Tax Reform including Capital Gains Tax with John Shewan

Episode 6 of the Curious Kiwi Capitalist Podcast

25 September 2019

My guest for this show is John Shewan—former chair of PWC, and serving Adjunct Professor of Victoria University and independent director.

In this episode we discuss:

• Why the Capital Gains Tax (CGT) 2019 recommendation failed
• Lessons from tax reform through the decades including:
  • the rebellion against Muldoon’s tax rates,
  • wide support and importance of the broad-base / low-rate approach,
  • always talk about tax in terms of tradeoffs and how taxpayers will be no worse off e.g. Sir John Key selling the GST and income tax rate changes together,
  • unless there is a crisis then incremental tax change with compromises is the best approach,
  • the government needs to actively sell their tax changes or others will take over messaging.
• The strengths of a land tax especially if accompanied by decreased income tax and increased entitlements (super & WfFTC)
• Government and demographic spending requirements putting extreme pressure on personal tax rates—bracket creep is now resulting in low income levels paying a 30% rate.
• Either income tax or GST rates will need to increase within 10 years unless the tax base is broadened e.g. through a land tax or investment property CGT.

Show Notes

About

John Shewan has had a long career in accounting, business and now academia. He is an independant company director, former chair of PWC and serves as an Adjunct Professor at Victoria University.

He sat on the Buckle Tax Working Group in 2010 (“A Tax System for New Zealand’s Future”, Victoria University of Wellington) and has been a tax practitioner throughout his career.

He is a past Chair of the Tax Education Office and the National Tax Committee of the New Zealand Institute of Chartered Accountants. He was awarded the CNZM in 2010.

He is truly not just NZ’s top tax expert but also brings intellectual firepower together with practical shrewdness to our business community.

Links

• LinkedIn
• Appointment as Adjunct Professor at Victoria University
• Episode Show Notes

Transcript: Tax Reform including Capital Gains Tax with John Shewan

Bruce: What are we trying to do with taxs here in New Zealand?
John: There’s really three major objectives with taxes aren’t there. The first one and the primary one is to raise the revenue that government needs to run the country, and to put it in context in the year to 30 June 2019 government’s expecting to collect around $84 billion in both Direct Tax and GST and other indirect taxes and another $5.8 billion and ACC, fire service levies and fines and other revenue.
So that’s the primary focus, but two other really important aspects of text redistribution of wealth tax does have a role in that the primary means of redistributing wealth is through the wealth transfer system, but obviously progressive tax rates achieve that as well and then thirdly an increasingly there’s a focus on corrective and behavioral taxes. Things like taxes on tobacco and alcohol and now we’re looking at taxes around environmental waste etc. So those are the three primary objectives and one of the most important messages I try and convey on tax policy is let’s work out what aspect of that we’re talking about before we start talking about the text tool that might be best to achieve it.
Bruce: And it seems that the increase in taxs is expected to rapidly increase over the coming years..
John: Yes so the New Zealand tax system has performed extremely well over the last 30 to 40 years, its served