Our Collective Contribution To Coronavirus Action
New Zealand is pulling together on Covid-19. We’re good at it. But this togetherness rests on decades of collective contributions to the government’s coffers.
Those contributions are allowing our government to fund the things that support us every day, but also in times of great need: public services, rubbish collection, policing, and people like Ashley Bloomfield. These collective contributions are called ‘tax’, and it’s thanks to them that we’ve managed to pull through the crisis so well (thus far).
Let’s step back a moment from the overwhelming impact of the lockdown on our daily lives, and remind ourselves of some COVID-19 realities.
The first is that our coronavirus response relies on health and social systems we’ve built up over many decades through our tax contributions. They’ve paid for the public health staff who carry out contact tracing, test for coronavirus, and treat those with symptoms. It’s paid for protective equipment, ventilators and laboratories.
Our collective contributions also pay for the economic cushioning provided by wage subsidies, benefits and transfers that are now being rightly funded. Our public health, hospital and social welfare systems were in the shape they were, pre-coronavirus, thanks only to tax.
Without sufficient resources, those systems wouldn’t be working. The alternative would be a dysfunctional, private-insurance-based health system like that currently hampering the United States’ crisis response. So we should all say a big ‘thank you’ to the generations of New Zealanders who have paid their fair share of tax so that we can get through this together.
The second reality is that other countries aren’t so lucky. The impacts of coronavirus – death, illness and economic meltdown – will probably be worst in the poorer countries. Indonesia, for example, looks like it will have up to 240,000 deaths by the end of April – and it has only 4 doctors and less than 3 intensive beds per 100,000 people. How will that country, and others in our region, test their citizens, when there are no testing kits? How will they be able to care for and help their people survive, with no ventilators?
Of the many reasons why countries are poor, a major one is that they lack the tax revenue they are owed. Multinational companies are very happy to have customers in those countries, but not so keen on meeting their tax obligations. In fact they invent clever ways to dodge tax with profit manipulation, unfair treaties, and tax havens. Multinationals use these schemes to cheat countries of billions of dollars and maximise private profit over people's wellbeing. Revenue losses, and their impacts, are disproportionately greater in the developing world. And poorer countries could really do with some of those billions right now, as they face the coronavirus crisis.
Thirdly, even countries like New Zealand could do better. The crisis has exposed huge gaps in funding health services, and how we provide for income support. Public health staff are heroic, but there has been more than a decade of underfunding and understaffing in public health. Numbers of public health workers have been reduced and facilities and equipment are insufficient or inadequate. Our primary health system is frighteningly fragile.
No planning had been done, before the crisis, to ensure support for workers in times of emergency. We are only playing catch-up now and developing ad hoc measures for financial support and strategies to ensure continued relationships between workers and employers.
We have talked a lot about tax reform over the last couple of years, with no tangible results. The Tax Working Group’s call for a capital gains tax was rejected.
The result? Our tax system has glaring holes. It relies too much on taxing ordinary salary earners and on GST. As a flat tax, GST takes a bigger chunk out of the incomes of the poor and thus does nothing to reduce inequalities. People with millions of dollars of wealth, in contrast, pay very little tax. In virtually any other developed country, they would pay tax on their capital gains, their inheritances or their wealth – ideas Tax Justice Aotearoa discusses here.
The fourth and final lesson concerns the future. As part of its response to coronavirus, the OECD has called for a ‘Global Marshall Plan’, like that used to rebuild Europe after World War II. On the international front, such a plan must involve fundamental reform to our international tax system. We should require multinational corporations to pay taxes to the countries where their sales, staff and factories are located, rather than pretending that their profits are generated in low- or no-tax states. Tax havens will have to go.
In New Zealand, we must resist claims by the wealthy that the most disadvantaged, such as people on minimum wages, should suffer the most. Those who promise tax cuts are, at best, disingenuous and at worse, dangerous. We will need more collective contributions in the form of tax revenue to plug the gaps due to the spending on the crisis and repair the holes in the government’s books created by bailing out crisis-hit companies. We must work with renewed vigour to build a tax system where all people pay their fair share, from all sources, including capital gains and wealth.
Most fundamental of all, we need to strengthen a common commitment to a truly fair - and indeed kind - society together by ensuring collective resources through tax investment. There can be no return to the ways things were: a ‘new normal’ must ensure both New Zealand’s recovery from the present crisis and greater resilience for the future.
Louise Delany, Tax Justice Aotearoa President