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Press release on the TWG final report

Income Equality Aotearoa Inc—“Closing the Gap”-- is pleased with the Tax Working Group final report but it does not go far enough says Peter Malcolm, spokesperson for the group.

Over the last 40 years there has been a significant shift of financial resources from the poor to the wealthy in New Zealand primarily through changes to the tax system. The TWG recommendations go some way to redress this unfair situation. The report says the TWG found that the present tax system, and consequently Government revenue, relies on a relatively narrow range of taxes that it is not particularly progressive and hence does little to reduce inequality. Further our present capital gains tax system is inconsistent and regressive; it undermines our social capital and benefits only the wealthiest members of our society.

As a consequence they have recommended a reasonably comprehensive capital gains tax , with a few exceptions. We can understand the exclusion of the family home on political grounds but consider the argument irrational. The TWG is also suggesting the CGT will make it possible to increase the income for the poor either through reductions in tax or increases in benefit.

But In our view the TWG hasn’t gone far enough. Although much of the following was ruled out by the Terms of Reference there are hints from the TWG that the Government should look further at some of these issues. There are no recommendations for increases in income tax for the rich and no move on windfall or inheritances taxes which mostly benefit the wealthy.

Our last area of concern is that there is no recommendation for an increase in the total tax take. Over the last 40 years, in real terms, many Government services, particularly those in health and education have been underfunded. Education is no longer free and neither is health for adults and this has placed an increasing financial burden on the poor. Also the salaries for people working in these areas need significant lifting. Some of this is happening now but it is nowhere near enough. To solve these problems will require an increase in the total tax take. Overall, we are a low tax country. In the last 40 years the wealthy have done well. On grounds of fairness and equity, our wealthy can and should make a larger contribution to the wellbeing of our society. This would lead to a reduction in our high rate of wealth/income inequality,

This is a good start by Michael Cullen and his team. They make strong statements about the importance of good attitudes, fairness and equity leading to a better society for all. We hope that on this basis the Government will have the courage to adopt most if not all of the TWG’s recommendations and then move on from there toward building that better society.

ends

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