Posts Tagged ‘Tax Working Group summary’
The Victoria University of Wellington Tax Working Group’s (“TWG”) Report has got much media attention, whether on Television, newspaper, radio or the internet. The report is interesting and whilst I admire the aims of striving to provide a “fairer” tax system, with a consistent top tax rate amongst companies, trusts, PIEs and individuals, there are some gaping holes in it.
Firstly here are the estimated costings of what the TWG has proposed:
| Option
|
Indicative annual
revenue ($ billion in 2009/10 prices) |
Notes
|
Raising GST
|
Up to $1.9
Up to $3.9 |
These estimates include automatic adjustments to benefit levels and superannuation payments. Substantially less revenue if there is other compensation for lower income groups. |
Imposing a Capital Gains Tax –
|
(1) Up to $9.0
(2) Up to $4.5 |
Estimates are based on full implementation, accrual basis and 2% rate of real property inflation. Lower revenue would be expected with a realisation-based tax, particularly during implementation. Revenue generated will also depend on the particular design of the CGT. |
| Land Tax | Up to $2.3 (for 0.5% tax rate) | Based on an assumed limited fall in land prices due to tax; revenue reduced by about $0.6bn if land tax is deductible against taxable income for businesses. |
| RFRM on residential
investment property |
Up to $0.7
(plus up to $150 million in tax saved on loss offsets from rental properties) |
Based on 6% (nominal) risk-free
return; rental property only. This estimate excludes other residential investment property (e.g. second homes). |
| Remove depreciation on
buildings |
Up to $1.3 | Based on no loss offset if buildings sold at a loss; estimated cost of allowing offset = $300 to 600 million. |
| Remove 20% depreciation
loading on new assets (excl. buildings) |
Up to $0.3 | Lower revenue gain if loading reduced rather than eliminated. |
| Changes to thin
capitalisation rules |
Up to $0.2 | Changes thin cap ‘safe harbour’ from 75% to 60%. |