Terms of reference announced for Tax Working Group
Tax Alert - December 2017
By Veronica Harley
The 100 day plan of the new coalition Government includes the establishment of a Tax Working Group (the Group) to consider changes that would improve the structure, fairness and balance of the tax system. In November 2017 the Ministers of Finance and Revenue announced the terms of reference for the Group. It was also announced that the Group would be chaired by Sir Michael Cullen who was a former minister of finance and revenue in the previous Labour Government, with the rest of the members to be announced prior to Christmas 2017. The membership will be diverse and will include representatives from all sectors of the New Zealand economy. It will not only include tax and finance experts, but also representatives from the business and community sectors plus Māori representation. The Group will be supported by a secretariat of officials from Treasury and Inland Revenue and will have an independent advisor to analyse the various sources of advice received.
The Group will have a wide mandate to look at New Zealand’s tax system and this has been broadly framed as follows:
- Whether the tax system operates fairly in relation to taxpayers, income, assets and wealth
- Whether the tax system promotes the right balance between supporting the productive economy and the speculative economy,
- Whether there are changes to the tax system which would make it more fair, balanced and efficient, and
- Whether there are other changes which would support the integrity of the income tax system, having regard to the interaction of the systems for taxing companies, trusts, and individuals.
In examining the points above, the Working Group has been tasked to consider in particular the following:
- The economic environment that will apply over the next 5-10 years, taking into account demographic change, and the impact of changes in technology and employment practices, and how these are driving different business models,
- Whether a system of taxing capital gains or land (not applying to the family home or the land under it), or other housing tax measures, would improve the tax system,
- Whether a progressive company tax (with a lower rate for small companies) would improve the tax system and the business environment, and
- What role the taxation system can play in delivering positive environmental and ecological outcomes, especially over the longer term.
However, the Government has specifically ruled out any increase in income tax or GST tax rate, the introduction of an inheritance tax, any other changes that would apply taxation to the family home or the land thereunder and the adequacy of the personal tax system. Further, the Group will not focus on the technical matters already under review as part of the Tax Policy Work program including international tax under the Base Erosion and Profit Shifting agenda and policy changes as part of Inland Revenue’s Business Transformation programme.
With regard to the issue of GST on low value purchases, the Government has stated the following: “The Group will have the opportunity to look at that issue, but it does not have a mandate to consider the GST rate. As the Working Group is mandated to consider fairness in the tax system, it will be able to review fairness across what GST is collected on. Due to this work already being started by the previous government, the Working Group will be given the ability to report back early on this issue, as appropriate”.
Final recommendations to Ministers are expected by February 2019. In terms of implementation, no significant changes will be implemented until the 2021 tax year, however the statement notes that where work was already underway, such as GST on online-purchases, it may be possible to make progress ahead of that timeframe.
December 2017 Tax Alert contents
- Tax Alert - December 2017
- BEPS proposals now before New Zealand Parliament
- Terms of reference announced for Tax Working Group
- R&D Tax Credits: Reflections from New Zealand and Australia
- Is AIM the right provisional tax method for you?
- GST on online shopping – the holiday is coming to an end
- Proving arm’s length pricing is set to become a taxpayer’s burden
- Impact of changes to the look-through company rules
- Are your GST processes and controls up to scratch?
- Recent tax developments