-
Watch Video
-
Related
The Q A panel discusses Paul Holmes' interview with the head of the government's working party on tax, Professor Bob Buckle.
PAUL HOLMES What do we make of some of those ideas Bob Buckle was talking about and what is likely really politically to be picked up by the government? Capital gains tax first of all Stephen Franks, they'll come to you on taxation cos you've got glasses.
STEPHEN FRANKS - Former Act MP
The issue really is - this is a good exercise, they want the
debate, the government has spent a year making sure people don't
panic so we fall into recession, but what they are all struggling
with is that we're borrowing the equivalent of a new hospital every
week, you know the Chinese are opening a power station every four
days, we're spending on maintaining our lifestyle the equivalent of
a hospital every week, or a university every two weeks, or the
entire Correction system every month.
PAUL That's what we're borrowing?
STEPHEN That's what we're borrowing, because we're spending more than we earn, and we've been doing it for 40 years, we've been living off the savings of poorer people, now fixing the tax system is a nice thing to do, but it's trivial compared to fixing the spending problem.
PAUL Still it gets them more revenue I suppose and of course the government's aim is to get more revenue to broaden the tax base, to increase the revenue without distorting and impeding productivity.
STEPHEN Absolutely but their worry is that as soon as the tax goes up in a way that affects income earners we lose our radiologists, our doctors, our plumbers, our electricians, anyone who can earn more in Australia we lose, and we're left with the less productive.
PAUL Well capital gains tax starts to become attractive doesn't it, I mean I don't particularly think I want it, but it starts to become attractive when you think that it might be able to enable them to reduce corporate tax and income tax.
THERESE ARSENEAU - Political Analyst
And to try to dampen the housing boom.
PAUL Well John Key of course will say that capital gains tax doesn't do that, because they have capital gains tax in the States and the UK and they've still got that.
THERESE There's a fair bit of consensus I think around the problem right, one of the problems as we've all talked about is that there's too much emphasis on taxing income, personal income and corporate income, and those assets capital and labour are mobile, so we're taxing the very assets that can leave, and the other side of the problem is we're investing too much in housing. In New Zealand I've seen figures where about three quarters of our capital investment is in housing compared to 50% in Australia, 37% in the US. So the problem then becomes what do we do about it, and on capital gains I mean some people say it's a good way or maybe a land tax would be a good way to sort of burst that bubble, as you said John Key doesn't agree with that.
PAUL I mean they're talking possibly what do he say eight or nine billion dollars possible from a comprehensive capital gains tax. Of course Michael Cullen, a shrewd political operator once said capital gains tax is suicide in New Zealand for a government.
DEREK FOX - Former Maori Television Chair
Yes possibly, but especially if you look at the voters who are
involved and they're the ones that are going around borrowing money
in order to buy multiple houses and whatnot. The sort of people I'd
be concerned about are the ones who would be affected by an
increase in GST, because they're clearly the bottom - you know
they're the lower income ones who'll be badly affected, they've
gotta eat, so they've gotta buy more food and so you know that
affects them.
PAUL Of course a part of the tax review also is increasing - doing it in such a way that we do not impede productivity, and Bob Buckle was talking about the corporate tax rate which I think is what 30 - 33?
STEPHEN It's coming down.
PAUL It's coming down, but he said it's 30. Internationally he says the corporate rates are coming, this is very important for investment coming into the country, here's what he said.
Bob Buckle: 'We had a relatively low corporate tax rate in the early 90s, we no longer have a relatively low corporate tax rate, so we do have to be wary of that.'
PAUL Relatively low is the point, us versus the international community. Should that come down?
STEPHEN Our problem is that we're too close to Australia, in Australia Henry is looking at it, they're probably going to go even lower, we should be prudently targeting it, bringing all of those top rates down to a common flat from around 25, if we're not going to again see people exporting themselves.
PAUL We have got to be at the level of Australia always on corporate rate don't we?
DEREK Yeah but what are the corporates that are left. You know 1980 when they said we had this great tax system in the 80s, look at the companies, the top 20 companies that were back then in the 80s, none of them are here now, they're all gone.
STEPHEN No no there's 500,000 companies, the companies that matter are all the little businesses, the top corporates are just the decoration on the cake.
PAUL I mean the point is if we can go lower than Australia, if we can be relatively low on corporate tax it might just encourage firms to come and set up here and employ people.
STEPHEN Well that's international experience, Ireland was the poorest in Europe and now it's not, I mean tax matters, tax really matters.
THERESE Politically we're talking about taxes, always tend to be a hot political issue, especially for a government that was elected on a platform of cutting taxes, but I would argue they've made a more important promise to us and that is one that doesn't fit neatly into the three year cycle, and it is a promise that they're gonna grow the economy and that I think has to be to the forefront at all times.
PAUL Now let us consider what we might be talking about in a week's time, what do you think's going to be the story of the week coming up?
STEPHEN I think it'll be ACC, there's a huge roar, if you've read Matthew Hooton, there ought to be people charged with the lies that were told about ACC in the last year, we've got a system that's being justified essentially as part of the welfare system, the attack on Nick Smith for his comment about the suicide was really saying we think it's okay for someone who dies of cancer for their family to get nothing, but somebody who dies of suicide to get the ACC in behind them.
THERESE No the attack was really because it showed an ignorance about the reality of why people commit suicide I think was the problem with the comment.
STEPHEN No, he was illustrating the fact that the consequences are so hugely different between one cause and another.
PAUL Story next week.
THERESE The story should be for everybody on either side of the ETS should be concerned about the process being used currently in parliament I think, the rush through the finance and expenditure committee, I think it should raise concerns for people no matter what side of the divide.
DEREK Well I think that both those stories are extraordinarily important and they should be there, and someone needs to check Nick Smith's medication.
PAUL Thank you very much Mr Fox for this advice.
