The Government’s updated tax policy work programme continues the focus on productivity, growth and wellbeing outlined in Budget 2019, Revenue Minister Stuart Nash announced today.
The tax policy work programme (TPWP) required an update following the release of the Tax Working Group (TWG) report in April. The TPWP was last produced in May 2018.
“We are committed to the fundamental principles of a broad-based, low-rate system,” Mr Nash says. “The TWG found that on the whole, New Zealand’s tax system is working well. But we need ongoing improvements to maintain its integrity, fairness and neutrality.”
“The refreshed TPWP reflects the need to encourage productive investment and ensure the tax system remains sound. It highlights our intention to deal with land speculation and land banking. It prioritises the need to address tax barriers to investment in infrastructure and to reduce compliance costs for business.
“Our goal is to build a productive, sustainable and inclusive economy. The Wellbeing Budget signalled our plans to balance fiscal sustainability with long-term infrastructure investments and improvements in living standards.
“Our tax policy has a big role to play to encourage productivity and growth. It has a direct impact on the lives of New Zealand families and businesses. It touches on priority areas like housing supply and affordability, nationally significant infrastructure, retirement savings, charities, and making life easier for small businesses,” says Mr Nash.
The tax policy work programme is grouped under a number of workstreams reflecting the government’s priorities. Key workstreams include:
Policy work will continue the review of current land rules, particularly affecting investment property and speculation, land banking, and vacant land. It will ensure that the current tax settings are fair and encourage investment where it is most productive. Enforcement of the current tax rules is also a priority.
The government is focussed on ways to enhance economic performance and minimise the impact of the tax system on businesses. This includes the tax treatment of spending on innovation. It covers feasibility and blackhole expenditure, or capital spending that is not otherwise deductible.
Work will also focus on minimising compliance cost for businesses; and lifting the economic performance of all businesses, especially smaller firms and the self-employed. It also considers employment matters in the face of the changing nature of work.
This work stream considers options for the digital economy and reflects growing public and government concern at the tax treatment of multinationals who earn income here. The Government has not made any decisions on whether to adopt a digital services tax. Its preference remains a multilateral approach through the OECD.
Infrastructure is a key area of interest for the coalition government. After nine years of neglect, the need to fix our public assets is a long-term challenge.
This project will consider whether the tax system has a role driving infrastructure investment. We are determined to reverse the current infrastructure deficit. This work supports our drive for a more modern, sustainable and climate resilient economy. It also contributes to unlocking the potential of our regions.
• Exemptions and charities
We are driving a focus on consistency and coherence of our tax frameworks. This includes entities such as charities and businesses run for charitable purposes, as well as institutions like local authorities and state owned enterprises. It is important that income tax exemptions and concessions are effectively targeted.
The work programme also includes a charities workstream. This work links to the charities project underway at Department of Internal Affairs.
• Social policy
This workstream supports the welfare overhaul including reform of Working for Families, the student loan scheme and KiwiSaver.
Mr Nash also confirmed an update to the Generic Tax Policy Process (GTPP) as recommended by the Tax Working Group.
“The GTPP allows people to participate at the front end of tax policy development. It helps ensure policy proposals are practical and workable while minimising compliance costs. The changes allow a greater level of engagement, in particular with Maori interests. This will be good for our tax system, our economy and our communities,” Mr Nash says.
The tax policy work programme and the updated framework for engagement are available at taxpolicy.ird.govt.nz/work-programme