18 Apr 2019

Capital Gains Tax: Government had to weigh up costs, benefits - Finance Minister Grant Robertson

9:26 am on 18 April 2019

The government had to weigh up costs and benefits of a diluted Capital Gains Tax, Finance Minister Grant Robertson has said, refusing to pin the backdown on New Zealand First's opposition to it.

Grant Robertson, Minister for Finance announces Budget 2018.

Photo: RNZ / Rebekah Parsons-King

Jacinda Ardern announced yesterday that the government would not introduce a tax on capital gains, even going so far as to rule it - and taxes on water or fertiliser - out for as long as she remains prime minister.

Finance Minister Grant Robertson, speaking on Morning Report today, backed her position.

"What the prime minister said was, having campaigned in 2011, 2014 and 2017 on this and put it to a group of experts, it was time to accept that there wasn't a mandate there to pursue it."

Despite Labour having campaigned on the tax for three elections, Prime Minister Jacinda Ardern having previously backed it personally and the Greens having pushed a CGT harder than anyone, he refused to pin the backdown on New Zealand First - adamant about not revealing the details of government parties' negotiations.

"No coalition government is going to go through every detail of its negotiations on every issue in public ... we don't reveal the internal workings of every of the dozens of decisions that we make every day.

"You've interviewed Winston Peters I'm sure, and others will, and you'll hear from him what he thinks."

He said he was on the record as having supported it - and he still does - but part of the decision came down to whether a watered-down version of the tax was even worth it.

"If you negotiate on these things, and you dilute down a capital gains tax - to a point where, you know, it's only applying to a very small part of the asset base; it isn't generating a lot of revenue; it adds to complexity - you start making cost benefit analysis of that.

"You do have to ask yourself 'are you actually introducing more distortion into the system? Are you making the system more complex, and for what gain?' So we had to weigh up a number of different considerations, but yeah we did look at a range of options."

He repeated Prime Minister Jacinda Ardern's position from yesterday that the Tax Working Group had been worth it.

"The Tax Working Group did a really good job of looking at the breadth of issues in our tax system. There's dozens of other recommendations which we are pursuing, that IRD are taking a look at ... the working group's report was still useful. There are still a number of issues that will be pursued as a result of it.

"There are other ways of improving fairness and we're already doing that: we're cracking down on multinationals; we're about to release a discussion document about a potential digital services tax and we've closed loopholes within the rental property area, and we did introduce the five-year bright line test."

He pointed towards other areas where the government was making changes to the economy, too.

"We find consensus on dozens of issues every week. This is one where we weren't able to do that, but we're doing a whole range of things. I'm about to deliver a Budget on 30 May that's going to, you know, address some long-term issues for New Zealand mental health, and we're going to have a more productive economy, look at reducing child poverty and improving child wellbeing.

"The point is that when we came into government, we reversed a set of tax cuts that has delivered $5.5 billion to low and middle income families. On 1 May, the winter energy payment will kick in for the second year giving superannuitants and beneficiaries a boost in their income. It means that there's a first year free of tertiary education, it means that we're finally making the investments in building and fixing our hospitals and building our schools.

"We are doing a huge range of things that improve the fairness of this country, this is just one issue that we couldn't get over the line. There are many more and we're getting on with it."

Govt will borrow to achieve its goals - Green co-leader James Shaw

Mr Shaw, who is also the associate finance minister, said the government would need to borrow money to achieve its social justice goals and targets around lifting children out of poverty.

Since the government was going to need extra money coming from somewhere, he was asked directly if they would be borrowing it.

"Yes, we are, but I can't comment on this year's Budget, obviously, because that's about to be announced."

There has been speculation recently that the government would need to relax its self-imposed rules around fiscal responsibility.

Mr Shaw later pulled back on his assertion when asked again if there would be extra borrowing, but said he believed relaxing the fiscal responsibility rules was how the government would be achieving its goals.

"I can't tell you that ... ultimately, I think that if you look at the long term fiscal strategy of government, you know, we have said that we think that that [fiscal responsibility] needs to be reviewed and and we intend to do so."

Green Party co-leader and Climate Change Minister James Shaw.

Green Party co-leader and Climate Change Minister James Shaw. Photo: RNZ / Rebekah Parsons-King

He said he was not aware of Labour negotiating anything from New Zealand First in return for the CGT backdown, including - as has been suggested by Politic this morning - that it would back Labour's climate change policies.

"Look, I'm not aware of that report so I can't comment on it... I haven't seen it, so I couldn't have had made a comment on something I haven't seen."

It was not something he had heard from the prime minister or at all during the final negotiations on the Capital Gains Tax.

He said the Green Party was not part of the coalition's conversations and he could not say whether or not it had been New Zealand First leader Winston Peters' call.

"I wasn't privy to those conversations and, you know, our relationship primarily was through Grant [Robertson] ... We were talking with him on a regular basis about where we were hoping it might go, but it is a coalition government and ultimately in coalition governments not everyone gets everything they want all the time."

"We were consulted on the indecision and so, you know, we just got to a point where we said 'well, you know, this is clearly not going to go any further, so government has to proceed'.

The government could still claim to be transformational, and the Greens were making progress, he said.

"The thing about this government, actually, is that you actually look at each issue, by issue and each thing stands or falls on its merits.

"We are getting some of the major ones. So I'll give you some examples. We've put $14.5 billion into rapid transit, buses, light rail, walking in cycling over the next 10 years; we've had the largest funding of conservation in the last 16 years, and we're about to introduce the Zero Carbon Bill into parliament.

"So you've got, you know, across a whole range of areas, huge progress - more progress than we were able to make in the 20 years that we were in opposition."

'The government is wasting a huge amount of taxpayer money' - opposition finance spokesperson Amy Adams

National MP Amy Adams announces she will stand for National Party leader.

National Party finance spokesperson Amy Adams Photo: RNZ / Rebekah Parsons-King

National Party finance spokesperson Amy Adams said it was public pressure that pushed Winston Peters to oppose the tax.

"If Winston Peters had wanted to block this he had every opportunity over the last 18 months," she said.

"It was only when public pressure - that actually we were a large part of the rallying of - got too strong to ignore that he might have taken some action.

"He could have killed this a long time ago. The fact that he chose to is only because he was pushed into it through public pressure."

Ms Adams said the tax would have been very damaging for New Zealand and National agreed it should be abandoned, but there was still a "world of difference" between the government and National on tax.

"We've been very clear that tax thresholds need to be adjusted in line with inflation, the government's refusing to do that," she said. National also opposed regional fuel taxes, increased petrol levies and other taxes.

"But the main thing between us, to be honest, is around spending. We think the government is wasting a huge amount of taxpayer money and that's why they're on the hunt for the new taxes all the time."

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