Capital Gains Tax a dilemma to NZ First Party

Capital Gains Tax a dilemma to NZ First Party

Peter Dunne

Wellington, February 16, 2019

Peter Dunne

Greens Co-leader James Shaw’s comment when Parliament resumed this week that the current government does not deserve to be re-elected if it fails to introduce a Capital Gains Tax would have been regarded as yet another reason why the Greens kept themselves from being invited into government for almost 20 years.

Significant Perspective

But now they are inside the tent, the comment takes on a more significant perspective.

Not because there was ever any doubt the Greens would back a Capital Gains Tax – after all, they have never yet met a new tax they do not like – but because of the acid it puts on the government’s formal coalition partner to state where it stands.

At the moment, it holds all the cards. With the Greens having now declared their hand, the future of the Capital Gains Tax rests not on the tax working group’s recommendations, nor even the Labour Party, but on the nine New Zealand First MPs, or, to be more specific, their quixotic leader. To date, they have maintained their typical silence.

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Opportunity for NZ First

With recent polls showing that New Zealand First will struggle to be in the next Parliament, an issue like Capital Gains Tax is potentially a heaven-sent opportunity for the Party to reassert its independence and act as a handbrake on government to stop the implementation of an unpopular policy. Indeed, James Shaw’s statement could almost be seen as inviting New Zealand First to do just that, perhaps in the hope of restoring itself in Labour’s eyes as the preferred partner it was before the last election.

But it is not as simple as that.

For a start, on this occasion, New Zealand First is not just any other party.

It is the government’s formal Coalition Partner, and its Leader is the Deputy Prime Minister. And the Capital Gains Tax is not just any other policy. It is a key plank of Labour’s tax policy, and, as such, comes into the category of a confidence and supply issue.

Failure to gain support to introduce such a policy, let alone a formal vote against it in the House, would raise serious questions of confidence, and could potentially bring down the government. And an election brought about in such circumstances would almost certainly see the end of New Zealand First.

So, there are strong reasons for New Zealand First supporting the introduction of a Capital Gains Tax, albeit after a few tweaks.

Party under pressure

However, a Capital Gains Tax is unlikely to be popular with a chunk of New Zealand First’s provincial and rural support base. Not that many of them are likely to be affected by it, but, as both Labour and National found out during the Superannuation debates of the 1980s and 1990s that spawned New Zealand First, it was not the reality of the impact of the Superannuation Surcharge – which never affected more than a quarter of superannuitants – but the perception that every one of them was hit, and the fear amongst those under 65 at the time that it would hit them too, that did the political damage.

A similar reaction is likely if a Capital Gains Tax is introduced, which is why New Zealand First is likely to face pressure from its support base to resist the proposal.

Hint to tensions?

So, the decision to support or oppose the Capital Gains Tax is likely to be a finely balanced one for New Zealand First, which is where James Shaw’s  statement assumes its real significance.

It is far less a statement of the Greens’ position, (which no-one would have been at all surprised to hear anyway) and much more an attempt, to flush out where New Zealand First stands. It also gives more than a passing hint to the tensions within the coalition government on the subject.


In that respect, one has to feel a little sorry for the Greens. They spent most of the last Parliament preening themselves as Labour’s Coalition Partner in-waiting, only to be gazumped at the altar by New Zealand First, because Labour was not astute, strong, or brave enough to say to New Zealand First they wanted to form a Labour/Greens coalition that they were welcome to join, or else they could keep the National Party in office.

In the event, the Greens were jilted and relegated to the position of Confidence and Supply Partner. Ever since, they have been struggling to reinsert themselves into the major policy loop, and this is but the latest example. 

Fudge and delay tactics

It could yet prove their most effective if they can force New Zealand First’s hand. But a more likely outcome is that New Zealand First will fudge and delay a decision as long as possible, quite possibly beyond the current Budget cycle, to make it difficult for Labour to legislate in advance  for the post 2020 Capital Gains Tax, as it wishes, while all the time keeping its own powder dry.

Although James Shaw deserves acknowledgement for doing his best to try to keep New Zealand First honest, he has in reality shown once more that when it comes to realpolitik New Zealand First will continue to run strategic rings around the hapless Greens. 

Peter Dunne is a former Minister in the Labour and National-led Coalition Governments from 1999 to 2017. He founded UnitedFuture Party but dismantled it upon his retirement from politics two years ago. He lives in Wellington.

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