Government on back foot on tax policy


Parliament Interior (Photo credit Sarada Nair)

Venu Menon
Wellington, May 3, 2023

The House witnessed a robust debate around tax with Minister of Finance Grant Robertson having to fend off aggressive questioning on the subject by opposition members, as well as a Green Party member, at its sitting on May 2.

David Seymour of the ACT Party fired the first salvo by asking if the minister would rule out introducing a “new tax on capital.”

Robertson clarified that “the Prime Minister has made it clear that there will be no major new taxes in the Budget such as capital gains tax or wealth tax.”

Seymour then sought to turn the screw on the oft-repeated opposition charge of unbridled government spending.

“How is it possible that his government is spending $11 billion, or 68%, more on health and $5 billion, or 38%, more per year on education since 2018, but fewer kids are attending school, fewer are getting university entrance, and waiting lists for operations are longer than five years ago?”

Robertson retorted by reminding the ACT leader of the impact of the Covid-19 pandemic on “issues like school attendance.” He said the government was working to “improve that significantly.”

But Seymour pressed on with his questioning of government spending and wanted to know why New Zealanders would agree “to any new government implementing a new tax on capital when this government has increased core Crown expenditure by 60%, compared   with general inflation of 20% in the last five years, and yet the trains don’t work, the roads are potholed, fewer criminals are in jail, fewer kids are attending school, and more people are queuing for operations?”

Dismissing the query as hypothetical, a visibly irritated Robertson highlighted the government’s track record on managing Covid-19, “with one of the lowest excess mortality rates.” He said the economy was 6% larger now than it was before Covid, with “more people in work, with record low unemployment, and with our net debt levels being among the lowest in the OECD with countries that we compare ourselves with.”

Deputy Leader of the opposition National Party Nicola Willis continued with questions around tax and sought to corner the finance minister into an admission on whether “government officials had been asked to provide advice on possible new taxes, such as, for example, a wealth tax on unrealised capital gains.”

When Robertson sidestepped the query, Willis wanted to know if Cabinet had discussed a new capital gains tax. But Robertson turned the tables on her by pointing out that National had backtracked on its commitment to not increase GST, by doing the opposite when it was in government.

But Willis, who faced a point of order from the Speaker, persisted by rephrasing her question, which prompted the finance minister to invoke the Official Information Act (OIA) to keep from disclosing Cabinet discussions.

Chloe Swarbrick of the Green Party, a Labour ally, raised the issue of fairness and whether the “wealthiest New Zealanders are paying their fair share of tax.”

She pointed out that teachers, midwives, and checkout operators “across this country pay more than double the effective tax rate of the wealthiest New Zealanders.”

Robertson fielded the question by sourcing it to the “high-wealth individuals tax report,” which he acknowledged as a “world-leading study.”

He agreed more could be done to make the tax system fairer.

Swarbrick pointed to the glaring tax rate differential between tax payers based on earnings.

However, Robertson, while reiterating that “there will not be major tax changes in the Budget,” appeared to strike an ambivalent note by adding: “Obviously, consideration can be given now to the report that has been produced.”

To a pointed question from the Green Party member whether revenue from wealth tax or a capital gains tax could go towards meeting the infrastructure deficit in transport, health, housing, education, and climate action, Robertson answered by expressing his satisfaction at the government’s record of infrastructure investment to date.

Venu Menon is an Indian Newslink reporter based in Wellington.

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