Speaker 5: the absence of a general capital gains tax, meaning that
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  Speaker 5: we are chasing tax free capital gains rather than investing
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  Speaker 5: in financial assets.
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  Speaker 4: Which would in turn be used to drive productivity.
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  Speaker 5: So there's a potential efficiency loss in our tax system
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  Speaker 5: at the moment. The second thing I'd say is that
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  Speaker 5: I completely agree with Robin. The bulk of our tax
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  Speaker 5: is inevitably going to be raised off the consumption and
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  Speaker 5: the labor income of us, and there's no huge pot
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  Speaker 5: of gold in squeezing much more out of the top
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  Speaker 5: two percent. But there is an equity point, and that
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  Speaker 5: is largely in New Zealand. We accept a progressive tax
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  Speaker 5: system where the more you earn and the more you have,
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  Speaker 5: the higher proportionally your burden is for tax, and in
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  Speaker 5: the absence of a capital gains tax, the New Zealand
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  Speaker 5: tax system overall is not that progressive as you get
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  Speaker 5: up to the top end because the very wealth they
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  Speaker 5: make most of their money out of capital gains. And
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  Speaker 5: so if that equity issue persists, it can undermine, in
• 10:29
  Speaker 5: my view, the willingness of the middle class who are
• 10:32
  Speaker 5: paying the bulk of the tax to keep doing that.
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  Speaker 5: And so that's a long term political issue I think
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  Speaker 5: that needs to be resolved.
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  Speaker 6: New Zealand has famously put a lot of their money
• 10:43
  Speaker 6: into property, which is really not a productive as seat.
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  Speaker 6: A house just sits there and gains wealth, but it
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  Speaker 6: doesn't make more houses. And so what you could argue
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  Speaker 6: is that there is a case for a tax setup
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  Speaker 6: that encourages people to invest more in the stock market
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  Speaker 6: and incompas these that might produce more things rather than
• 11:02
  Speaker 6: in property.
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  Speaker 3: I agree with Deaf that land is a big issue.
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  Speaker 3: I mean, seventy five percent of the capital gains tax
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  Speaker 3: on colored grou estimate cape of land, and that's our
• 11:18
  Speaker 3: big as set. That's what the Zelanders do. They borrow
• 11:20
  Speaker 3: money off Australia and bid up device of land. We
• 11:23
  Speaker 3: end up with noble land obviously, just more expensive land
• 11:27
  Speaker 3: and more debt and no more productive investment.
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  Speaker 2: So land is a big issue.
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  Speaker 3: And the problem with that is taxing land is politically
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  Speaker 3: extremely difficult because who owns the land.
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  Speaker 2: It's farmers, the elderly and EWI and I.
• 11:42
  Speaker 3: Can see the theoretical argument for more tax on LAD
• 11:45
  Speaker 3: and people buy LAD for the inpace and values that
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  Speaker 3: it will produce, and I understand that, and I agree
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  Speaker 3: that there is a good case for taxing it, but
• 11:53
  Speaker 3: to target the elderly farmers and EWI to meet our
• 11:57
  Speaker 3: future tax burden is sort of a hard one to sell.
• 12:01
  Speaker 1: Speaking of the elderly, we've got an aging population here
• 12:05
  Speaker 1: in New Zealand. Chris Hipkins sees that twenty one percent
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  Speaker 1: of the population will be over sixty five in the
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  Speaker 1: next ten years. How are we meant to pay for
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  Speaker 1: that if we don't raise taxes, Jeff.
• 12:16
  Speaker 5: That is the difficult question, and I'll be one of
• 12:18
  Speaker 5: those people. There's two big expenses we've got coming at us.
• 12:22
  Speaker 5: One is national superannuation and that's because we have a
• 12:25
  Speaker 5: universal scheme, and the second is our health costs. The
• 12:29
  Speaker 5: National superannuation affordability. You know, it's affordable at the moment,
• 12:33
  Speaker 5: but it's not going to be affordable in a coming
• 12:35
  Speaker 5: decade or so. So you've only got a couple of choices.
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  Speaker 5: You can raise more taxes, or you can reduce eligibility.
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  Speaker 5: And again that's where I think a capital gains tax
• 12:45
  Speaker 5: has some appeal because most of the capital gains are
• 12:49
  Speaker 5: earned by people over sixty five. Because at the end
• 12:52
  Speaker 5: of your life, your economic life cycle, you've accumulated capital,
• 12:55
  Speaker 5: and you're more likely to accumulate capital gains that are
• 12:58
  Speaker 5: the same people we're giving a universal national superannuation payment too,
• 13:02
  Speaker 5: and so an element of self funding there feels to
• 13:05
  Speaker 5: me to be a sensible thing to consider.
• 13:08
  Speaker 1: Gee, if you're saying that superannuation will not be affordable
• 13:11
  Speaker 1: in the next decade, so we've got ten years effectively
• 13:14
  Speaker 1: as that we were saying to introduce another tax.
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  Speaker 5: Or make decisions about age of eligibility or coverage. I mean,
• 13:22
  Speaker 5: I'm not in I think there is some real benefits
• 13:25
  Speaker 5: in a universal national superannuation. It's easy to administer, it's equitable,
• 13:29
  Speaker 5: it doesn't have perverse incentives, but it's expensive. You know,
• 13:32
  Speaker 5: your other option could be to start means testing national
• 13:35
  Speaker 5: super but that brings with it a whole lot of
• 13:37
  Speaker 5: other sort of policy and behavioral challenges.
• 13:40
  Speaker 1: Robin, what do you have to say about Jeff's comments there?
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  Speaker 3: Well, I agree with New Zealand supers. It's actually a
• 13:47
  Speaker 3: good scheme. It means that New Zealand is over sixty
• 13:51
  Speaker 3: particularly over sixty five, are more in the workforce than
• 13:55
  Speaker 3: any other country I'm aware of. We have a very
• 13:57
  Speaker 3: high number of sixty five plus people in the workforce
• 14:01
  Speaker 3: working and that's a good way to manage aging population.
• 14:05
  Speaker 3: And that's largely accomplicable to the fact that we don't
• 14:07
  Speaker 3: means test dexillance super But really the real pressure on
• 14:11
  Speaker 3: the aging I think will be healthcare and including geriatric care.
• 14:15
  Speaker 3: And if we do have to raise more revenue, I mean,
• 14:20
  Speaker 3: the capital gains tax doesn't raise much and most of
• 14:23
  Speaker 3: that's from land and that's difficult. Anything else is basically
• 14:27
  Speaker 3: reduces our productivity, and we have.
• 14:29
  Speaker 2: To increase our productivity if we.
• 14:32
  Speaker 3: Want to have a prosperous society of old people, so
• 14:35
  Speaker 3: we need more wages and more prosperity. I would just
• 14:39
  Speaker 3: increase TST. I can't see why not everybody pays for it,
• 14:42
  Speaker 3: and it also has the good feature that people who
• 14:47
  Speaker 3: are retired still pay it because they're consuming not working.
• 14:50
  Speaker 3: So actually it's a way of moving the tax burden
• 14:53
  Speaker 3: into the not working part of the population, which is increasing.
• 15:07
  Speaker 1: As raising GST a good idea from your perspective, JEF, I.
• 15:12
  Speaker 5: Think it's certainly worth considering. We've been to that tap twice.
• 15:17
  Speaker 5: GST started at ten percent, then went to twelve and
• 15:19
  Speaker 5: a half, it's now at fifteen. The thing about raising GST,
• 15:22
  Speaker 5: there's a couple of issues that might put.
• 15:25
  Speaker 4: A ceiling on raising GST.
• 15:27
  Speaker 5: The first issue is simply as GST gets higher, the
• 15:32
  Speaker 5: incentives to avoid it gets stronger. That there's pretty low
• 15:35
  Speaker 5: avoidance of GST in New Zealand. It's a pretty efficient tax.
• 15:38
  Speaker 5: It all gets collected and as the rate goes higher,
• 15:41
  Speaker 5: the incentives to avoid it gets stronger, So you want
• 15:44
  Speaker 5: to consider that. And the second thing, which is more
• 15:46
  Speaker 5: difficult is it's a regressive tax because if you're on
• 15:50
  Speaker 5: a lower medium income, you consume all of your income
• 15:53
  Speaker 5: and most of it, apart from your mortgage payments, will
• 15:55
  Speaker 5: be subject to GST. If you're on really high income,
• 15:58
  Speaker 5: you save half your income, you don't immediately pay GEST
• 16:01
  Speaker 5: on it.
• 16:01
  Speaker 4: You do when you spend those savings.
• 16:03
  Speaker 5: So that regressivity goes against the progressive nature of the
• 16:07
  Speaker 5: New Zealand tax system. And there are some solutions for
• 16:10
  Speaker 5: that in terms of lifting benefits or changing tax rates
• 16:13
  Speaker 5: at the low end. But that regressivity would be a
• 16:16
  Speaker 5: reason why I wouldn't immediately reach for a GST raise.
• 16:19
  Speaker 1: Okay, Robin, let's took through some of these taxes now,
• 16:22
  Speaker 1: starting with a capital gains tax. It's been discussed, debated, recommended,
• 16:26
  Speaker 1: and ruled out multiple times before.
• 16:29
  Speaker 6: The International Monetary Funds released it's yearly report into New
• 16:32
  Speaker 6: Zealand's economy, repeating calls for an overhaul by adding capital
• 16:36
  Speaker 6: gains and land taxes.
• 16:38
  Speaker 1: I've already said that I still believe in it, but
• 16:40
  Speaker 1: I have given my word you will not have a
• 16:43
  Speaker 1: capital gains tax under a labor led government. I lead
• 16:48
  Speaker 1: about one hundred and thirty countries have some form of
• 16:51
  Speaker 1: the capital gains tax, and about thirty do not include
• 16:54
  Speaker 1: New Zealand. Is it time we catch up and introduce one.
• 16:57
  Speaker 3: I'm not quite logically opposed to capital gains taxes. It
• 17:00
  Speaker 3: is incup and therefore obviously should be considered. But the
• 17:04
  Speaker 3: devils in the detail, and it has to be on
• 17:07
  Speaker 3: a realization basis. I think it means you don't get
• 17:11
  Speaker 3: losses if discourages entrepreneurial investment. All of that sort of
• 17:16
  Speaker 3: stuff is a cast forward on land, as I've said,
• 17:18
  Speaker 3: But that's really.
• 17:19
  Speaker 2: The real political difficulty.
• 17:22
  Speaker 3: And I hated the aspect of the colored one, which
• 17:25
  Speaker 3: basically put an extra tax burdened on shareholders in terms
• 17:30
  Speaker 3: of gains on shares, meaning that we increase the tax
• 17:34
  Speaker 3: on New Zealanders investing in domestic companies. But we kept
• 17:39
  Speaker 3: it the same for fig designing New Zealand shares, and
• 17:42
  Speaker 3: we made it the same for Neator's own fine shares.
• 17:45
  Speaker 3: So increase the tax on New Zulanders early domestic shares,
• 17:48
  Speaker 3: don't change everything else. Will have less news of designing
• 17:51
  Speaker 3: New Zealand shares and more news of it designing feign shares.
• 17:55
  Speaker 3: That's the opposite of what we want to have. That's
• 17:57
  Speaker 3: less investment in the economy.
• 17:59
  Speaker 1: In terms of a capital tax, are there any examples
• 18:02
  Speaker 1: of countries who are doing this well and collecting a
• 18:04
  Speaker 1: lot of revenue from it?
• 18:06
  Speaker 5: Generally capital gains taxes the research I've seen, they seem
• 18:10
  Speaker 5: to collect between sort of one to one and a
• 18:12
  Speaker 5: half percent of GDP when they are fully fledged. Takes
• 18:16
  Speaker 5: years to build up to that level, so it's not
• 18:18
  Speaker 5: a pot of gold. It's not going to solve our
• 18:20
  Speaker 5: revenue shortfall crisis. But you know, five billion dollars our
• 18:24
  Speaker 5: next budget, we're going to have an operating allowance of
• 18:26
  Speaker 5: less than a billion, So five billion dollars you can
• 18:29
  Speaker 5: do some infrastructure, You can do some things with that.
• 18:32
  Speaker 5: I wouldn't be turning away from that. I think that
• 18:36
  Speaker 5: Robin's right. Most capital gains taxes in other OECD nations,
• 18:40
  Speaker 5: and they've.
• 18:41
  Speaker 4: Virtually all got them.
• 18:42
  Speaker 1: You know.
• 18:42
  Speaker 5: They're full of political compromises and exemptions and loopholes, and
• 18:47
  Speaker 5: they're complex to administer. So there are all of those
• 18:49
  Speaker 5: downsides of a capital gains tax. But in my mind,
• 18:54
  Speaker 5: as we look forward from both an efficiency and inequity
• 18:57
  Speaker 5: perspective potential revenue shortfall, I think we should be sensibly
• 19:01
  Speaker 5: considering one and seeing if we can iron out some
• 19:03
  Speaker 5: of those design faults of other jurisdictions in a New Zealand.
• 19:07
  Speaker 1: Version, Robin onto a wealth tax now, which you said
• 19:10
  Speaker 1: is a terrible idea. Is there a risk that a
• 19:13
  Speaker 1: wealthfall capital gains tax will drive people away from investing
• 19:16
  Speaker 1: in New Zealand and therefore accelerating our brain drain.
• 19:20
  Speaker 3: Well, a capital gains tax is pretty normal overseas. I
• 19:23
  Speaker 3: don't think if peeding of the capital gains tax thirty
• 19:25
  Speaker 3: nine percent would be for the outrageous internationally, but it's
• 19:28
  Speaker 3: in the norm internationally. A wealth tax would be right
• 19:32
  Speaker 3: after it, and fewer countries are having them. And yes,
• 19:37
  Speaker 3: any form of wealth tax which aim to raise any
• 19:41
  Speaker 3: material amount of money the wealthy would leave.
• 19:45
  Speaker 2: It will absolutely leave.
• 19:47
  Speaker 3: A lot of people with over ten million dollars ago
• 19:50
  Speaker 3: will leave the country and they'll go to maybe Australia
• 19:54
  Speaker 3: and we will lose out big time.
• 19:55
  Speaker 1: Jeff, is the threshold for this tax set high enough
• 19:59
  Speaker 1: for a while tax?
• 20:00
  Speaker 5: Well, I'm on this one. I'm one hundred percent with Robin.
• 20:03
  Speaker 5: I think a wealth tax would be a bad idea.
• 20:06
  Speaker 5: I'm not sure that we'd have as much capital flight
• 20:08
  Speaker 5: as Robin forecasts, but maybe I'm Pollyanna. But the wealth
• 20:12
  Speaker 5: tax has two problems. The first is valuation. Much of
• 20:16
  Speaker 5: New Zealand's value is held in the hands of private businesses,
• 20:19
  Speaker 5: and you don't have a quoted value for those shares.
• 20:22
  Speaker 5: And a business is only worth what you can get
• 20:24
  Speaker 5: for it when you sell it, and businesses are volatile
• 20:26
  Speaker 5: and value, so it's very hard to value in order
• 20:29
  Speaker 5: to impose the wealth tax. And the second problem is liquidity.
• 20:33
  Speaker 5: You don't have any cash necessarily to pay the wealth tax.
• 20:36
  Speaker 5: And so you might have a very valuable family business
• 20:39
  Speaker 5: that in one year makes a loss and it's still
• 20:41
  Speaker 5: very valuable because in futures it will make profits. How
• 20:44
  Speaker 5: does it pay the wealth tax if it's made a loss.
• 20:46
  Speaker 5: And so those two problems for me mean I would
• 20:49
  Speaker 5: rule wealth tax out and Captain Gain's tax to me
• 20:52
  Speaker 5: looks like a better option because you've got a value,
• 20:55
  Speaker 5: you've got a transaction, you've got a value, you've got
• 20:57
  Speaker 5: liquidity to pay it.
• 20:58
  Speaker 4: So I'd agree with Robin.
• 20:59
  Speaker 1: Let's end with a bit of a pitch from you
• 21:01
  Speaker 1: both in a nutshell, if a political party came knocking
• 21:05
  Speaker 1: asking for your tax policy idea for twenty twenty six,
• 21:08
  Speaker 1: what would your recommendation be.
• 21:11
  Speaker 3: Starting with you again, Robin, my recommendation is we've got
• 21:15
  Speaker 3: to have more fiscal discipline than we've shown in the past.
• 21:18
  Speaker 2: And I think that's all political parties.
• 21:20
  Speaker 3: And we should try to keep our tax burden roughly
• 21:25
  Speaker 3: no Highlanders. Now it's about thirty five percent of GDP,
• 21:28
  Speaker 3: and I think anything.
• 21:29
  Speaker 2: More is hard.
• 21:30
  Speaker 3: But if we need more money, we've got to collect
• 21:33
  Speaker 3: the money from the where the people have money, and
• 21:36
  Speaker 3: there's a large number of them, and that's the middle class.
• 21:39
  Speaker 3: And I would say, well, if we need more money
• 21:42
  Speaker 3: for carrying of the elderly healthcare, we put on GST,
• 21:46
  Speaker 3: increase TST and avoid all these other very taxes which
• 21:51
  Speaker 3: basically undermine productivity and investment and one thing I would say,
• 21:59
  Speaker 3: you can. I argued that capital gains tax. I said,
• 22:01
  Speaker 3: by the way, but a wealth tax is the most
• 22:05
  Speaker 3: disastrous idea.
• 22:06
  Speaker 1: Jeff, what would you say?
• 22:07
  Speaker 5: So, I'd be lobbying the government or an incoming government
• 22:11
  Speaker 5: to carefully design and introduce a comprehensive capital gains tax
• 22:16
  Speaker 5: in a relatively stripped down way to try and avoid
• 22:19
  Speaker 5: the worst impacts on productivity that Robin points out. As
• 22:23
  Speaker 5: the revenues from that capital gain tax rose, I would
• 22:25
  Speaker 5: recycle those into tax cuts.
• 22:28
  Speaker 4: At the lower end.
• 22:29
  Speaker 5: And the reason for doing that there's a bunch of
• 22:31
  Speaker 5: technical reasons around marginal tax rates, but also in order
• 22:34
  Speaker 5: to get more disposable and come to more people. And
• 22:37
  Speaker 5: then in the future, if you do need to increase
• 22:41
  Speaker 5: the proportion of tax taken out of the economy, you
• 22:43
  Speaker 5: have a capital gain structure that can be dialed up.
• 22:46
  Speaker 5: So that'd be my tax policy prescription.
• 22:50
  Speaker 1: Robin and Jeff an interesting debate about New Zealand's tax system.
• 22:53
  Speaker 1: Thanks for joining us today. That's it for this of
• 23:00
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• 23:03
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• 23:07
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