A guide to the Tax Working Group's 'other'
By Pattrick Smellie
Feb. 21 (BusinessDesk) - The New Zealand Superannuation Fund shouldn't have to pay income tax, rubbish and traffic congestion taxes should be pursued, and the "unusually loose" rules governing privately controlled foundations and trusts need new rules, the Tax Working Group says.
The proposals are just three of the many recommendations the group made today beyond the treatment of capital gains.
Another targets Uber drivers, Air Bnb renters and auction site traders, saying the withholding tax regime should be extended “as far as practicable, including to platform service providers, such as ride-sharing companies”.
While the capital tax element has captured most headlines, the report contains a raft of other recommendations and some significant tweaks to the existing tax regime that an expanded capital gains tax regime would require.
Among the latter: a likely requirement for "mandatory consolidation" of business entities "to ensure tax base integrity", based on recent Australian experience.
Elsewhere, recommendations made in other areas include:
• environmental taxes
Levies to discourage wasteful packaging are backed, along with the use of congestion charging in crowded streets to discourage drivers from using certain roads at certain times of day. A stronger emissions trading scheme is also recommended. Environmental taxes could become a larger proportion of the total tax take over time, the group suggests, consistent with the government's ongoing commitment to a low-rate, broadly based tax system.
• sin taxes
The group maintains its opposition to taxing tobacco any more heavily because of its impact on the lowest income groups, saying other government policies to help quit smoking should be pursued. It only supports a 'sugar tax' if the government's desire is to reduce overall sugar consumption rather than targeting particular sugary products, in which case it recommends regulation.
• commercial building depreciation
This should be reinstated, if only for seismic repair costs.
• Deductibility of childcare costs
The group recommends against extending tax deductibility to childcare costs, saying this should be dealt with by other government policies.
• better information about wealth
While New Zealanders' incomes are well-recorded and understood, less than is desirable is known about how wealth is distributed among the population. The group recommends "oversampling" asset-owning groups to learn more about wealth and income, including a wealth question on the census, regularly repeating high-net worth analysis by the tax department, and commissioning further research on capital income.
The group remains opposed to exemptions for some goods from GST. It concedes there is still no practical way to levy GST on financial transactions and urges policymakers to keep an eye on international developments in that area. It also suggests the application of GST to contractors should be reviewed because it involves high-cost compliance for small tax gains. Alignment between the definition of an 'employee' and 'dependent contractor' is also needed for both public policy and tax purposes.
• Private charities and trusts
While not concerned about charities’ business income if surplus funds are applied to the main charitable purpose, the group recommends reviews to ensure charitable purposes are being met and funded. It recommends "removing concessions for privately controlled foundations or trusts that do not have arm’s length governance or distribution policies as rules in this area appear to be unusually loose”.