The Government’s new tax working group chaired by former Finance Minister Sir Michael Cullen is not an attempt to “grab revenue”, Finance Minister Grant Robertson says.
Releasing the terms of reference for the long-foreshadowed working group, Robertson told media the goal was to create a better-balanced and fairer tax system.
“Somebody who goes to work every single day and pays tax on every dollar they earn can look at somebody who is speculating in the housing market and wonder why they’re not being treated fairly - we want to address that issue.”
He said it was possible the changes could be revenue-neutral, and denied the review was an attempted tax-grab.
“We are not setting out on this process to increase or grab revenue, we’re setting out on this process to get a fairer and more balanced tax system.”
The terms of reference for the group say it should specifically consider the benefits of a capital gains tax or land tax, a progressive company tax, and the economic environment over the next five to ten years.
Robertson confirmed comments made before the election that certain areas would be outside the scope of the review, including increasing any income tax rate, the rate of GST, inheritance tax and changes that would apply to the family home or land beneath it.
The terms of reference also say the group should focus on “what role the taxation system can play in delivering positive environmental and ecological outcomes”, but Robertson confirmed a carbon tax was not specifically on the table, with a separate agreement in place around reforming the Emissions Trading Scheme.
“What we are saying is over the long term, we want the tax system to support positive environmental outcomes. Now that may be around other issues to do with water or to do with pollution, I’m not going to preempt that today - what I can tell you is this an issue that both our coalition partners have asked us to include within the taxing group.”
While GST rates would remain unchanged, the working group could consider whether to exempt certain products from GST, such as female sanitary products or fresh fruit and vegetables.
A proposal to apply GST to online purchases from overseas was still being worked on, and could be fast-tracked ahead of other tax changes if the working group “feel we can make a concrete step forward”.
“For main street retailers in New Zealand at the moment they feel like there’s an unfair advantage for international companies selling online.
“In principle, [Revenue] Minister [Stuart] Nash and I agree on that, what we now need to work through is the way in which a regime could be developed.”
Robertson said the review would also look to the changing nature of work and how the tax system needed to adapt.
“Issues like the changing nature of work won’t necessarily impact in the next three years, but the tax system that we design for the future needs to understand that people working traditional 40-hour weeks in continuous employment is changing.”
The group could consider the possibility of tax breaks on pensions and savings if it wanted, Robertson said.
However, any changes to Working for Families or consideration of a universal basic income would be part of a separate review undertaken as part of a coalition agreement with the Greens.
The terms also ruled out looking at international tax reform under the Base Erosion and Profit Shifting agenda, although Robertson said the broader issue of multinationals and company tax was still on the table.
The rest of the group, set to be announced before Christmas, was likely to be made up of eight people including Cullen, covering those with tax expertise and other representatives.
“We obviously need people who are tax experts...but we also want to make sure that the people who are affected by the tax system have a voice in this process, so that means businesses, that means working people as well, and we've also included a specific requirement that the group is able to understand the role of Maori business and enterprises as well.”
He expected the group to be made up solely of New Zealanders, although expected it to work with people in other countries.
While the working group’s recommendations would not be binding, Robertson said it had been set up to provide the best possible advice to the Government.
“We’ve been clear as you see by the terms of reference the specific and particular areas we want the group to look at, but we also understand they're independent and they will come up with some of their own ideas.”
It would be supported by a secretariat of officials from Treasury and Inland Revenue and have an independent adviser to analyse advice.
He denied the Government had excessively restricted the group’s scope by limiting the areas it considered, saying: “What we’ve done is create a more focussed review than we’ve seen at times in the past...but they also have a wider mandate to take an overall look at the balance of the system.”
He had asked IRD and Treasury officials to be “as creative as they possibly can” in setting up a public consultation process.
“One of the things that struck me during the election campaign was the fact that New Zealanders have a hunger to know more about their tax system, and I don’t think at the moment every New Zealander understands completely the way in which the tax system works.”
The Government wanted consultation to go “beyond the usual discussion documents and websites to actually be much more interactive”, and was considering the establishment of shadow working groups made up of young Kiwis to develop new ideas.
Robertson said the group would meet no later than February 2018 and would produce an interim report by September 2018.
Any changes would not be implemented until the 2021 tax year, which would give voters the chance to accept or reject any proposals at the 2020 election, he said.