The Tax Working Group (TWG) reported their findings yesterday afternoon (20/1/2010) at: http://www.victoria.ac.nz/sacl/cagtr/pdf/tax-report-website.pdf
Summary of the TWG’s findings
The main recommendations in the report are to:
- Align the company, trust, portfolio investment entity and top personal income taxation rates (to 30%)
- Increase GST to 15% (but provide tax incentives to those on lower incomes)
- No exemptions to GST (keep its broad application)
- Make NZ’s company tax rate competitive with Australia (ideally lower than that of Australia)
- Bring in more taxes to “broaden the tax base”
- Not to implement a Capital Gains Tax (which Inland Revenue said was notoriously hard and inefficient to administer)
- Strongly consider bringing in a tax on equity invested in property – “risk-free rate of return method” (as property is an “unproductive investment” according to the TWG, and we need to invest more in the NZ sharemarket, managed funds and in term deposits).
- Consider removing the 20% depreciation loading on new plant and equipment (eg new curtains, appliances, carpet on your rental property would no longer gets a 20% loading to the depreciation rate)
- Consider removing tax depreciation on buildings (building structure) on rental properties if empirical evidence shows that they don’t depreciate in value
- Change the thin capitalisation rules by lowering the safe harbour threshold to 60% from 75%, to minimise interest expense costs to offshore parents companies
- Keep the imputation credit system (for company dividends)
- Reducing Government (over) spending was not looked at by the TWG
What is the TWG?
The TWG is a group of corporate tax practitioners, academics, businesspeople, and high ranking Inland Revenue and Treasury officials, that was established by Victoria University’s Centre of Accounting Governance and Taxation Research. Whilst Bill English (Minister of Finance) and Peter Dunne (Minister of Revenue) didn’t actually request that this group be formed, they were supportive of it.
They held 6 sessions from June 2009 to December 2009.
My initial thoughts
- There was no consideration given to reducing Government expenditure. We are bleeding over $200 million a week ($10 billion per year) by New Zealand spending more than we earn. As part of a decent civil society we want to provide a roof over every New Zealanders’ head that wants it. This is Housing New Zealand’s role – they need private landlords to house the poorest Kiwis.
- There was no-one from the New Zealand Property Investors’ Federation (NZPIF), Property Council or gigantic commercial property owner (like Goodman Property or AMP) to represent property investors’ interest.
- Martin Evans NZPIF President and Andrew King NZPIF Vice President were charged $200 each to attend the last session! Others including media and managed fund observations were not charged this.
- It appears that there was an orchestrated attack on property investors, with them not there to speak for themselves.
I will research more, do a summary table of what the TWG suggests and then read the full report (73 pages) and speak with colleagues in my network to give you my full thoughts on this.