COMMENT

Simon Bridges marked his first anniversary as National leader in Hamilton this week, talking to various groups about issues of the day.

Needless to say, the proposed capital gains tax was top of the agenda, and not Jami-Lee Ross.

Bridges received a gift not unrelated this week from Speaker Trevor Mallard, who revealed Bridges is charged massively more by VIP transport for the use of Crown cars than ministers are.

Advertisement

So when his expenses were leaked to Newshub in August last year (after a series of public meetings to introduce himself to the country), they would have been just $33,281 rather than $83,693 if the ministerial rates had applied, and that would have been within the ballpark of ministerial usage.

The practice applies to Mallard's transport, too, and may go to his motive for revealing it and wanting to change it.

It means Mallard and Bridges may travel a lot less than ministers in Crown cars, but appear to have travelled a lot more.

In the what-ifs that follow the revelation, it may well be that, had the same rates applied, the expenses would not have been worth leaking. That may not have got Bridges out of trouble, however.

With the bitterness of Jami-lee Ross towards Bridges laid bare, there almost certainly would have been other efforts employed to undermine him as leader.

Whether Bridges has a second anniversary on February 27 next year is not certain.

But the chances would be higher if the Government decided to implement the comprehensive version of the capital gains tax (CGT) - the one that would apply to Kiwisaver, small businesses, farms, investments property and every other assets class except the family home, art and jewellery.

You can tell when a government is in trouble when the opposition just shuts up and watches the damage it is doing to itself.

Having joined the initial chorus against the comprehensive plan favoured by Michael Cullen's Tax Working Group, Bridges has been relatively quiet this week observing as the Government wrestles with a reality entirely of its own making.

Ardern and Finance Minister Grant Robertson appear to have no strategy of how to sell it because they don't know yet what they are selling.

They are left with repeated references to fairness but avoiding specifics.

That is the trouble with tax reform. It sounds so good on the hustings and in theory but when it comes to practical application, it creates anomalies and can deliver something completely unintended on closer examination.

According to the Tax Working Group, a CGT would have little or no impact on house prices but would increase rents, the treatment of Australasian shares in Kiwisaver would create incentives for foreign investors to buy New Zealand shares and create incentives for New Zealand investors to buy foreign shares.

That is not the CGT as sold on the hustings.

So desperate is the Government to distance itself from the CGT proposals that its spin-doctors have been imploring media to use the word "would" in their headlines rather than "will" when describing the impacts of a CGT.

It is losing a battle because it can't define what it is fighting for. Even the gifts of persuasion that Jacinda Ardern possesses have not been sufficient so far to be convincing.

Having worked in a fish and chip shop after school and having grown up on an orchard may have broadened her life experience, but that does not give her an insight into the anxiety the proposals are creating.

Ardern effectively hoisted the white flag this week, signalling that farmers and other small businesses will be exempt when she declared she was hearing them.

It was an attempted display of empathy from the political necessity that she doesn't have the numbers from New Zealand First for the sort of CGT she really wants.

The Government has earmarked April to reveal its plans for a capital gains tax and, given the negative response to it, early April will be a safer bet than late April.

The most insidious of the proposed changes are to KiwiSaver - in this case to reduce the benefits of higher income earners and to increase the benefits of low-income earners – because it is easier to get away with.

National incessantly got its sticky paws into KiwiSaver.

Savers did not march in the streets to protest when, for example, National removed the tax exemption on employers' contribution to KiwiSavers' accounts.

The Government was taking for its own coffers something the individual KiwiSaver had not seen in the pay packet.

The effect on savings over a lifetime could be huge, especially for those with generous employer contributions.

But because it is on a savings scheme that has yet to be cashed in, it is easier for governments to interfere with KiwiSaver than changes to, say, income tax.

The current plan is to reverse National's grab but only for those earning less than $48,000 and for the minimum employer contribution of 3 per cent.

Assuming the Government chooses to apply a CGT to only residential investment property, the revenue projections would be slashed, from raising about $3 billion a year after five years under a comprehensive tax, to just over $1b in the fifth year of implementation.

Put another way, the $8.3b that was projected to be raised in the first five years across asset classes would become $2.78b and the extent of the promised offsets by way of tax reduction would be commensurately less.

The Government should be nervous that any offsets would be permanent but the projected revenue from a CGT little more than guess work – especially set at such a high rate as 33 per cent, a rate that will distort seller behaviour well beyond comparisons with sales in countries with lower rates.

Capital gains tax will continue to be a nightmare for the Government.

Bearing in mind the adage that governments lose elections, oppositions don't win them, the worry should not be whether CGT increases Bridges' chances of having a second anniversary, but whether it could be responsible for him marking a third one from the Beehive.