The Labour party yesterday released its key tax policies, to be contested at this year’s general election (available at www.labour.org.nz).
- A capital gains tax (“CGT”), for implementation by 2013.
- Ring fencing of investment property losses and clamping down on avoidance.
- A new marginal rate of 39% on incomes above $150,000.
- A tax-free threshold of $5,000.
- A 12.5% tax credit for Research & Development (“R&D”) expenditure.
- Removing GST on fresh fruit and vegetables.
The attached taxmail provides some initial views on these proposals.
The key change is a reasonably broad based realised CGT, excluding the family home. There are strong tax policy arguments in favour of a comprehensive CGT as part of New Zealand’s “broad base low (tax) rate” approach.
However, there will inevitably be political and practical compromises which could dilute the ultimate effectiveness of a CGT.
The other proposals are a mixed bag, in our view. Re-introduction of the 39% rate accompanied by a $5,000 tax-free threshold will reduce the effectiveness and increase the costs of the tax system, and removing GST on fresh fruit and vegetables, while well-intentioned, will add complexity to an internationally well-regarded GST system.
We do, however, believe there is room for an R&D tax credit regime in New Zealand, if the objective is to grow New Zealand’s innovative businesses.
If you have any questions on the above, please speak to your usual KPMG advisor or contact: