Politicians will be carefully calculating impact of reforms on personal interests
Bob Buckle's tax report will have many of our more wealthy MPs working their calculators overtime to assess the effect of different reform options on their net wealth.
Major tax reform always produces winners and losers.
Buckle's taxation working group went to some lengths to point out just who would
win or lose from its reform options.
We all want to end up in the winners' camp, but most of us are not in a position to influence the outcome. MPs can - and do.
A flick through Parliament's annual register of MPs' pecuniary interests reveals many parliamentarians could lose out if the Government moved to plug the tax loopholes that sprang up after its predecessor whacked the top personal tax rate up to 39c.
More than two-thirds of the National line-up have beneficial interests in trusts (entities that the Inland Revenue believes are responsible for a $300 million hole in tax revenues at the current 33 per cent tax rate).
Then there are investments in rental property (another area which IRD says cost the Government $150 million in lost tax revenue) and the traditional investments in farms and share portfolios.
The MPs' personal wealth - like those of National's support base - is spread across asset classes which stand to either retain or lose value depending on which of the working group's options the Government chooses to fund major cuts to company and personal taxes.
The Buckle team estimates significant revenue could be raised through broadening the tax base.
For instance, introducing a comprehensive capital gains tax would produce up to $9 billion, or $4.5 billion if owner-occupied housing is excluded; a land tax could produce $2.3 billion; levies on imputed residential investment properties $700 million and axing depreciation on buildings $1.3 billion.
But even before the Buckle team reported, Prime Minister John Key said he was not in favour of broad-brush capital gains taxes. Key contends they are difficult to implement, something the IRD agrees with and now also the Buckle group.
How fortunate.
A glance at Key's own list of pecuniary interests shows he would be a sitting duck for a capital gains tax regime given his tally of top-class homes and the share portfolio which he has tucked away in a blind trust.
His colleagues (and party supporters) will have breathed a sigh of relief that the Buckle group did not make an overwhelming recommendation to pursue this tax.
Key and Finance Minister Bill English say they will put the national interest first when it comes to cherry-picking options.
If capital gains tax is a political no-goer, the next most obvious option is a land tax (basically a bit like an extra rates bill which goes to the Government rather than local authorities).
The political downside for the Government is this tax could badly affect some farmers, retirees and Maori land trusts.
Federated Farmers has already started lobbying against the tax.
Grey Power and the Maori federations will not be far behind.
The MPs' register shows most of the Maori Party's MPs have beneficial interests in Maori land trusts.
They've already scored a sweetheart deal to back emissions trading legislation. Their chances for a repeat performance have to be good.
There are other options: increasing GST would pull in an additional $1.7 billion to $3.7 billion.
National insiders suggest that increasing GST is more likely as voters will simply get annoyed by the presentation of their annual land tax bill.
Key has given this option credence by saying beneficiaries would have to be compensated.
Wiping depreciation on buildings is also a potential starter as it plays into the whipped hysteria against landlords.
National's blind spots on the taxation front are obvious. It shouldn't succumb again to more special pleading from Maori interests, but it might.
The Act Party wants personal and company taxes dropped - fast.
But it would prefer this is achieved through axing Government spending rather than introducing more taxes.
The National Government doesn't need Labour's support. But if major reform is to stick it will have to try to ensure across-the-board fairness.
Unfortunately the Buckle report did not really chart a path for the future. Too many mixed agendas. Too much cross-over with the capital markets' review team's work.
This was evidenced by a particularly odious comparison - the working group's decision to point out that the $200 billion Kiwis have tied up in rental properties had a negative taxable return of about $500 million in 2008, whereas the NZX has a market capitalisation of about $55 billion.
Investors will not come flocking to the NZX if property is made less lucrative.
The problem is the NZX has a very poor spread of companies.
Kiwi investors cannot get exposure to Fonterra as it is not listed.
Forestry companies such as Carter Holt Harvey have gone from the boards.
The banks are gone. Major media companies are owned by private equity.
The top 10 companies listed on the NZX account for nearly half the stock exchange's total market cap: Telecom, Auckland International Airport, Fletcher Building, Kiwi Income Property Trust, Ryman Healthcare, Fisher & Paykel Healthcare, Contact Energy, Infratil, Sky TV and Sky City Entertainment. In Australia the top 20 companies on the ASX basis include big mining companies like Rio Tinto, BHP Billiton and Newcrest, and gas producer Woodside Petroleum, which have done well from their exposure to China.
Then there are the four major trading banks, the insurance firms and funds managers, a brewing company, transport firm and rural servicing company and Telstra.
Pity we don't have such quality stocks here.