Proper process for Labour's Working Group on Tax Policy

Dr Bryce Wilkinson
Insights Newsletter
8 September, 2017

In 1936 the much-quoted US journalist HL Mencken wrote“government is a broker in pillage, and every election is a sort of advance auction sale of stolen goods”.

So here we are in 2017, preparing to vote in yet another government spending auction of someone else’s money. But whose money is it to be?

Probably all the major parties chant in unison at this point: “Not yours, dear voter; of course not.” Then whose?

Well, Labour seems to have the most novel answer in the field. It looks like: “how about we set up a Tax Working Group, and determine that after you have voted us in?”

This is not a very attractive offer. There is many a shopper who might hesitate to enter a shop where she might find she is the one paying for everyone else’s groceries.

Jacinda Ardern seems to be ‘onto it’. She has been busy narrowing the scope for doubt. There will be no increase in GST or the top personal rate of tax (33%). Any capital gains tax will exclude family homes. Tourists and multinationals are in the gun, but they don’t vote.

So what might be left afoot? Labour’s latest fiscal plan states that:

“We will establish a Tax Working Group in government. It will have a mandate to create a better balanced tax system, including between assets, wealth, income and consumption. Labour is committed to delivering a tax system that is fair, simple, and collected.”

So taxes on land, assets and wealth look to be in the frame. So do taxes on capital gains on businesses, farms, rental properties and other private investments.

None of these look simple. There are unsettling questions about current and base valuations, inflation adjustments, realised and unrealised gains, and the ring-fencing of losses. Fairness may be whatever a majority of shoppers want it to be.

So what more can Labour do from here to alleviate shopper uncertainties?

One option is to assure shoppers that Labour will follow sound, established tax policy development processes. We have one. It is called the Generic Tax Policy Process. It provides for five stages in the development of tax policy, with public scrutiny at each stage.

Parliament would determine the matter, but informed public opinion would be consulted, and heeded. 

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