Thomas Pippos. Photo / Sylvie Whinray
OPINION:
Tax and tax policy seem to garner as many opinions as there are taxpayers.
Complicating matters is that outside of the perceived policy clarity that headline rates afford, and even ignoring effective rates, the number of pieces to the tax policy jigsaw and how they can be configured is eyewatering - even by equally informed participants that have similar outlooks.
As all participants are not equally informed and do not have similar outlooks, the number of permutations and combinations are endless; noting that the survey respondents are likely to be similarly informed, and also have somewhat similar outlooks (in terms of operating at the most senior levels of participating organisations).
Accepting that context, the survey results do have a commonality of themes, and broadly contain similar sentiments to recent surveys, including that undertaken last year.
Consistent with that, survey respondents remain concerned with the competitiveness of our corporate tax rate (54 per cent versus 38 per cent), albeit the strength of sentiment has waned by 12 per cent since last year.
In terms of competitiveness against Australia, the sentiment remains high and unwavering year on year (2022= 64 per cent and 2021= 67 per cent), that a staged reduction in our corporate 28 per cent rate to the Australian 25 per cent rate is desirable.
As always, it's never quite as simple as that, with comments raising the importance of considering overall tax burdens, rather than just focussing on headline rates, accepting that the weighting different stakeholders place on interrelated considerations will always vary, and the context of the debate will always evolve with time.
More interesting seems to be the outcomes of the questions that look to glean preferences around the tax policies of the major parties.
Consistent with some of the earlier comments, and as evident in the nature of tax policy differences between Labour and National, the political tax policy debate is very much at the margin having regard to the totality of tax policy settings.
The margin can however be quite an emotive one, with polarised views often shaped by the personal lens through which respondents view fairness and equity. Two areas where this comes into play are the various residential property tax measures and the 39 per cent tax rate, with both areas continuing to raise a fair degree of disquiet from respondents.
Of the two broad areas, the 39 per cent tax rate continues to be as largely unpopular as it was in prior years, with 48 per cent of all respondents not supportive of it, and another 16 per cent only somewhat supportive. In many respects that is not that surprising, as it is largely symbolic in nature and really only impacts those that derive material levels of income in their own names that cannot be left within investment structures. It doesn't, therefore, impact New Zealand's most wealthy, it exacerbates the taxation of labour over capital, and it would impact most respondents.
Similarly, the property tax measures generally also don't find favour with respondents, with the interest deductibility limitations on the residential property being the least popular of all, carrying nearly the same level of unpopularity as the 39 per cent rate with 45 per cent who don't support and 20 per cent who somewhat support.
Interestingly, looking at the results from the other side of the same coin, in terms of Labour's tax policies and those of National that look to repeal the same, there appears to be a statistically significant level of respondents who are unattracted to the current tax settings, but appear begrudgingly more accepting of them remaining, which may stem from respondents accepting the necessity of raising this additional revenue given the wider context New Zealand faces (as brought out in certain comments).
Possibly aligned with this sentiment, respondents are raising more concerns (in the comments) around inequality and equity than they have in the past, including the appropriateness of those with the greatest levels of wealth needing to contribute more than what they do.
What's unclear is whether and to what extent this is driven by respondents seeing more visible challenges with those at that end of the wealth spectrum, including homelessness, the tax burden falling disproportionately more on labour than capital, and/or the general lack of a capital gains tax in NZ.
The likelihood is that all these factors and more are possibly coming into play.
Consistent with this, concerns around wealth inequality continue to grow, with respondents having a heightened level of concern relative to last year at 62 per cent (from 57 per cent).
More this year (71 per cent versus 59 per cent) continue to believe that the Government's role in wealth inequality is ensuring suitable levels of welfare and income (that is a heightened safety net), with the majority of respondents (80 per cent) continuing to have no real attraction to generally taxing wealth and assets (outside of capital gains) in addition to income (accepting some comments arguing the opposite for New Zealand's most wealthy).
There is a heightened view that the Government is looking to tax capital further, having regard to the various wealth discloser projects in play; whether the High Wealth project and or the new reporting requirements for domestic trusts; with around 79 per cent of respondents feeling this is not just about gathering information to better understand the lie of the land, but also a means to an end to tax capital (in some way).
The upshot is that tax appears to be currently less emotive than it was, including a greater acceptance that we have certain societal challenges that need to be addressed first, but a lesser acceptance that the Government is dealing with those challenges. The fact that the tax debate between the two major parties is largely at the margin helps dampen the current debate, with the sentiment likely to only become strained if the policy differences grow.
Time will therefore tell what role tax will play in the upcoming 2023's election. It's unlikely to be centre stage and more likely a curve ball that could either work for or against one of the major parties depending on how it is played; with the recent GST debacle on KiwiSaver serving as a timely reminder of how emotive tax policy can be, and how its best to tread carefully when looking to navigate through it.
For now, the greater concerns seem to be whether that tax revenue is being appropriately deployed by the Government and its agencies to address the issues at hand, a concern that appears to be growing rather than abating, and with respondents somewhat restless and frustrated accordingly.
• Thomas Pippos is chair of Deloitte
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