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Labour reverses Ardern's 'captain's call' on tax reform

Labour reverses Ardern's 'captain's call' on tax reform

by Pattrick Smellie

Sept. 14 (BusinessDesk) - The Labour Party has reversed one of new leader Jacinda Ardern's first 'captain's calls', saying it will implement no tax reforms recommended by a working group before the 2020 election.

Announced by the party's finance spokesman, Grant Robertson, the move returns Labour to its position under the previous leader, Andrew Little.

The tax working group policy was always intended as a way to neutralise the political attacks that cost Labour votes in both the 2011 and 2014 elections when it campaigned explicitly on implementing a capital gains tax. Despite excluding the family home, the CGT issue played poorly with the electorate.

Labour scrapped the policy under Little, replacing it with the tax working group policy and a promise to take its recommendations to the electorate.

Ardern announced a change to that policy in an interview on Aug. 22 with the New Zealand Herald, saying: "It is different leadership, different decisions. Andrew [Little] made a call that he would go back to the electorate. I made a call that if I was in government and presented with a tax working group paper that suggested these are the things you need to do to be able to tackle the housing crisis and inequality in your tax system, to then sit on that for one, maybe two years without doing anything didn't feel right to me."

The combination of attacks on Labour's tax agenda and over-reaching claims by the National Party of a large fiscal "hole" in Labour's budget plans are judged to have blunted the momentum that has seen Labour recover from a low point of 24 percent in the most-watched public opinion poll, by Colmar Brunton for ONE News, to a high point of 43 percent in a poll taken between Sept. 2 and 6.

Another Colmar Brunton poll is due on TVNZ's One News programme tonight, but a poll taken last week for rival TV3's Newshub service by Reid Research, showed a reversal, with Labour trailing National by 9.5 percentage points on 37.8 percent support. While private polling undertaken by both the major parties is said not to show anything like as dramatic a shift as the Newshub poll, Labour insiders have been acknowledging the party's upward momentum stalled around a week ago.

Since then, Labour has ramped up its accusations of "lies" and "scaremongering" by the National Party, which released a new attack ad this week playing on Labour's campaign slogan, "let's do this", saying "let's tax this".

In a joint statement, Robertson and Labour's revenue spokesman Michael Wood said: "We have heard the call for New Zealanders’ voices to be heard. We will involve the public at every stage of the working group, as well as Cabinet and Parliament's consideration of any changes that arise from it.

“We know it is important to get this right, so we will balance the need for certainty and urgency by ensuring that any potential changes will not come into effect until the 2021 tax year. This gives multiple opportunities for public input, and a general election before any new tax would come into effect.

"To avoid any doubt, no one will be affected by any tax changes arising from the outcomes of the working group until 2021. There will be no new taxes or levies introduced in our first term of government beyond those we have already announced," said Robertson and Wood.

Labour has proposed a 10 cents per litre regional fuel tax in Auckland to help fund transport infrastructure, an international tourist levy, a royalty on bottled water and a levy on commercial water use aimed mainly at irrigators, and to include 10 percent of agricultural greenhouse gas emissions in the emissions trading scheme by 2020 as a first step in gradually bringing agriculture into the ETS.

It will also shift the so-called 'bright-line' test that requires capital gains tax to be paid on the sale of residential properties sold by non-owner occupiers within two years of purchase to a five-year threshold and "will end negative gearing" allowing property investors to offset mortgage repayments on an investment property against other income.

Robertson and Wood reiterated that "Labour will not make any changes to personal income tax, corporate tax rates or GST", other than reversing the income tax cuts legislated to come into effect next April.



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