Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 


Dunne Speaks

Dunne Speaks

4 September 2014

Tax seems to have become the first real issue of the election, following the distractions of recent weeks.

And, as usual with tax debates, the argument quickly has descended into the devil of the detail. The one certainty about tax policy is its inherent complexity, the fact there will always be winners and losers, and frequently unintended consequences.

The fundamental point of a tax system often gets overlooked – its primary purpose is to raise the revenue a government needs to carry out its functions. Income versus expenditure, if you like. When I was Minister of Revenue, I had prominently on my desk a copy of Canada’s first Income Tax Act passed in 1917 – a slim volume of just 11 pages. It made the point by its brevity that the collection of tax was a mechanical process which needed to be properly applied. As a standard for tax administration, it is probably as relevant as ever today.

However, tax policy has been distorted over the years and around the world by governments of all stripes who have sought to use the tax system for all range of other purposes – from encouraging and incentivising particular forms of behaviour in business, through to discouraging or severely penalising other forms of economic activity deemed socially, politically or economically undesirable. The more governments have sought to use the tax system in this way, the more complicated it has become, and the more uneven and prone to anomalies it has been seen to be. And a whole new industry of interpreting, devising ways around the system, exploiting the system for advantage, or just finding new activities to escape the tax net has sprung up the world over, with now dramatic implications in the digital era for international tax collection in particular.

This is the backdrop against which the current tax debate in New Zealand is being conducted. Like most tax debates, it is missing the point. The argument should not be about what new distortionary taxes can be introduced to skew behaviour one way or the other, but more about the basic point of ensuring that all the taxes levied are properly collected. The debate this week over the details of Labour’s proposed Capital Gains Tax simply presages more complexity, more issues with avoidance and boundary definitions, and overall, a less simple tax system, should the policy ever be implemented. Similar problems lie ahead with the tax free thresholds being proposed by the Greens and the Conservatives. For its part, National needs to be careful about grafting too much of the welfare system’s income support policies onto the tax system, for similar reasons.

From my vantage point, having been at the heart of and now outside the tax policy loop, the situation is clearer than ever. The key to good tax policy in the future is governments getting back to the basics – ensuring the system collects the revenue they need to do their job, and not trying to use taxes to re-organise the world the way their prejudices dictate.

ends

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

 

PARLIAMENT TODAY:

Mt Eden Prison: Serco Inquiry Extended

A two month delay to the Government investigation into prison fight clubs shows the extent of problems within the Serco circus, says Labour’s Corrections spokesperson Kelvin Davis. More>>

ALSO:

Health And Safety: Late Addition Of National Security Provisions A Concern

The New Zealand Law Society has expressed its significant concerns at the last-minute addition to the Health and Safety Reform Bill of provisions for a closed material procedure for court proceedings where national security is involved. More>>

ALSO:

Rugby And Beer: World Cup Alcohol Bill Passes

ACT MP David Seymour’s Sale and Supply of Alcohol (Extended licensing hours during Rugby World Cup) Bill completed its third reading by 99 to 21... More>>

ALSO:

Gordon Campbell: On The Flag Campaign

So far, the public has treated the government’s flag campaign with something between disinterest and disdain. Most New Zealanders have instinctively seen through the marketing hype involved. More>>

Change For 2017: Local Govt To Decide On Easter Sunday Trading

The Government is to enable local communities, through councils, to decide whether retailers can open on Easter Sunday, Workplace Relations and Safety Minister Michael Woodhouse announced. More>>

ALSO:

(And Targets Worse Than Australia's): Foresters Abandoning Emissions Trading Scheme

The Government’s gutting of the Emissions Trading Scheme has caused foresters to leave and emissions to rise, says Labour’s Climate Change spokesperson Megan Woods. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
 
Parliament
Search Scoop  
 
 
Powered by Vodafone
NZ independent news