Can the coalition all agree on tax?
By Richard Harman (author)
(This is Part One of two based on an interview with Finance Minister Grant Robertson. Tomorrow: Labour's future)
Labour will need the support of the Greens and NZ First if it is to take a capital gains or wealth tax into the 2020 election campaign.
Otherwise, it will have to try and negotiate with both its support parties after the election if it is in a position to form a Government.
Finance Minister Grant Robertson confirmed this to POLITIK yesterday.
Robertson said the party’s intention was to take the report of the Tax Working Group, and draw up legislation based on it and then take that into the election campaign.
But it may not be as easy as that.
Central to the Tax Working Group’s investigations is a wealth or capital gains’ tax.
In the past Environment Minister David Parker has been a fervent advocate of these sorts of taxes.
A keen student of Thomas Piketty he believes they would deal to growing inequality in New Zealand.
(The country now has the 10th most unequal distribution of income in the 35 nation OECD. Australia, Ireland, Switzerland and the Scandinavian countries are less unequal.)
In background papers, Treasury and Inland Revenue have all but dismissed a wealth tax as being inefficient, difficult to administer and where one is are applied internationally, is being withdrawn.
That leaves a capital gains tax which is the preferred tax in OECD countries.
But the problem for Robertson is that during the last election campaign NZ First Leader Winston Peters opposed it.
“It is off the table,” he said on TVOne’s “Q+A”.
“The two factors are it doesn’t work and the second thing is there is no fairness if you haven’t got capital losses for consideration as well.”
Robertson is keeping his options open.
The Tax Working Group is due to report next month.
"There may be things (in it) we agree with, there may be things we disagree with," he told POLITIK.
“We are not bound to accept the whole thing.
“In terms of tax what we do there will be very significant.
“We made that clear in the campaign by saying that the implementation date of anything we decide is 2020.
“The 2020 election will be a chance for people to say they agree or disagree with where we are heading on tax.”
So how will be reconcile Labour's position on the tax Working Group with NZ First and the Greens?
“That will be something to work through,” he said.
“What we committed to pre-election was that any legislative stuff would be done by the election but not come into force till after the election.”
But what happens if he can’t get support from NZ First or the Greens.
“There may be elements, and I’m not pre-judging this, that we park and say we will wait until after (the election) and see what it looks like,” he said.
“But we have made a commitment around the core issues of the balance of the tax system that if there are going to be changes that are coming in 2021, we will have gone through the legislative process.
“But I am confident that among the three parties in the Government, the major issue; the underlying issue, about whether or not we have got a fair and fit for purpose tax system – I think there is some pretty good shared ground there.”
But what Robertson faces with the Tax Working Group and the three Government parties is a microcosm of what it faces all the time; that as it confronts issues that are not in Coalition Agreement with NZ First or the Confidence and Supply Agreement with the Greens, then all the parties must return to negotiations.
In a way, the coalition negotiations never stop.
So is the uncertainty that this may generate, a factor in the lower business confidence figures currently being reported.
But Robertson doesn’t buy that analysis.
“The speech from the throne outlined the Government's plan for the threeeyars, and it is a very comprehensive speech, and when you go back through it, you will see the things that we are doing.
“That to me is the document that people should go to if they are looking for what is in the scope of this Government.
“But on a day to day basis, of course, we have to negotiate things where they arise or where we didn’t cover in the coalition agreement.
“This is not new.
“I owe the fact that I got a job in Helen Clark’s office to the fact that someone needed to come in and help manage relationships with United Future and the Greens.”
Robertson says the current Government is different, particularly to the Key Government.
“This is a genuine coalition Government, and there will be issues that we have to work through."
And of those issues, none may be more important than how to deal with the report of the Tax Working Group which will form the basis of Labour’s manifesto at the next election.