Labour is about to announce new tax policies but leader Phil Goff is tight-lipped about whether a new capital gains tax would be part of the package. Business editor Dene Mackenzie looks at some options.
Labour Party leader Phil Goff confirmed yesterday an announcement on the party's new tax policies could be expected over the next couple of weeks.
"It will be in the area of taxation and we'll be looking at, as we've foreshadowed, indicating how we would be paying for the policies that we're introducing, and any changes in the broad taxation area," he told reporters.
Mr Goff would not say whether new taxes would be announced, such as a financial transactions or capital gains tax.
"I'm not ruling anything in or out at this stage. You'll just have to wait for the announcement when we've completed the policy process."
He would not say what Labour's stance was on a capital gains tax, telling reporters he would not talk about taxation issues ahead of the announcement.
Polson Higgs tax partner Michael Turner said there were only a few areas to which Labour could turn. They included lifting the top tax rate back to 39%, from 33%, and taking the GST off fresh food and vegetables - both of which would be fraught with problems.
"It's not too hard to predict Labour lifting the top tax rate.
But then we go back to the problems of the last 10 years, of people structuring their finances to avoid tax - an issue which is winding its way through the court now, and the IRD conducting audits.
"Mr Goff is openly making attacks on farmers and anyone else who won't vote for them."
Large companies were now "enjoying" the 28% tax rate which was introduced by National. It would be a big call to put that rate back up to 30%, or 33%, Mr Turner said. However, if Labour needed a lot of money quickly, lifting tax rates was the easiest way to go.
The downside was that at present, New Zealand's company tax rate was lower than that in Australia.
"It would raise a few eyebrows of anyone looking hard at investing here or Australia, but is a possibility if he is trying to upset the people who don't vote for Labour."
A capital gains tax had been ruled out by the last Labour government led by former prime minister Helen Clark and finance minister Michael Cullen, he said. Private housing would be exempt, which removed up to 70% of possible income. A capital gains tax also meant people held on to their properties longer if they were sitting on a large tax bill when they sold.
Even if Labour introduced a capital gains tax the day after the November 26 election, there would be at least a year before any revenue was gathered, Mr Turner said.
Removing GST from food was a vote winner for Labour. It sounded a good idea as people on low and fixed incomes would see a reduction in their grocery bills.
But for accountants and the IRD, it would be a nightmare to administer, and calls would soon come for more exemptions. Calls had already been made for petrol to be exempt from GST and there was a suggestion that GST should be removed from the purchase of a first home. Also, some people believed that having a car to get to work was just as important as buying food, Mr Turner said.
The National Party had been "brave" with its calls on tax, he said. Raising GST to 15% from 12.5%, removing the depreciation from buildings and reducing company tax were all moves the previous Labour government did not have do because the money was flowing in the door.
While some of those moves were not popular, voters realised that something had to be done.
"It's all about reading the voters. Voters are more attuned to reality than Mr Goff gives them credit for," Mr Turner said.
