A rich-lister fears the middle class could end up bearing the brunt of tax changes aimed at the well-off, while another uber-wealthy Kiwi says the Government’s “spin” made those in business “look like criminals”.
Briscoe Group managing director and deputy chairman Rod Duke was worried an investigation Revenue Minister David Parker had Inland Revenue do into the amount of tax 311 of the country’s wealthiest families pay would pave the way for the introduction of a capital gains tax.
This, he believed, would be “punitive” for hard-working people.
“It is not a rich person’s tax,” Duke said, saying it would also catch “thrifty savers” who tried to prepare for the futures of themselves and their children.
The IRD’s research found the 311 surveyed paid a median effective tax rate of 9.4 per cent and had a median wealth of $106m. Treasury, however, believes a comparable tax rate for a “middle wealth” Kiwi was 20.2 per cent - a rate that includes GST they pay and any benefits someone might receive like Working for Families.
Prime Minister Chris Hipkins today stressed the Government “will not introduce any major tax changes like a wealth tax or capital gains tax in this Budget”.
“We set out our tax policy at the last election and we are sticking to it,” Hipkins said.
Nonetheless, there is speculation Labour might campaign ahead of the October election on introducing a capital gains tax should it be elected to govern again.
The bright-line test, introduced by the former National-led Government and expanded by the Labour-led Government, already requires property investors to pay income tax on gains received from selling a residential property within 10 years of buying it.
Duke feared a regular capital gains tax, which would apply to property bought and sold over any timeframe, would harm middle-class people. He noted it would be too difficult to design a regime that excluded middle-wage professions such as teachers and police officers, but might include higher-income doctors and lawyers.
While Revenue Minister David Parker clarified he wouldn’t want to tax the family home, owners of one property may currently need to pay tax under the bright-line test if they don’t live in their home for a time and then on-sell it within 10 years.
Duke didn’t want to comment on whether he thought the tax system was fair more generally or whether he believed he paid enough tax.
However, he pointed out the dollar value of the tax he paid was substantial.
Duke said Inland Revenue hadn’t contacted him or his friends to ask them to partake in its survey of super-wealthy people.
He wondered how the Inland Revenue pitched the survey to respondents, and whether it suggested there was a political desire to tax them more.
Another rich-lister, who didn’t want to be named, believed the Government’s “spin” on the Inland Revenue and Treasury research was “ludicrous”.
He believed the research made those in business, who paid tax, “look like criminals” and questioned why the Government wasn’t more focused on using the tax system to improve productivity.
A third rich-lister, who also did not want to be named, took a very different view.
He told RNZ he made his fortune on untaxed capital gains but supports taxing those gains - saying it was only fair to bring New Zealand into line with other countries.
However, he told RNZ a more broad-brush approach - like a capital gains tax on all properties beyond the family home - would do more for the government’s revenue.
“You could take all the money off [rich listers] and it would fund the government for a day. The government spends about $100 billion a year and taxes about $100 billion a year, so anything that happens needs to materially contribute to the revenue side of things. Otherwise, it’s just the politics of envy.”
Parker on Wednesday was quick to pour cold water on the idea he was buttering up the electorate for a capital gains tax after allegations from the National and Act parties.
“I’ve long believed, as a lot of other people do, that there are unfairnesses in the tax system. I remain of that view and I think this report proves that case,” Parker said.
National’s finance spokeswoman Nicola Willis argued any tax unfairness was the fault of the Labour Government for driving up untaxed asset values while doing little about the inflation that had pushed workers into higher tax brackets.
National leader Christopher Luxon also told reporters this week New Zealand’s uber-wealthy already pay their fair share of tax.
“It’s not the wealthy that are the problem here. This Government has pumped up asset values and the wealthy have done well,” Luxon said. “The top 2 per cent of New Zealanders are paying about 26 per cent of all our income taxes and I think that is entirely fair.”
The Green Party’s revenue spokesperson Chloe Swarbrick, however, said the report confirmed her party’s suspicions about the unfairness of the tax system.
“The only barrier to a fair tax system, well-funded public services and ensuring everyone has what they need to survive is political willpower,” Swarbrick said.
“Let’s be clear: to allow millionaires to continue to not pay their fair share after this explosive evidence is a political choice. Poverty is a political choice.”
Willis said the capital gains highlighted in the report were largely unrealised and this was a cause for caution.
Act leader David Seymour also said unrealised gains should not be classed as income.
“Unrealised capital gains are profits that exist on paper in the theoretical possibility the assets are sold, but not in reality. The report can’t be taken seriously if hung off such a concept,” Seymour said.
“As Act predicted, David Parker’s study was a politically driven fishing expedition to find people with money and take it from them.”