Key areas of the Tax Working Group Final Report released today were disappointing, says Canterbury Employers’ Chamber of
Commerce Chief Executive Leeann Watson.
One of the most important and contentious elements of The Report, aimed at addressing the structure, fairness and
balance of the New Zealand tax system, was around capital gains tax.
Ms Watson says the proposed capital gains rules should not be implemented because of the significant impact on small and
medium-sized enterprises (SMEs).
"We support the Government’s review to ensure that our tax system is fit for purpose for a changing business
environment. However, there is very real concern that taxing both shares and business assets under a comprehensive
capital gains tax regime would create double taxation.
"This could disadvantage New Zealanders owning shares in New Zealand and create inconsistencies around overall taxation
on investment."
Ms Watson says a capital gains tax would be unlikely to achieve the desired outcome for business.
"There is concern around the effect for capital markets in a capital constrained economy with a long-term savings
deficit. Adding further tax on the savings and investment of those New Zealanders in the middle-income bracket won’t
drive the deepening and broadening of the capital base that we need for business investment, which is higher
productivity and wages.
"While the impetus behind the changes are aspirational, there is little to indicate they would significantly reduce
overinvestment in housing or increase ‘tax fairness’. In addition, there is concern that additional administration costs
and investment distortions could outweigh any benefits and potentially discourage much-needed investment and innovation
by locking businesses into current asset holdings.
"It is vitally important that we remain competitive as a country and are not continuing to add further compliance for
business and in particular small business, who represent 97% of all businesses in our economy."
Ms Watson says there needs to be a viable business case for any changes to the current tax system.
"There seems to be a real focus on ‘fairness’ in the system design, as opposed to revenue-building, so we need to be
careful that any tax changes are for the right reasons and are backed by a clear, practical and sustainable business
case. We currently have a fairly simple and efficient tax system that should be kept and better enforced, with changes
to specific rules where needed."
Despite concern around some of the proposed changes, Ms Watson says the level of consultation around the proposed
changes is a positive sign.
"There has been considerable engagement on this issue, with submissions in the thousands from New Zealanders including
iwi, businesses and unions.
"While these have highlighted the challenges and opportunities for the tax system, they also reinforce that tax is a big
issue with significant reach into - and implications for - every part of our community.
"We will continue to advocate on behalf of our local business community on this issue and look forward to hearing the
response from Government in April."
To explain what this Report and the proposed changes mean for local business, The Chamber will be hosting Expert Update:
2019 Tax Report on 28 March, with Dr Deborah Russell - MP and tax expert, and Kirk Hope - Chief Executive of BusinessNZ
and member of the Tax Working Group.
ENDS