The spectre of tax is haunting our politics and the upcoming election. The policy complications of exempting foods from GST howl in the night, while wealth and capital gains taxes circle the Beehive like angry ghosts – despite successive prime ministers’ best attempts to exorcise them. Our politicians have spent 30 years assuring us that these apparitions are not real, hushing us back to sleep. But the current revenue system is moth-eaten and crumbling.
In April last year, then-revenue minister David Parker laid out the principles of a modern tax system. In a speech at Victoria University of Wellington, Parker cited Adam Smith, the 18th-century Scottish economist regarded as the intellectual architect of modern capitalism. In today’s terms, it should be equitable: those on equivalent incomes should pay the same amount of tax and those with more resources should pay more than those with fewer. It should be convenient, transparent and easy to navigate. And it should be efficient, avoiding economic distortions or damaging productivity.
While New Zealand had legislative frameworks around things like public finance, climate change and child poverty, there was no coherency around tax – “that most important of government functions”.
So, he was introducing legislation to fix this. The Taxation Principles Reporting Bill would require the Inland Revenue Department (IRD) to produce a report every year documenting the fairness, coherency and integrity of the tax system, which collected $113 billion from New Zealanders last year.
Parker went further. He’d also given his tax officials the power to investigate the assets, income and tax arrangements of our wealthiest households. Officials couldn’t determine whether the tax system was fair, he argued, if they didn’t even know how much the very wealthy earned, what they owned or how much tax they paid on it. Their study population consisted of 311 high-net-worth households. Those of a left-wing persuasion
