Labour tax policy panned

As people wake up to the deliberate absence of critical details from Labour’s economic policies, John Shewan tears apart the income tax component of Labour’s borrow and hope strategy.

PwC Chairman and Tax Working Group member John Shewan is critical of the income tax aspects of Labour?s tax package. Leaving CGT aside, which Shewan says is clearly an issue where there are pros and cons, and the pivotal question is whether an overall net benefit will result, he described the balance of the package as being directly contrary to several of the foundation principles set down by the TWG.

In particular, the TWG?s strong recommendations around lowering and aligning tax rates, maintaining a comprehensive GST base (no member of the TWG supported GST coming off fruit and veges), and reintroducing incentives falls well short of the principles laid out in the TWG Report. Shewan points to the significant distortions caused by the up-ending of the tax system last time the tax rate was increased at 39%, and questions why NZ would want to go through the same pain again.

He also laments the fact the Govt declined to accept the recommendation institutional arrangements be introduced to ensure there is a strong focus on achieving and sustaining efficiency, fairness, coherence and integrity of the tax system when changes are introduced. He argues on this score the non CGT aspects of the package announced last week fall well short of the TWG framework, which is based on accepted orthodoxy from the OECD and similar organisations.

As we know Labour doesn’t want to tell us the details, they think the public aren’t interested and they will be found to be boring. ACtually Trevor was wrong about that, it isn’t that we will find them boring, it is that we find them dishonest.