Tax Working Group scope and objectives

The Tax Working Group's scope and objectives that were agreed in early 2009.

Introduction

The work of the Te Herenga Waka—Victoria University of Wellington Tax Working Group aims to build on the tax conference, 'New Zealand Tax Reform—where to next?', in a manner which allowed a more focused concentration on the key issues conditioning medium term tax policy decisions. This involved a number of tax strategy workshops over six months, leading up to a conference hosted by Te Herenga Waka in early December 2009.

Aims

The workshops aim to focus on key areas of tax policy concern. The group’s aim is to identify important issues, to develop a common understanding of the medium-term context that the tax system will need to operate within, and advance the analysis of a variety of policy options.

In particular the groups aims were:

  • The government announced a 30:30:30 medium term goal, the group will debate this goal and may suggest additional goals.
  • The fiscal position is likely to mean that it will be difficult to achieve this goal quickly in the absence of other fiscal policy changes, or other changes to the tax system.
  • The government has noted concern about other taxation issues such as high EMTRs which may be reducing productivity. Company taxation is also an obvious issue and there may be a need to respond quickly if Australia appears likely to make substantial changes to its company tax system in the course of Australia’s Future Tax System review. In addition, demographic change may necessitate consideration of changes to the tax system in the longer-term.
  • The Group will test these medium-long term objectives and endeavour to ensure there is broad understanding of what are likely to be seen as key pros and cons of different possible ways of reforming taxes in the medium term and of raising additional revenue to fund suggested tax rate cuts or other changes to the tax system.
  • If it takes some time to get to 30:30:30, what should be done to ensure coherence of the tax system in the interim?

This process is seen as a key part of preparing the background for the examination of medium-term tax policy by Ministers. It has not been designed to lead to specific recommendations, but rather to allow full identification of the issues that Ministers will need to consider in their consideration of medium-term tax policy. This, of course, does not preclude that a consensus might form on certain issues.

The output of the workshops will provide a context for the proposed conference to be held in December, to focus discussion on the key issues and viable alternatives. The conference in turn will help to engage the wider New Zealand public in the discussion.

Format

The format will involve presentations (either written or oral, or both) of research and policy papers prepared by officials and commissioned consultants as background to the session; and open discussion.

Open discussion in the Tax Working Group sessions is encouraged, on a non-attributable basis. Summaries of the discussions would be prepared by officials and circulated to participants for comment. Following this, these summaries and the documents prepared for the sessions, will be made available after each session.

Timing

The goal of the process is to provide Ministers with information on appropriate directions for New Zealand taxation policy. The process should aim to end no later than December 2009. The proposed sessions are:

  • Session one: The fiscal framework. Issues would include the consequences of the current financial crisis on the medium term fiscal framework; future expenditure requirements arising from demographic changes such as population ageing; future revenue potential of existing tax bases, (fiscal drag etc.). Essentially, how big is the medium term revenue deficiency?
  • Session two: Structure of the personal income tax and GST systems. This session will consider options around reforms to personal tax rates, social welfare payments, and GST. Implications of demographic ageing and integrity issues with higher GST rates would be considered. Options would be examined recognising fairness and efficiency aspects of the tax/transfer system and revenue sustainability (including revenue-positive reforms).
  • Session three: Revenue raising options. Assuming that there is a medium term revenue deficiency and/or funds are required to make other structural changes, (see Session 2), sources of funds would need to be identified. Potential sources of funds could include the extension of existing tax bases, as well as the introduction of new ones. Issues to be considered include: revenue potential; distributional impact across classes of taxpayers; the economic and commercial impact of the measures; and practical design and implementation issues. The aim would be to examine the pros and cons of possible base-broadening and rate change options in the light of these considerations.
  • Session four: Corporate taxes and tax integrity This session will consider the potential revenue and competitiveness aspects of corporate tax including implications for New Zealand from the Australian Tax Review and the role of imputation. It would also consider how company taxation fits with the personal income tax system and related integrity issues This will include the feasibility of 30/30/30 or other alternatives identified in the review process. The context for the discussion will be provided by the first three sessions.
  • Session five: Wrap-up The session will discuss conclusions that have arisen from the first four sessions and associated work-streams. The aim is to have fleshed out the pros and cons of different options and whether any options should be dismissed as being unworkable. The session will also bring together conclusions from previous sessions on the overall tax mix (corporate/personal/indirect). Where consensus on particular issues has not been achieved, key judgment calls would be identified for presentation to Ministers.

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