Opinion on RNZ, February 24, 2019
The Tax Working Group’s recommendation for a broad-based Capital Gains Tax will test the strength of Labour’s coalition with NZ First.
Labour is heavily committed to a more fair tax system and will see the recommendation for a broad-based Capital Gains Tax as a way of achieving that.
It is at the core of the Tax Working Group’s report, covering holiday homes, land, most shares and business assets.
Winston Peters opposed
The Greens have already embraced it, but to get it into law Labour must deal with a very different and much more difficult party.
Without NZ First. it has not got the numbers to get the legislation through Parliament.
The Party’s Leader, Winston Peters, is on record as a strong opponent of a CGT. He has said it does not work in other countries and will not work here.
In recent days, some of his MPs have been saying the same thing privately.
Mr Peters does not swallow dead rats.
There is no way he is going to change his mind to the extent necessary for the government to get this through in the form presented by the Tax Working Group.
Problem for FM
This is the problem Finance Minister Grant Robertson has to deal with in the weeks ahead, before the Cabinet signs off on its intentions in April.
He is in for a tough time, because Mr Peters will play this for all its worth.
He would want concessions, and his demands will be focused on NZ First’s voter base in the regions and among older people.
He will almost certainly insist that farmers are exempt, and perhaps small businesses as well.
We have seen it before with the changes that Labour had promised to Employment Law, which NZ First watered down to a level that greatly reduced their impact.
If Mr Peters goes through a similar exercise with a CGT that he will be a hero to those he has saved from it and his Party could reap the rewards at the ballot box.
PM under test
It will also test Prime Minister Jacinda Ardern’s leadership. She will have to decide just how far she can push Mr Peters without a meltdown, and what she is prepared to give up to get NZ First’s votes.
And that is not all she has to worry about.
National is already fiercely attacking the CGT recommendations as “an assault on New Zealand’s way of life” and is vowing to repeal it.
It’s well known around Parliament that National believes imposing a CGT would be political suicide for the government. It has been hoping for that since the Tax Working Group was established.
When the government does decide what it’s going to do it will prepare legislation that can be passed before the 2020 election and come into force after it.
It will dominate the campaign, and imposing any new tax is always a very hard sell.
It is easily attacked, and it is easy to scare people.
There are sure to be furious rows about what information is accurate and what is deliberate misinformation about its impact.
The government must be very careful when it considers all these issues, because they could be vital to its chances of winning a second term.
Peter Wilson is a Life Member of Parliament’s Press Gallery, 22 years as NZPA Political Editor and seven as Parliamentary Bureau Chief for NZ Newswire. Indian Newslink has published the above story and pictures under a Special Arrangement with www.rnz.co.nz
Check out RNZ Tax Working Group coverage
The Tax Working Group unveils final report, recommends a Capital Gains Tax
Capital Gains Tax recommendations: Opposition comes out swinging
Look back on RNZ’s live coverage of reaction to the recommendations
The Tax Working Group to release findings: What to expect