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LAWCOMM 403 long notes.docx
LAWCOMM_403_long_notes.docx
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LAWCOMM 403 long notes.docx-CONTENTS Tips ...........
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
LAWCOMM 403 long notes.docx-CONTENT...
LAWCOMM_403_long_notes.docx-CONTENTS Tips ......................................................................................................................................................................................... 4 Introducon ............................................................................................................................................................................
Page 40
New Zealand does not have a general capital gains tax – but there are some capital gains that are defined as income
Subpart CB of the Income Tax Act 2007 extends the definion of “income” to cover various classes of capital gain:
o
Profit-making undertakings and schemes (s CB 3)
o
Personal property acquired for the purpose of disposal (s CB 4)
o
Brightline test (s CB 6A)
o
Land acquired for the purpose of disposal (s CB 6)
If New Zealand were to introduce a CGT:
o
Should these provisions be repealed, so that such gains would be subject to the CGT instead (probably at a
lower rate)?
o
Or should they remain in force?
LAND TAX
A land tax would operate in a similar fashion to local body rates
o
Local body rates are taxes imposed by the local councils
Every block of land in New Zealand have all been valued – these values are updated over me
Each council imposes a tax on the owners of land within the council’s territory – the tax is calculated
as “rates” and is like a flat tax plus a progressive tax on top
o
The idea of a land tax is that it would be possible for the central government to also operate a tax of this kind
at a significantly higher rate than the local body rates
The Tax Working Group did not recommend in favour of this tax
o
This was mainly because they recommended in favour of a CGT
GST PREFERENCES
This is the idea that it is inappropriate for GST to be charged on basic necessies
o
In most countries, there are preferenal GST treatments of various kinds for basic necessies (e.g. basic
foodstuffs, educaonal expenses, medical expenses, menstrual products)
o
The debate in New Zealand mainly centred around the idea that there should be preferenal GST treatment
for fresh fruit and vegetables:
Arguments for:
The effect of flat GST may be regressive as poor people spend more of their income on
goods, so they spend a bigger proporon of their income on GST – therefore, by having GST
preferences, there is tax equity as poor people spend less on GST
Promotes healthier eang as people will tend to buy healthier food?
Arguments against:
It is difficult to draw the line between healthy and unhealthy food
Preferenal treatment may not make much difference if GST is only 15% and goods that
don’t get preferenal treatment can reduce their prices only a lile to compete
It is difficult to draw the line between what poor people might spend on and what rich
people will spend on – it is hard to structure GST in a way that your liability to tax depends
on your ability to pay it (which is how income tax is structured)
The Tax Working Group did not recommend in favour of this tax
DEATH TAX
A death tax used to exist in New Zealand
o
However, it was abolished because it was highly suscepble to avoidance on a large scale (mainly through the
use of trusts)
o
Other problems:
Polically unpopular – but it is unclear why because death taxes are structured to be focused on the
richest minority
In Australia, the state of Queensland had abolished death taxes – New Zealanders tended to rere to
Queensland along with their assets, became a resident of Queensland, and avoided death taxes
There are some strong arguments in favour of death taxes
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