Photo: RNZ
A group representing more than 3000 accountants in New Zealand has called for a rethink of the tax system, including the introduction of a capital gains tax.
CPA Australia has made a submission in response to Inland Revenue's long-term insights briefing, which warned that tax would need to increase in the coming years.
The organisation agreed with Inland Revenue on many of the pressures on the New Zealand system, including an ageing population that would mean fewer working taxpayers, and higher pension and healthcare costs.
Productivity was also a problem, along with the cost of living and AI potentially changing how people worked.
It said the country's tax base was narrow with a heavy reliance on income tax and GST, which make up the bulk of the tax take.
It said the absence of a capital gains tax put pressure on the other taxes.
It suggested adding a CGT, land tax and even GST changes to help recalibrate the tax mix, as well as indexing tax brackets to inflation so that people's tax bills did not increase over time when their income was only keeping pace with inflation.
CPA said it was also worth considering making KiwiSaver compulsory, means-testing super and providing more tax incentives for retirement savings, such as a model in which contributions and returns were not taxed.
'We are not bringing in sufficient revenue'
The chair of CPA's New Zealand Tax Committee, Angus Ogilvie said unless there were significant changes to the way superannuation was set up, there were clear issues around a long-term structural deficit.
"We are not bringing in sufficient revenue to cover the cost of the existing welfare system and running the government, which is problematic. One option is to increase economic growth, which will bring in more revenue as a result but one wonders whether that alone will close that gap."
He said New Zealand had long been described as a "broad-based low rate tax system".
"For many years it was just that. The base was fairly comprehensive and the rates were relatively low. But now the top personal tax rate has gone to 39 percent, I don't think anyone could argue that is low. The company tax rate is one of the highest in the OECD. We argue that we aren't that low rate, nor are we broad-based.
"With a couple of exceptions, we don't tax capital gains in New Zealand, that's quite unusual in the OECD context. Pretty much every OECD country has some for of CGT, Australia certainly does but New Zealand does not. If we want to broaden that base, we need to consider a CGT."
He said CPA was suggesting it should apply to assets purchased from a certain date, so that it was not retrospective.
"The downside is it would take some time before it realised a reasonable amount of revenue but we acknowledge that you have to start somewhere. The alternative is to put all assets into that net but that would verge on impossible.
"You have to value all those assets, some of them are easy to value, like property, but you can imagine a small business, valuing the assets in terms of what it would sell for in an active market, if it's a specialist business it's difficult to ascertain without a property valuation process. That's always been a very valid criticism of a CGT.
"If it's based on assets that are purchased after a particular date then it becomes very easy."
Call for review of superannuation provisions
He said the superannuation settings needed to be revisited, but it was a political question that was difficult for politicians to deal with.
"Universal provision of super for everyone over the age of 65 is very expensive. It's not means tested in any way - in Australia it is."
He said something would need to be done. "I don't think there's anyone who seriously believes going to get on top of structural deficit issue unless the economy grows and that doesn't seem to be happening spontaneously so what other options have we got?"
He said putting GST up was another option, but it would hit lower-income earners hard because they spent a greater proportion of what they warned. That could require an adjustment to welfare settings.
CPA was not in favour of a wealth tax because it could prompt people to shift wealth to other countries without such a tax.
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