The Tax Working Group is trying to find out ways to make tax more fair.
Imposing not just a Capital Gains Tax but the costs of complying with it on individuals and business is anything but fair and, as Hamish Rutherford shows, the attempt by the group’s chair Sir Michael Cullen to shut down discussion in it makes it worse.
. . .After a critic raised concerns of the implications of proposals in the working group’s interim report, Cullen was dismissive.
Critics should wait for the tax working group’s final report in February, he said. The interim report may be the only thing the public has to work off, but Cullen said that the Tax Working Group’s own work had moved on and all the problems are being solved.
This Kafkaesque shutdown came after Wellington businessman Troy Bowker made alarming claims about the possible costs introducing a tax would have on small business, predicting the cost of compliance would be billions of dollars.
Bowker claimed the tax working group’s preferred method for introducing the tax – creating a “valuation day” after which all assets captured by a new tax would immediately be taxable – would create huge compliance costs, with all businesses needing to be professionally valued on a given day.
Valuing things like commercial property is as easy as valuing your home – just look up the rateable value. But valuing businesses, especially small businesses, can be much harder. Much is tied up in the knowledge and contacts of the key employees, which is tough to put a price on.
Although Bowker’s assessment of the possible costs was guesswork, the tax working group’s own interim report appears to back up his argument. . .
While the exact cost might be debatable, that there will be a cost and it will be high is not and nor is who will pay it – everyone directly or indirectly.
Anything that adds to the cost of doing business and reduces profit, as a CGT will, decreases productivity. That in turn makes the businesses less able to expand and could lead it to contract, threatening jobs and the businesses’ viability. Should the businesses survive, the added cost will sooner or later be passed on, at least in part, to everyone who uses the goods or services that business provides.
Meanwhile, the question that ought to be asked, is what’s fair about more and higher taxes when the government is running a very healthy surplus?
The previous government took the quality of its spending very seriously aiming for better rather than more.
This government is sprinkling money here and there like fairy dust in the mistaken belief that quantity is better than quality.
There is a case for more spending in some areas where spending was too constrained but there is no case of profligacy with public money.
A government with money to waste is a government that’s taxing us too much.
More care about how and on what money is spent would reduce waste and allow us all to keep a bit more of the money we earn.
Instead of looking at ways to impose new and more tax, the TWG ought to be working out how to tax us less.