Is that it?

After a week of promises and sly looks and whispered sweet nothings Labour delivered their “step change” taxation policy. Surely there is more to it?

If there isn’t then this has to be the biggest wet blanket policy launch ever tried by a political party in New Zealand. If this was the policy that was going to bring “game on” to the election then David Cunliffe must have been talking like it was a Rugby Game between Malta and the All Blacks where Malta scores a drop goal in the 78th minute.

Cactus Kate tears apart their proposals piece by piece as only a tax lawyer could do. Labour though tore it apart in the launch with their reliance on an “Expert Panel” to actually deliver their policy sometime in the future. For them to say that this is fully costed and the numbers stack up when there are som many key areas yet to be determined by an “Expert Panel” that is so far un-appointed is beyond silly, it is actually unconscionable that they think they deserve the Treasury benches. Even Alex Tarrant has noticed it at

Here is but a sample of the things Labour?couldn’t?be bothered thinking about and have left to the “Expert Panel”:

Source: Labour Document.

The Expert Panel will advise on how to apply the rollover principle so it is consistent with existing legislation.

Capital gains on inheritance passed on after death will be rolled over to the heir, and not payable until the asset is realised. This follows the Australian example. The Expert Panel will be asked to give advice in this area.

The Expert Panel will be asked to provide advice on outstanding issues in relation to trusts

The Expert Panel in cooperation with the Law Commission will explore mechanisms to ensure a family home can be protected from liability without giving up the main residence exemption

There is no intention for traders in capital assets to be taxed less than at present once a CGT is in force. The Expert Panel will explore means of ensuring that this does not occur.

Issues to be Referred to the Expert Panel

The Expert Panel will be asked to deal with issues that are technical in nature and involve areas where a high degree of specialised knowledge is required before a final decision can be reached. In many cases the Expert Panel will be asked to consult with the affected community in order to better inform their decision.

In addition to the detailed design issues relating to key policy features already mentioned, the Expert Panel will be asked to consider the following issues in more depth.

Assets whose V-Day Value is below their Purchase Value
The Expert Panel
will be asked to provide advice on how to treat assets whose v-day value is below their purchase value.

For example,?Canada?dealt with this issue by allowing taxpayers the option of using ?the median rule?. This means they take the middle value out of the purchase price, the v-day value and the sale price as the base cost from which capital gains are calculated. This means that if the purchase price is in the middle, i.e. the asset is sold for more than its purchase price but less than its v-day value, then no capital gain (or loss) is assessed.

M?ori customary land passes upon death to the subsequent generation and is not normally sold. The rollover on death provisions mean no CGT is payable.

Ordinary assets owned by M?ori business entities would be treated in the same way as for other taxpayers.

Any complexities arising will be referred to the Expert Panel.

Rollover Provisions
The Expert Panel will be asked to give advice on the circumstances in which rollover provisions should apply.

Many countries have rollover provisions which provide for a deferral of CGT beyond the year in which the asset is transferred or disposed of. Apart from relationship break-ups and death, the issue of when rollovers should be allowed is complex and technical.

They may apply where the transfer of an asset class is between taxpayer entities (e.g. from one arm of a business to another). They may also apply when a taxpayer disposes of one asset, and replaces it with a similar asset.

Venture Capital
The Expert Panel will be asked to advise whether venture capital investment should be exempt from CGT as in?Australia?to avoid a Trans-Tasman tax differential, or whether, for reasons of simplicity, asset neutrality and anti-avoidance venture capital should be treated in the same way as other investments.

Different Ownership Forms
The Expert Panel will be asked to consider the treatment on different ownership types, drawing on the Australian approach.

There is a range of asset ownership forms available in New Zealand, such as partnerships, tenants in common and joint tenants.?Australia?s approach is to have each individual within a partnership or tenancy calculate their capital gain or capital loss according to the portion of their legal interest in the asset (joint tenants are treated as if they each own an equal interest in the asset).

Other Issues
Treatment of Non-residents
As a general principle, non-residents will be subject to CGT in the same way as residents. The Expert Panel will advise on any complexities that may need to be taken into account. This will include any technical issues, such as the impact on double taxation agreements.

Treatment of People Migrating from?New Zealand
Migration from?New Zealand?will be treated as a capital gains event in respect of assets other than land, buildings and business assets, which the Expert Panel will be asked to advise on. This is in line with the approach taken by?Australia.

I really wonder if Labour have actually done any work on this at all. If, as they are keen to tell us that the rest of the OECD usues a capital gains tax why are so many key areas being left to an “Expert Panel” to sort out. It isn’t rocket science.

Labour have bombed this policy. Given their performance in the past 3 years that was hardly surprising. If this was the silver bullet to save them in the general election then they best load the silver bullet in a gun and shoot Phil Goff pronto.