Progressive thinking

perspectives ten on tax Published May 2017 Edited by Rhydian Thomas and Kirsten Windelov Design and layout by Dan Phillips Printed by Pivotal Thames This resource is also available online at www.psa.org.nz/taxbooklet New Zealand Public Service Association Te Pūkenga Here Tikanga Mahi PSA House, 11 Aurora Terrace, PO Box 3817, Wellington. Phone 0508 367 772 Email [email protected] www.psa.org.nz ISBN 978-0-908798-09-4 Contents

3 Foreword

7 Talking tax, with 25 Tax and the context and all that Social Contract Morgan Godfery Bob Stephens 11 History of tax policy in 28 Climate change New Zealand and tax policy Paul Young Dr Lisa Marriott 32 New Zealand’s tax 16 What my parents taught settings in an me about tax (and fairness) international context Max Rashbrooke Terry Baucher 19 Taxing wealth 36 Tax and family assistance Bill Rosenberg Susan St John 23 Four tax myths that 39 A light touch on foreign might pop up this year trusts and companies Keith Ng Shamubeel Eaqub

42 Author bios

Progressive thinking: ten perspectives on tax 2 Foreword

Kia ora koutou, healthy for now. In that sense, paying tax is a pragmatic decision – what it We need to talk about tax. funds may not always be of immediate Not like we have been, either. Not use to us, but it likely will be in the exclusively in terms of ‘tax burdens’ and future. Of course, most of the things ‘tax relief’, and not in terms that assume our taxes pay for are useful to us every all taxation is bad and all tax cuts are day – roads, schools, hospitals – and good. It’s simplistic, and it’s making many of those things are funded by the us forget the reasons we pay tax in the taxes of those who came before us. If we first place. This kind of individualistic talk about tax in this way, our parents language is also dividing us when we and grandparents invested in the New need more than ever to be standing Zealand that we now live in, and we are together for strong public services. reaping the rewards of their labour. Talking about tax These analogies are of some use in illustrating why we – the Public Service There are two enduring progressive Association Te Pūkenga Here Tikanga perspectives on rethinking our public Mahi – have produced this book. We’re dialogue around tax. The first uses the uncomfortable with the fact that tax analogy of a club membership; where only seems to be discussed by ordinary Erin Polaczuk tax is a subscription fee we all pay people when they’re talking about tax and to fund a place that offers all of the cuts during election year; that timeless Glenn Barclay personalised services we need, but it promise of governments seeking votes requires upkeep, staff, equipment… you National secretaries through what is essentially an over-the- may only have joined the club to use for the New Zealand table bribe – vote for us and we’ll give the gymnasium once a week, but your Public Service you some extra money in the pocket. subscription also helps to clean the Association bathrooms, to pay the reception staff, As we see it, our present situation in Te Pūkenga Here New Zealand as considered through to fix a leaking roof. Without yours and Tikanga Mahi the two perspectives described above others’ subscription fees, the whole is: a club whose management is so place would fall apart and no one would obsessed with offering membership get to use the services they joined the discounts that they’ve been overlooking club for in the first place. the severely degraded quality of the The second idea is that we ought to be equipment on offer, or a long-term talking about tax like it’s a long-term savings account with diminishing savings account where we each deposit contributions that is incapable of weekly, knowing that one day, we may producing the kind of return on well need to withdraw the money to pay investment that we as depositors have for our healthcare costs, even if we’re been promised.

3 Progressive thinking: ten perspectives on tax Foreword

What metaphor fails to capture fair equal pay settlements and the protection of our natural environment Here at the PSA, we have an are all at risk. The Government acute sense of what tax pays for. Representing over 63,000 workers in urgently needs to redress these the public service, the state sector, funding deficits before tax cuts are local government, the community dangled in front of voters yet again. public sector and district health In fact, it could be argued that a third boards, we see what our taxes fund perspective on tax has implicitly every day. We see the Department emerged over the last nine years – in of Conservation ranger who looks it, New Zealand is a large business after our native wildlife and protects that has been through some very At present, it endangered species from extinction. tough economic times. We’re all We see the library staff, tirelessly investors in this great big corporation, is clear that working at the centre of their and after eight years of hardship, many of the communities to bring information we’re finally due a dividend from public services to life for all New Zealanders. We see our CEO for our ongoing faith in the the border control agents working to great belt-tightening of the nation. we fund with keep our borders secure, the Ministry This perspective is pervasive, and it is our taxes staff processing Official Information unhelpful. It is even more unhelpful Requests to make our society more that all of our major political parties have been transparent, the home and disability now seem to have bought in to this neglected and support workers looking after the rhetorical approach to some extent, most vulnerable people in New signalling their 'fiscal responsibility' underfunded Zealand. by promising to cap spending on since this All of these services are the result of critically underfunded public services the taxes that we and others before us at an arbitrary threshold while Government have paid for – they are not nice-to- assuming that current tax settings and took office in have add-ons for a prosperous society; levels are optimal. 2008…” they are the necessary foundations for New Zealand is not a membership- any well-functioning nation. only club; it is not a long-term savings At present, it is clear that many of the account; it is not a corporation moving public services we maintain through from red ink to black. It is a diverse our taxes have been neglected and South Pacific nation of over 4.5 million underfunded since this Government people who should rightly be able to took office in 2008: health, housing expect that paying tax affords them and education are the most visible and their whānau access to good casualties, but support for families, quality, timely and reliable public people made redundant, funding for services. Currently, they cannot.

Progressive thinking: ten perspectives on tax 4 Proper state investment in these since its implementation. Several services is not a burden on the market authors identify the problem of economy, contrary to the popular major tax avoidance by multinational myth – as David Hall (Director of the companies, and several want to see Public Services International Research income tax arrangements re-evaluated Unit at the University of Greenwich) for a more progressive and fairer noted in a 2009 paper, strong system that doesn’t over-burden the economic growth has gone hand-in- worst-off in our society. Inequality, hand with rising public expenditure over-politicisation and fairness are since the mid- 19th century, at least. also recurrent themes. Consistently, it has been demonstrated As we write this, we’re coming up Consistently, that public services can be provided to the current Government’s ninth much more efficiently and effectively it has been Budget. We hope that around this by the state than by the market alone. time, you will enjoy reading and demonstrated Again: New Zealand is not a business. that public considering the perspectives on Having the conversation offer here, and that you will break services can be all social conventions and talk about In this book, we’ve collected together tax – loudly and unashamedly! – with provided much ten of our country’s best writers, your friends, families and colleagues. more efficiently academics and campaigners to Tax is not just the prerogative of consider the different elements of governments to discuss – it is paid and effectively tax policy in theory and practice. In by the people for the people, and by the state these ten chapters, our contributors consequently, we should all have a consider everything from tax myths significant say in how it operates. than by the and political promises to specific measures for taxation on wealth We hope you will join us in this market alone. and carbon emissions; from family conversation. Again: New assistance and inequality to social Ngā mihi nui, contract theory and tax avoidance. We Zealand is not a also include primers on New Zealand’s Erin Polaczuk business.” history of tax policy and our relative taxation in an international context. We’re not advocating for specific taxes nor fiscal policies in this book; this Glenn Barclay is not a manifesto. Some consistent themes do emerge over the ten articles here – New Zealand’s lack of a comprehensive Capital Gains Tax, for example, or the regressive status of Goods and Services Tax in practice

5 Progressive thinking: ten perspectives on tax Stand Together

Progressive thinking: ten perspectives on tax 6 Talking tax, with context and all that

Here’s some advice, a truism from years of talking and writing about te ao Māori: never mention the Treaty of Waitangi in polite company. People shift in their seats, their bellies tighten, and they think you’re accusing them of something sinister.

“I’m not a racist” – this is the On this understanding of tax- necessary qualifier – “but”. as-technical-pursuit, most New Sometimes I wish the same were Zealanders would willingly Morgan Godfery true when talking about tax. Instead hand it over to technocrats and of standing to attention, people’s pointy-heads. It’s a neat trick for Morgan (Te Pahipoto) is a writer and trade eyelids droop, their shoulders slump conservative or centre left politicians unionist based in and they sink back in their chairs. who want to encourage people to Wellington. “Tax sucks.” It’s not the subject you’d understand tax as a “burden”: here’s discuss in any sort of company. this bad and complex thing – tax He’s also a non-fiction – and we’re the only ones with the judge for the Ockham In one way you can sympathise with knowledge, skills and willingness to New Zealand Book this. When politicians discuss tax like offer “relief.” Awards and sits on the they do data, all millions and billions, Legal Issues Centre board at the University a thing existing in a privileged “We’ve had no tax relief for seven of Otago. realm somewhere above politics and years, going on eight now,” ACT people’s lives, the first reaction is to leader David Seymour told RNZ in He tweets at switch off. Tax talk becomes about March. “It’s time for the government @morgangodfery. “thresholds” and “efficiency” instead to actually look after the people who of the schools it might pay for, the pay the bill.” This is a cute soundbite, hospitals it might improve and the and typical of conservative and houses it might build. centre right politicians, but it leaves the most important things unsaid. In a government green paper titled, ironically, Making Tax Simpler1, If there is a tax reduction there people are referred to as “customers” must be a corresponding reduction and the findings revolve around in spending or a corresponding bureaucratic buzzwords like increase in debt. This is what’s “flexibility” or vague platitudes at stake with talk of reducing the like “modernising the tax country’s tax income. Except no administration system”. one mentions schools that might

1. “Making Tax Simpler: A Government Green Paper on Tax Administration”, Hon. Bill English and Hon. Todd McClay, accessed 17 April 2017. URL: https://goo.gl/lJEoQc

7 Progressive thinking: ten perspectives on tax Talking tax, with context and all that go without teacher aids, hospitals appear to be off the table. New wealth that might keep fewer patients in taxes also appear to be a no-no. overnight and additional homes that The first issue here is ideological go unbuilt if there isn’t enough tax – conservative and centre right income to either keep things going politicians consider tax a barrier to as they are or to improve things. economic growth – and the second is Instead the emphasis is on what “I” discursive. might gain, like a “block of cheese,” to In the prevailing discourse, the borrow former Labour Party Finance economy is like a living, breathing Minister Michael Cullen’s talking person. It gets “jittery”, “confident” and point from 2008. it rewards “risk-takers” and punishes Against the idea of paying the same or scroungers. News programmes cross more tax for better schools, hospitals to bank economists who read the and homes, the idea of gaining tarots, consult the heavens and deliver another block of cheese each week their findings about how the economy The Economy seems petty. What use is personal is feeling. Will it punish exporters? “relief” if others go without? It’s worth Should consumers lift their retail isn’t a person. It pointing out that this is more than spending to appease it? cannot feel - it hypothetical. Dressed in their tailored navy suits, certainly isn’t In the last budget Vote Health was, bank economists are like the priests on a conservative estimate, $248 of old, holy garb and all, and they bestowed with million short of what it needed to and their colleagues pronounce on intention or cover inflation, population growth the vagaries of The Economy. Are – including the effects of an ageing government taxes “hurting” it? The consciousness.” population – and the new services the answer is almost always yes. government announced2. If we only wanted to maintain current health In this economic discourse, The services there are three options: Economy feels things like you and I. “reallocating” funding – perhaps Now it seems so obvious it’s almost the government could keep school redundant, but it’s worth stating operation grants frozen – debt (though for the record: The Economy isn’t a the government says it wants to person. It cannot feel – it certainly reduce debt) or tax changes. isn’t bestowed with intention or consciousness. Instead it’s the name The problem, at least as far as this we give to the sum of our decisions government is concerned, is that its about production, consumption hands are tied. Income tax increases and money.

2. Bill Rosenberg, “Did the Budget Provide Enough for Health?”, Council of Trade Unions, accessed 18 April 2017. URL: https://goo.gl/Ih8PBA

Progressive thinking: ten perspectives on tax 8 Talking tax, with context and all that

In fact, tax is what makes the economy. Tax is what we use to pool economy possible in the first place, our resources and secure the things not the thing “hurting” it. we need: schools, hospitals, homes and more. US Senator Elizabeth Warren put it best in an iconic speech that Perhaps talking about tax in context was (predictably) vilified by her is easier said than done. Everywhere opponents:3 you look and listen, tax is talked about as something holding us down. “There is nobody in this country who got rich on his own — nobody. Even the Greens, the most You built a factory out there? Good progressive Parliamentary party on for you. But I want to be clear. You tax, sometimes fall into the trap with moved your goods to market on the former co-leader Russel Norman roads the rest of us paid for. You telling media in 2014 that National’s It’s an hired workers the rest of us paid research and development policies exhausted to educate. You were safe in your “hurt the economy,”4 again as if it factory because of police-forces and feels like we do. I go on television truism, but it fire-forces that the rest of us paid and radio and sometimes lapse seems apt here: for. You didn’t have to worry that into talking about the “healthy” or marauding bands would come and “unhealthy” economy, again as if it “taxes are the seize everything at your factory — were like you and I. price we pay for and hire someone to protect against The ‘vile maxim’ to which the civilization”.” this — because of the work the rest of ‘masters of mankind’ adhere, wrote us did.” Adam Smith in the Wealth of Nations, It’s an exhausted truism, but it is ‘all for ourselves and nothing for seems apt here: “taxes are the price other people.’ The doctrine is better we pay for civilization,” as former known as class warfare, waged not in US Supreme Court Justice Oliver the streets but in governments and Wendell Holmes famously said. At parliaments. The battles are often this point my chapter might read like fought over tax. How much and from a polemic. In one sense, I suppose whom? How much and to whom? it is, but in another sense it’s more These questions determine whether than that: this is a plea to understand a child in Moerewa attends a well- taxation in context. Tax isn’t a resourced school, whether a patient weapon politicians use against the Tauranga receives the best possible

3. Tiffany Gabbay, “Elizabeth Warren on Class Warfare”, The Blaze, accessed 17 April 2017. URL: https://goo.gl/9i5CNd 4. Russel Norman, “National’s Cuts to R&D Will Hurt The Economy”, Scoop, accessed 17 April 2017. URL: https://goo.gl/vzfB0t

9 Progressive thinking: ten perspectives on tax Talking tax, with context and all that care and whether the pot holes on the Desert Road are filled. Taxation is not the realm of technocrats. It’s not something we should cede to politicians. It’s the thing that helps us to determine the kind of life we might lead. 

Progressive thinking: ten perspectives on tax 10 History of tax policy in New Zealand

This chapter provides a brief history of some of the tax policy changes in New Zealand’s recent history. It examines the three primary forms of taxing: income, consumption and capital. The deliberate trend of tax changes in recent years has been to broaden the tax base and lower the tax rates and is visible in much – but not all – of New Zealand’s extant tax policy. Moreover, tax policy has become less complex in recent Dr Lisa Marriott decades, with the removal of personal and company tax Lisa Marriott is an concessions. Associate Professor of Taxation at Individual income taxes shown, due to the rebates that were Victoria University of available to taxpayers. Wellington’s School New Zealand has a history of of Accounting and progressive income taxes, whereby New Zealand is unusual in taxing Commercial Law. income taxes are structured on an from the first dollar earned. Most Lisa’s research interests individual’s ability to pay. Rates for OECD countries have a tax-free 1981 and 2017 are outlined in Table include social justice threshold, whereby no tax is paid and inequality, crime 1. Table 1 shows how rates have until income exceeds a certain and the tax system, and become less progressive over time: the behavioural impacts rates have reduced across all income threshold. Instead, New Zealand of taxation. thresholds and the thresholds have targets low-income earners through also reduced. While the tax rates are the Working for Families package of higher in 1981, the effective tax rates tax credits. This is discussed further were frequently lower than those on page 34.

Table 1: Income Tax Rates 1981 and 2017 1981 2017 Taxable income Equivalent Tax rate Taxable income Tax rate (1981 dollars) (2017 dollars) $1-$5,000 $1-$21,404 14.5% $1-14,000 10.5% $5,000-$11,683 $21,405-$50,013 35% $14,001-$48,000 17.5% $11,684-$16,266 $50,014-$69,632 48% $48,001-$70,000 30% $16,267-$22,000 $69,633-$94,178 55% Over $70,001 33% Over $22,000 Over $94,179 60%

11 Progressive thinking: ten perspectives on tax History of tax policy in New Zealand

Company taxes by OECD standards. Reference to Figure 1 outlines corporate income Like individual income taxes, tax rates across OECD countries. company taxes have also reduced This shows New Zealand’s current in recent decades from 48% company tax rate of 28% is now one (1986-1988) to the current rate of the higher rates among OECD of 28%. Company tax rates have countries. While New Zealand been relatively stable, remaining has followed the trend of other at 33% from 1989 to 2007, before countries in reducing its company commencing the decline to the tax rate, other countries have 28% rate where it remains today. continued to reduce their rates However, the 28% rate is not low while New Zealand’s rate stabilised. ...New Zealand’s Figure 1: Corporate Income Tax Rates (%) – OECD countries (2016)1 current

40.00 company tax 35.00 rate of 28% is 30.00 now one of the 25.00 higher rates 20.00 among OECD 15.00 countries.” 10.00 5.00 0.00 Italy Chile Israel Spain Korea Japan Latvia France Poland Ireland Greece Mexico Austria Iceland Finland Estonia Canada Norway Sweden Belgium Portugal Slovenia Hungary Australia Denmark Germany Switzerland Netherlands Luxembourg New Zealand New Czech Republic Czech Slovak Republic Slovak United Kingdom United

1. OECD.Stat, Table II.1, retrieved from https://goo.gl/DWTVCm 9 April 2017.

Progressive thinking: ten perspectives on tax 12 History of tax policy in New Zealand

GST and benefits from having limited exemptions. At the present time, New Zealand’s goods and services GST accounts for over 25% of New (GST) regime is admired globally. Zealand’s tax revenue collected. GST replaced the wholesale sales tax system that was known for its The efficacy of the GST regime multiple rates and exclusions, which can be seen in Figure 2. In 1981, limited its ability to effectively approximately 11% of government contribute to government revenue. revenue was collected from sales taxes, while nearly 66% was collected Since its inception in 1986, GST from individual income tax. has collected a large proportion of government revenue at a relatively Some 30 years later, GST was low cost. It commenced at the rate collecting 32% of government of 10%, increased to 12.5% in 1989 revenue, while individual income tax While GST is and 15% in 2010. New Zealand’s had reduced to 41%. While GST is highly effective GST system is relatively simple highly effective from the perspective from the Figure 2: Proportion of Tax Collected 1981 and 20112 perspective of revenue Individual tax collection, it lacks the ability Company tax to capture an individual's Sales taxes / GST

ability to pay...” Excises, import duties, etc

Other

0 10 20 30 40 50 60 70

2011 1981

2. McLeod, R., Patterson, D., Jones, S., Chatterjee, S., and Sieper, E. (2001). Tax Review 2001: Final Report. Wellington: New Zealand Treasury and Inland Revenue (2015) Tax Policy Introduction Template, Policy Advice Division.

13 Progressive thinking: ten perspectives on tax History of tax policy in New Zealand of revenue collection, it lacks the There appeared to be little political ability to capture an individual’s appetite to strengthen these forms ability to pay, that is, it is regressive of taxes, which contributed to their – those on lower incomes pay a eventual demise. Estate taxes were higher proportion of their incomes repealed in 1992 and there has been in GST than those on higher no further attempt to introduce incomes. This is because those on a similar tax. Gift duties were lower incomes will typically spend repealed from 2011. a higher proportion (often all) of Historically, New Zealand had a their incomes, whereas people on land tax that operated from 1878 higher incomes will save a higher to 1992.1 In a similar way to death proportion of their incomes. duties and gift taxes, it eventually Wealth Taxes collected little tax – 0.2% of tax revenue by 1980.2 However, there In the present time, New Zealand has never been a comprehensive In the present has few taxes that would typically capital gains tax in New Zealand. time, New be considered as wealth taxes. However, this has not always There are some components of Zealand has been the case. Death duties and capital gains that are taxed as few taxes that gift duties were introduced in they are explicitly included in 1866 and 1885, respectively. The the Income Tax Act 2007. But in would typically initial objective of these taxes the absence of such an inclusion, be considered was revenue generation and capital gains are not taxed in New Zealand. redistribution. as wealth This provides a tax advantage Gift duties had the additional aim taxes.” to those who have capital of limiting the opportunity for assets and has the potential to people to avoid death duties by distort decision-making towards gifting their assets prior to their investment in capital assets due death. to their tax-preferred status. This In their early days, these taxes approach is unusual among OECD collected a moderate amount of countries and has generated revenue, but this deteriorated much debate. While it is generally over time as avoidance measures accepted that the New Zealand became commonplace. income tax base is effective, it is

3. Barrett, Jonathan and Veal, John. (2012). “Land Taxation: A New Zealand perspective”, eJournal of Tax Research, 10(3):573-588. 4. McCaw, P.K., Schmitt, G.J., Kean, J.A., Phillips, R.T., Thompson, E.G., Titter, H.M., Tyler, B.H.C., Vautier, K.M., and Wright, A. (1982). Report of the Task Force on Tax Reform. Wellington: Government Printer.

Progressive thinking: ten perspectives on tax 14 History of tax policy in New Zealand

also recognised that the absence of The most obvious gap is the capital gainstaxation is a gap that almost complete absence of taxes undermines the overall on capital in New Zealand.

philosophy adopted to tax policy It is notable that the primary group The most in New Zealand.3 This topic is benefitting from this absence of covered in more detail on page 17. taxes on capital is the wealthy who obvious gap own capital assists. is the absence Conclusion By way of contrast, the group most of taxes on New Zealand has adopted a disadvantaged from increases in ‘broad-base, low-rate’ philosophy rates of GST are those who have capital in New to tax policy. The concept of this the lowest incomes. approach is that taxing across a Zealand. It is The political sensitivity of taxing broader base provides for overall capital gains is acknowledged, but notable that the lower tax rates. it must also be acknowledged that primary group While some tax policy adheres a broad-base, low-rate tax regime benefitting to this approach, there are some cannot be achieved when a key significant gaps that challenge the component of the tax base from this is the coherence of the approach. is excluded.  wealthy who 5. McLeod, R., Patterson, D., Jones, S., Chatterjee, S., and Sieper, E. (2001). Tax Review 2001: own capital Final Report. Wellington: New Zealand Treasury assists.”

15 Progressive thinking: ten perspectives on tax What my parents taught me about tax (and fairness)

When I was a child, I remember often complaining, as all children do, that certain things weren’t fair. My exasperated parents must have responded, as all parents do at least once, that life often isn’t fair. But the larger lesson they taught me, across the whole of my upbringing, is that it doesn’t have to be that way.

What they meant, in essence, is that of themselves and their employees, a good society is one that pushes the government’s health systems, back against unfairness wherever it telecommunications networks and Max Rashbrooke can. It knows that our rewards in life so on. Max Rashbrooke is a should reflect our own efforts but research associate at the in practice are affected by dozens The most respected political Institute for Governance of things outside of our control, philosopher of the twenty-first and Policy Studies, and century, John Rawls, argued that even the author of Wealth and and that society must find ways to New Zealand. compensate for that. people’s talents, being drawn out of the genetic pool, should be seen He has written Tax matters enormously to this extensively on income as “a common asset” and that while discussion, because it is one of the and wealth inequality, we should encourage people to use main ways to tilt the balance back and has worked as a those talents to the full, we should towards fairness. If people’s income journalist in both the UK and New Zealand. and wealth truly reflected their also all “share in the benefits of this own decisions and nothing else, distribution whatever it turns out there would be far fewer reasons for to be”. taxation. And of course many high- Tax exists in part to fulfil these earning people do work hard. demands. It holds onto the portion But people often succeed for myriad of people’s incomes and wealth that other reasons. They get help from has derived from luck, inheritance their parents, or they are born with and the common pool of assets, and talents they have done nothing to uses it both to top up the incomes deserve, or they happen to be in the of people who have been less lucky right place at the right time. (via the benefits system) and to Anyone who has made money replenish the common pool. (Like in New Zealand has also done so any natural resource, the pool has to by drawing on a common pool of be continually filled up, otherwise resources: the public roads they drive it won’t be there for the next on, the taxpayer-funded education generation to draw on.)

Progressive thinking: ten perspectives on tax 16 What my parents taught me about tax (and fairness)

In this sense, tax pushes back working or motivated than formerly. against unfairness, which Indeed the hundreds of people who sometimes goes by the name of apply for every new supermarket unjustified inequality. The material check-out position tend to suggest forms of inequality – imbalances otherwise. So there is good reason to of income and wealth – have think that the increases in income increased significantly in New and wealth imbalances of recent Zealand in recent decades. In fact, decades have not been entirely Currently New income imbalances increased more deserved, and that the tax and here than in any other developed benefit system should do more to tilt Zealand does country1 between 1985 and 2005 the balance back towards fairness. – a major shift in New Zealand’s not ask much Currently New Zealand does not economy and culture. of its richest ask much of its richest citizens. Rob Since the mid-1980s, the typical Salmond’s 2011 book The New New citizens ...the rich person (the mean equivalised Zealand Tax System4 showed that poorest New household in decile 10, in technical the poorest New Zealanders pay just Zealanders pay terms) has seen their annual income under 30% of their income in tax, (after-tax and inflation-adjusted) and the richest pay 34%. just under 30% grow by around $60,000, while the And this excludes money made typical poor person has only seen a of their income selling assets, which, if we could roughly $2,000 increase.2 in tax, and the measure it, would almost certainly Stored-up wealth, meanwhile, is drop the tax rate of the rich below richest pay very unevenly distributed: the that of the poor, since it gives them 34%.” wealthiest 1% of individuals have lots of extra income but attracts one-fifth of all household wealth,3 essentially no tax. while the poorest half of the country So we don’t ask much, have almost nothing. proportionately, from people But there is little evidence that who have often had enormous the richest New Zealanders have advantages and who can afford to suddenly become harder-working pay more, compared to what we or are making a much greater ask of those who’ve often had very contribution than they used to, and difficult upbringings and have equally little evidence that poorer nothing left over once their bills New Zealanders are less hard- are paid.

1. https://goo.gl/SBSyxE 2. https://goo.gl/9z4emh 3. https://goo.gl/brM9I0 4. https://goo.gl/l3S2HP

17 Progressive thinking: ten perspectives on tax What my parents taught me about tax (and fairness)

A tax system that did more to makes $80,000 selling a house address this unfairness and pays the same tax as someone who unjustified inequality would have gets the same amount in salary. several elements. The first would Or it could tax all wealth annually, be a higher top rate for income as proposed by Piketty and (in tax, perhaps for those earning over different form) by New Zealand’s $100,000 or $150,000 a year. own Gareth Morgan. New Zealand’s 33% top rate is New Zealand could also institute extremely low internationally (the a lifetime gifts tax, as proposed ...the most UK and Australia, for instance, by the late Anthony Atkinson, a glaring hole in both have a 45% top rate), and distinguished British economist. modelling5 by economists Thomas His idea was that the first, say, New Zealand's Piketty, Emmanuel Saez and $200,000 of gifts received in a tax system, Stefanie Stantcheva shows that lifetime could be tax-free, to allow developed countries could increase uninterrupted inheritance of from a fairness top rates as high as 80% before small(ish) amounts, but all further point of view, losses from avoidance and reduced gifts should be taxed, so that those effort would outweigh the revenue lucky enough to get these gifts is the failure to gains. could compensate those who don’t. tax wealth in That’s a kind of fairness that I think But the most glaring hole in New my parents would recognise.  any form...” Zealand’s tax system, from a fairness point of view, is the failure to tax wealth in any form, except for the government’s very minimal tax on houses sold within two years of purchase. Like annual income, people’s stored-up wealth can be earned through hard work, but it can also be inherited, gifted, or made by, say, flipping houses. For this reason, most countries tax wealth in some form, and New Zealand could easily follow their lead. It could tax capital gains thoroughly, so that someone who

5. https://goo.gl/ITMnjF

Progressive thinking: ten perspectives on tax 18 Taxing wealth

Wealth is assets. They can be physical like land, buildings, plant and equipment, ‘intangible’ like trademarks, patents, and a firm’s reputation or brand, or financial like a bank account, shares, bonds or other securities. Companies and people own assets because they hope to get future benefits from them whether as income or capital gain or non-financial benefits such as having a house to live in.

Bill Rosenberg Why tax wealth? issue beyond this discussion, but taxes Bill Rosenberg was on wealth are among the policies that Inequalities in wealth are much greater appointed Economist need to change. They could help to even than inequalities in income. The and Director of Policy at reduce the likelihood of more housing the CTU in May 2009. most recent data from Statistics New Zealand1 showed that in the year to bubbles and to rebalance the New He holds a BCom in June 2015, the wealthiest one-fifth Zealand economy if more investment Economics, a BSc in moved out of buying and selling larger Mathematics and a of households had almost 70% of and more expensive houses into PhD in Mathematical household wealth and the top 1% alone Psychology. had 18% of the wealth - more than productive assets that supports good jobs. Bill was previously the least wealthy 60% combined. The Deputy Director, highest incomes tend to come from Taxes on wealth also help to combat University Centre for wealth, and can be much higher even tax avoidance. Companies with Teaching and Learning than extreme chief executive salaries. operations around the world avoid at the University Extremes of wealth concentrate power taxes by using various tricks to shift of Canterbury, a and influence and are therefore bad Commissioner on profits to low tax countries. They TEC, and a member for social cohesion and a healthy undermine the revenue we need for of the Regional Land democracy. If wealth can be passed good public services. Wealth taxes can Transport Committee on without limit between generations be more difficult to avoid than income of Environment then those extremes worsen. taxes. Canterbury. A large part of wealth is in housing. What taxes on wealth do we Home ownership can boost local communities and social stability. But have? fewer people live in their own homes, New Zealand has few wealth taxes left. which are becoming increasingly The only notable one is a weak capital unaffordable. Fixing that is a complex gains tax. Income tax is payable on

1. Household Net Worth Statistics: Year ended June 2015, Available at https://goo.gl/L8oz66

19 Progressive thinking: ten perspectives on tax Taxing wealth the profit made in reselling a property What taxes on wealth would be (not the owner’s family home) within useful for New Zealand? the first two years or if it was bought It is important to head off growing with the intention of resale at a profit. extremes of wealth. Any form Taxes on wealth used to be much of progressive income or wealth more extensive. Until 1992 there was tax would help with this, but the an estate duty of 40% on deceased most direct would be to reinstate estates over $450,000 ($730,000 in estate and gift duties. A simple and today’s dollars). Gift duties (abolished progressive structure for an estate only in 2011) discouraged avoidance duty would be to exempt an amount approximately equal to the median of estate duties. We should do house price ($550,000 at time of Stamp duties, abolished in 1999, writing) and tax the remainder at what is possible taxed property sales. They are a the top income tax rate which is through form of transaction tax, and in many currently 33% but should be higher – countries are also levied on share at least 45%. taxation to make sales. We should do what is possible housing more They are a close relative to financial through taxation to make housing affordable, less transaction taxes which can reduce more affordable, less subject to price bubbles and to encourage the flows of speculative international subject to price investment in other productive forms finance. These flows can at times bubbles and of assets. A full capital gains tax on have disastrous effects on financial property encourages investors to to encourage stability and the value of exchange focus more on investment income investment rates. than on rising asset prices. It may Land taxes were one of the earliest slow the formation of a price bubble, in other taxes in colonial New Zealand but but it would need a tax that almost productive were abolished in 1990. However confiscates the capital gain to make speculation unattractive once rapid there is still a property tax in the forms of assets.” price rises are underway. Capital form of local government rates which gains should be taxed like any other are levied on the value of both land income. For public acceptance it and buildings. Property registers would exempt the primary family make land and property taxes very home. efficient to collect. An alternative is a tax on a deemed Most of these taxes are common ‘risk-free rate of return’ on the among other countries, including property (usually taken to be the Australia. New Zealand is unusual in interest rate at which Treasury can its weak taxation of wealth. borrow). Again the primary family

Progressive thinking: ten perspectives on tax 20 Taxing wealth

home should be exempted or low quality low cost starter houses for income home owners compensated which first-home buyers get priority. by reductions in other taxes. This Finally, we should be designing an would have the benefit of being a international financial transaction more reliable source of revenue tax to help manage the exchange rate than a capital gains tax, but the of the New Zealand dollar and during disadvantage of being less responsive financial crises. Cooperation with to downturns in the economy. It other governments would make this removes much of the advantage that more effective. housing currently has over other forms of investment. A capital gains tax should be retained for other forms of wealth (such as shares) and on property if price bubbles recur. Assistance to There is concern that overseas low to middle residents push up house prices, particularly during a bubble. We income first- could copy the Australian ban on home buyers non-resident purchases of existing houses. Alternatively we could levy must avoid the a hefty stamp duty on property risk of pushing purchases by non-residents: for example British Columbia in Canada prices up introduced a 15% property transfer further.” tax on foreign real estate buyers in 2016 .2 Assistance to low to middle income first-home buyers must avoid the risk of pushing prices up further. We could couple concessionary interest rates or a contribution to their deposit (paid for by the above taxes) with a requirement that they buy new houses. At the same time the government should be building or requiring developers to provide good

2. Canada tax targets foreign house buyers, 26 July 2016, available at https://goo.gl/eqWn09

21 Progressive thinking: ten perspectives on tax Progressive thinking: ten perspectives on tax 22 Four tax myths that might pop up this year

Myth 1: “40% of households pay no released by the Minister of Finance’s ‘net taxes’” office, and usually its first public appearance3 is on David Farrar’s blog.4 Since 2011, Bill English has been pushing1 the idea that around 40% of Myth 2: The top 10% of taxpayers NZ households don’t pay any “net tax”. paying 46% of taxes proves they’re In its first iteration, the claim was very overtaxed technical and specific. English said It’s true - the top 10% of taxpayers pay that these households “receive more 46% of all income tax - but that’s only in income support than they pay in half the picture. income tax” [emphasis added]. But Keith Ng by 2016, it’s mutated into a wildly How much tax you pay depends on Keith Ng is a data inaccurate claim in the media:2 that two things: a) the tax rate, and b) your visualisation consultant these households are “contributing income. It’s pretty straightforward, so by day and data nothing to New Zealand’s tax take” and it’s incredible how often people blame journalist by night, using that the whole tax system is propped “high amount of tax paid” on the tax data to understand and up by “a small number of taxpayers rate being too high, and completely explain complex issues [who] bear the brunt of New Zealand and policies. ignore the income effect. tax bill”. He also has the prettiest The top 10% of taxpayers make around tax spreadsheets you’ve The problem with “net taxes” is that 34% of all taxable income, nearly as ever seen. it excludes GST, which accounts for much as the bottom 70% combined. 32% of all taxes. Not quite as much as So while they pay a lot of tax, they also income tax (38% of all taxes), but it’s a make a lot of money. whopping big heap not to count. It also only counts cash transfers - so if you But the critical part is that they pay a get cash from the government, that gets higher tax rate, and that’s where any counted, but if you get a service from debate about tax fairness ought to the government (such as education, or start. The top 10% of taxpayers have an healthcare) that does not. average income of $140,000 per year, and pay 26.5% of that in income tax. “Net tax” is an arbitrary and The next 10% down from them have meaningless way to count who is an average income of $73,000, and pay “contributing” and who isn’t. It exists as 20.4% of that in income tax. a political tool. Although it is produced by Treasury, Treasury themselves have The defining factor of a progressive never published it. It has only ever been income tax system is that people

1. https://goo.gl/H0kdW 2. https://goo.gl/ycpUOj 3. https://goo.gl/DDAOy0 4. https://goo.gl/3K4Dxk

23 Progressive thinking: ten perspectives on tax Four tax myths that might pop up this year on higher incomes pay a greater While bracket creep is rightly And that’s what happened. By percentage of their income in taxes. characterised as “a tax increase by the time 2014 rolled around, the Whether you think that’s fair is a stealth”, successive governments economy grew slower than expected matter of values, not fact. But looking - left and right - have kept it and tax revenue was $4b less than at the “total tax paid” or “proportion as a handy political tool. It’s a the 2010 forecast. Did the tax cut of tax paid” without looking at mechanism that automatically fail to stimulate growth? Or was income or tax rate is just plain raises taxes a tiny bit each year; the economy worse because of the Christchurch earthquake and other misleading, and tells us nothing over time, it gives governments the option to increase spending or to factors, and the tax cut helped about progressiveness or fairness. tweak the tax system. soften the blow? Myth 3: Bracket creep has Myth 4: Tax cuts pay for reversed the effects of the 2010 themselves tax cuts Here’s an idea: If everyone gave Bracket creep refers to the effect the government less money, the The defining of inflation on the tax rate. As our government would receive more factor of a incomes grow (due to inflation), we money. This is not a joke. The 2010 move into higher tax brackets and a tax cuts5 were estimated to cost progressive pay higher tax rate, even though the around $1.1b over four years. But by income tax growth due to inflation isn’t really 2014, the tax cut was supposed to making us richer. result in the government receiving system is that an extra $175m a year in taxes. Before the 2010 tax cut, the average people on tax rate for all taxable income was The magical part is a single line in higher incomes the budget called “Adjustment for 21.4%. Immediately after the tax cut pay a greater kicked in, at its lowest point in 2012, macroeconomic effects”. Treasury includes this because they believe the average tax rate fell to 18.9%. percentage of that tax cuts will help the economy That’s the impact of the tax cuts. grow faster, and a bigger economy their income in By 2015 (the latest year for which means more taxes. taxes.” data is publicly available), it It’s a sound idea in theory, except crept back up to 19.5%. That 0.6% it’s a bit like a rain-dance. If it rains increase is partly the result of more than average after I do a bracket creep. It’s not nothing - and rain-dance, then clearly it was very Even with the benefit of hindsight, it disproportionately affects people effective. If it rains less than average it’s impossible to prove or disprove. earning around $50,000 per year after I do a rain-dance, then you’re That’s a pretty lousy way for an - but people are still paying less lucky I did it, because it would’ve “evidence-based” government to income tax than they did in 2010. been much worse if I didn’t! justify spending a billion dollars. 

5. https://goo.gl/hRGxWG

Progressive thinking: ten perspectives on tax 24 Tax and the Social Contract

Contrary to the opinion of the New Right, the payment of tax is a measure of citizenship, of being a member of society. Taxation is not theft of one’s market income, but is the method of payment for the services that government provides.

Tax, along with government government expenditures. expenditure, also permits the Government spending includes redistribution of income from social security, pensions, health Bob Stephens the current well-off to the current care, education, infrastructure, less well-off; from those without defence, police, environmental Bob Stephens retired dependents, to those with protection and the operation of from being an Associate dependents, especially children; Professor in the School the state itself. Taxation must be of Government in 2010. for individuals throughout their considered along with the benefits lifetime; and between generations. that accrue from government While at Victoria University he published Some will be net gainers from spending. widely in the areas of the interactions of taxation and For this social contract to be taxation, social policy, government expenditure, most will acceptable to society, it must be including co-establishing roughly break-even, while those the NZ Poverty seen as fair. Fairness is multi- Measurement Project, who are better-off are more likely to faceted. Fairness covers both and income distribution. pay more in taxes than they receive horizontal and vertical equity, and from government expenditures. He is still involved incorporates inter-temporal and in these areas at the Taxation is part of a social contract, inter-generational equity. Institute of Governance developed and endorsed via the Horizontal equity requires that and Policy Studies. political system, which links all individuals in similar economic members of society through the and social circumstances pay the interaction of all government same level of taxation. Vertical expenditures and the payment for equity is the appropriate amount those services. Taxation is not just of tax (and receipt of government personal income tax, but covers services) that the rich pay relative to GST, company taxation, excise the poor. Without horizontal equity, duties, tax on fringe benefits, as attempts at ensuring vertical equity well as ACC levies and road user are a random lottery. Overcoming charges. flawed policy from the past creates Profits from state-owned winners and losers, but this is a enterprises and government way of increasing fairness and thus deficits are other ways of financing enhances the social contract.

25 Progressive thinking: ten perspectives on tax Tax and the Social Contract

Unlike the market, a major problem some individuals can structure for taxation is the separation of a their financial affairs to permit direct link between payment and tax avoidance and tax evasion. receipt of government services. This Tax rules allow some sources of separation is not just today, but also income to be treated differently. occurs on a temporal basis: today’s Those who receive income from government funds school children tax-advantaged second housing, who are tomorrow’s workers or capital gains, face far lower and taxpayers, and these people effective tax rates than wage subsequently become recipients earners. Housing is a preferred of pensions. The current fall in the investment to other assets which number of taxpayers relative to raises house prices and imposes pensioners is seen as unfair to the a burden on current and future Taxes are younger generations who will need generations. Issues of horizontal to foot a larger tax bill to maintain inequity led to the 1986 tax reform, paid at one existing level of services. However, with the uniform GST replacing a stage of the today’s pensioners paid taxes in the wholesale tax with rates ranging past in the expectation that they from zero to 60%. lifecycle in the would receive a pension. The social Some sources of income such as expectation contract applies over the life-cycle. fringe benefits were tax free whilst that you will others had a marginal tax rate of Radical tax reform, changes in the receive a degree of provision and payment up to 66%. Horizontal equity is also for government services, or the level playing field, allowing benefit at a resources to go to their most significant changes in demographic later stage: a structures, can easily change inter- efficient use. temporal notions of fairness. The The degree of vertical equity is a redistribution social contract cannot be seen in social judgement, to be determined, of one’s own isolation from wider changes in in part, by the political process. economic and social conditions, The substantial widening of wealth.” such as increasing market income market income inequality is hard inequality, market liberalisation, for government to counter, but in changes in family formation New Zealand income inequality with sole parenting, longer life has been exacerbated by the expectancy and higher divorce lowering of personal income tax rates. rates, especially at the upper end of earnings, with the top tax rate now It is seen as unfair that multi- being 33%. national companies can use tax havens to avoid tax on New Over the last 30 years the personal Zealand derived profits, or that income tax system has become far

Progressive thinking: ten perspectives on tax 26 Tax and the Social Contract

less progressive: for someone on while the baby-boomers will average earnings, the tax rate has be net beneficiaries. For fiscal fallen from 23% to 19%, while at 3 balance, when today’s young times average earnings the average retire, the smaller tax base will tax rate has gone down from 38% require a cut in benefits (especially to under 30%. The targeted nature superannuation), or higher taxes. of family assistance (a tax credit) The development of the New has led to a fall in the inequality Zealand Superannuation (Cullen) of the tax system for those with Fund was designed to offset dependent children. this intergenerational inequity: government payments into the fund Much income redistribution occurs increase current tax payments; Taxation is throughout one’s lifecycle, between drawing down the fund, post 2040, periods of relative ‘want’ and part of a social tax payments for superannuation relative ‘plenty’. Market incomes need not increase. This lifecycle contract... rise during the early periods of redistribution would permit future employment, flatten, and then drop which links payment of pensions, limiting dramatically when retired. In a the spectre of intergenerational all members family there is often a shift from a inequity. of society one-income to a two-income. The social contract is thus multi- This combination of benefits and faceted: taxes pay for current through the tax payments smooth out variations government spending; taxes allow interaction of in living standards over the for income redistribution between lifecycle, with people contributing current rich and poor; they are an all government when the incomes are relatively effective method of redistributing expenditures high and receiving net benefits income and expenditure over when incomes are relatively low. one’s lifetime; and they can show and the Taxes are paid at one stage of the whether different generations are lifecycle in the expectation that payment for treated equitably by the state.  you will receive a benefit at a later those services.” stage: a redistribution of one’s own wealth. Most households pay roughly the same amount in tax as they receive in benefits, but that there is some redistribution from lifetime rich to lifetime poor. With the ageing of the population, younger taxpayers may contribute more taxes to the welfare state than they will receive from it,

27 Progressive thinking: ten perspectives on tax Climate change and tax policy

For as long as the world has been earnestly attempting to tackle climate change, economists have advocated a price on greenhouse gas emissions as the best way to do it.

The rationale is simple: emissions In this chapter, I discuss where to from impose a cost on society, and here and argue three main points. exposing polluters to this cost will First, that a reformed ETS can deliver incentivise change. ‘Internalising’ results with the right political intent. the cost through carbon taxes1 or Second, that New Zealand’s overall emissions trading will reduce level of carbon pricing is low. And demand for carbon-intensive third, that higher carbon prices – if Paul Young products, make cleaner alternatives done right – can not only reduce our Paul Young is a more competitive, and spur low- emissions, but help us build a fairer researcher and writer carbon innovation. and more prosperous country. with the Morgan Foundation focused Beginning with Finland’s carbon A big fat price on carbon tax in 1990, pricing schemes have on climate change and environmental issues. expanded to cover 13 percent of “The appropriate price is what I call global emissions.2 very scientifically ‘A Big Fat Price’ on Paul has worked carbon. You have to give very strong voluntarily and In New Zealand, following a tortuous signals about the fact that you want to professionally on climate and ultimately unsuccessful effort to push out carbon.” change issues for eight years, and co-founded put in a carbon tax, the Fifth Labour - OECD Secretary-General, Ángel Generation Zero in 2011. Government passed the Emissions Gurría4 Trading Scheme (ETS) late in its reign Paul holds a MSc in What price do we need? One approach physics. in 2008. is to determine a ‘social cost of The failure so far to deliver a strong carbon’, which the OECD argues can and reliable price, and to reduce New be “very conservatively” set at EUR Zealand’s emissions,3 has eroded 30 (NZ$45) per tonne of emissions.5 support and led to calls to start over These assessments are contentious with a carbon tax. and values-laden; some studies find

1. I use ‘carbon’ throughout to refer to all greenhouse gases. 2. World Bank, Ecofys and Vivid Economics (2016). State and Trends of Carbon Pricing 2016. World Bank, Washington, DC. P.22. Accessible at https://goo.gl/6WeaXC 3. Ministry for the Environment (2015). New Zealand Emissions Trading Scheme Review 2015/16: Discussion document and call for written submissions. Ministry for the Environment, Wellington. Accessible at: https://goo.gl/OP6vkB 4. Accessible at: https://goo.gl/L54SZY 5. OECD (2016). Effective Carbon Rates: Pricing CO2 through Taxes and Emissions Trading Systems. OECD Publishing, Paris. Accessible at: https://goo.gl/Sy7NMZ

Progressive thinking: ten perspectives on tax 28 Climate change and tax policy

costs exceeding US$200.6 A second phase-out of the “one-for-two” subsidy approach estimates the price needed underway, polluters currently face a to reduce emissions in line with price around NZ$11.50 per tonne.9 agreed global temperature goals. A Further change is needed. The ETS recent International Energy Agency study found CO2 prices should rise to could be reconfigured as follows to US$120 (NZ$170) by 2030 in OECD deliver stronger prices and greater countries for a reasonable chance of predictability, while retaining key The price keeping global warming under two advantages of trading: level is key, but degrees.7 1. Keep it closed from other markets 10 so too are price The price level is key, but so too are for the foreseeable future; price reliability and predictability. 2. Introduce government auctioning reliability and Furthermore, even a strong carbon of emissions units up to a fixed predictability. price will not be sufficient alone; cap; it must be part of a broader policy Furthermore, package. 3. Introduce a price corridor with lower and upper limits (managed even a strong Reforming the ETS through auction reserves); carbon price The ETS has delivered neither strong, 4. Set levels for the cap and will not be reliable nor predictable prices to price corridor several years in date. This sorry tale has been told advance, with an indicative range sufficient alone; 8 elsewhere. But the root of the extending further. it must be part problems has been political decisions, not the tool itself. In this model, the government, not of a broader ETS participants, would lead any Most critical was the lack of limits purchase of international carbon policy package.” on the quantity of foreign carbon credits to help meet New Zealand’s credits participants could use. Since commitments. New Zealand was cut off from Kyoto Protocol carbon markets in mid-2015, This model would establish a the ETS has been recovering. With the transparent, shrinking cap on New

6. https://goo.gl/mdKzkX. Accessed 19 April 2017. 7. OECD/IEA (2017). Chapter 2 of Perspectives for the energy transition – investment needs for a low-carbon energy system. Accessible at: https://goo.gl/qOicIx 8. Simmons, Geoff and Paul Young (2016). Climate Cheats. The Morgan Foundation, Wellington. Accessible at: https://goo.gl/CmVYxz and Leining, Catherine and Suzi Kerr (2016). Lessons Learned from the New Zealand Emissions Trading Scheme; Motu Working Paper 16-06. Motu Economic and Public Policy Research, Wellington. Accessible at: https://goo.gl/OMkWBL 9. Unit price from www.commtrade.co.nz with 67% surrender obligations. 10. I acknowledge the participants in Motu’s ETS Dialogue for helpful ideas and discussion on options for reform of the NZ ETS.

29 Progressive thinking: ten perspectives on tax Climate change and tax policy

Zealand’s emissions. It would give It is particularly urgent to avoid clear future price signals to guide investments in long-lived, low-carbon investments. Finally, carbon-intensive assets, such as it would generate revenue for the coal boilers. In the absence of a government, who could add it to sufficient ETS price, one idea is the public purse, recycle it through a targeted levy on new boilers rebates or reductions in other taxes, equivalent to, say, a carbon price of or invest it in targeted low-carbon at least $100 per tonne. With wise infrastructure and programmes. While debate rages on about whether and how to include implementation, A broader view on carbon biological emissions in the ETS, we have nothing prices we could start with a simple tax on Most developed countries have a nitrogen fertilisers with revenue to fear and range of specific taxes on energy used to fund native revegetation. much to gain use (for example, fuel taxes). I would even make the case – at Regardless of the reason for from higher least in the short-term – for a fossil implementation, these impose an fuel levy on top of the ETS. This carbon prices. effective price on carbon. could be done relatively easily by They can make In all but a few countries, energy charging a ‘surrender fee’ on each taxes currently vastly outweigh emissions unit. our tax system explicit carbon prices.11 Overall, fairer and more New Zealand has among the lowest Smoothing the transition effective carbon prices in the Concerns around rising carbon progressive, OECD. This strengthens the case prices tend to gravitate around while tackling for increasing our carbon price, and two poles: impacts on low-income for considering a broader range of households and impacts on trade- the urgent pricing instruments than just the exposed businesses. Both are crisis of climate ETS, such as the following. legitimate issues, and both can be change.” managed through careful policy Unlike a fuel tax, our unique road design. Current ETS settings are user charge system for diesel overly generous on the latter, while vehicles doesn’t penalise less doing nothing about the former. efficient vehicles. The OECD has recommended introducing an Emissions-intensive, trade-exposed excise duty on diesel.12 activities get a free allocation

11. OECD (2016). Effective Carbon Rates: Pricing CO2 through Taxes and Emissions Trading Systems. OECD Publishing, Paris. Accessible at: https://goo.gl/TS8HMw 12. OECD (2017). OECD Environmental Performance Reviews: New Zealand 2017. OECD Publish- ing, Paris. Accessible at: https://goo.gl/wpHmK1

Progressive thinking: ten perspectives on tax 30 Climate change and tax policy

of emissions units, reducing companies’ price exposure by up to 90%. There are problems with how this is done, but the biggest issue is opportunity cost: free allocation represents foregone revenue. While there is a case for transitional assistance, this must be weighed up against other uses of the money. Elsewhere, carbon revenues are commonly recycled through The ETS has rebates or tax reductions targeted delivered at low-income households. Many governments also use a portion of neither strong, the revenue to invest in a low carbon reliable nor future. This too can be targeted towards those most vulnerable to predictable the impacts of climate policies – for prices to example, home insulation subsidies for low-income households, and date. But the retraining programmes for workers root of the in carbon-intensive industries. problems has Depending on how the revenue is been political used, carbon pricing may even boost GDP growth.13 Research shows decisions, not that environmental regulation has the tool itself.” significant positive effects on long- run productivity. With wise implementation, we have nothing to fear and much to gain from higher carbon prices. They can make our tax system fairer and more progressive, while tackling the urgent crisis of climate change. 

13. OECD (2016). Effective Carbon Rates: Pricing CO2 through Taxes and Emissions Trading Systems. OECD Publishing, Paris. Accessible at: https://goo.gl/NAsqGW

31 Progressive thinking: ten perspectives on tax New Zealand’s tax settings in an international context

During the year ended 30th June dramatic effects. According to one 2016, the Government collected Inland Revenue report in 2015, there nearly $70 billion in tax revenue, were 4,000 families with an effective or about $14,900 from every person marginal tax rate of 100%. in the country.1 That sounds like In other words, every additional a fair sum of money, but how does dollar earned was effectively lost New Zealand’s tax burden compare through the combination of benefit internationally? abatement and tax. It’s conceivable Very well it appears, based on the that more families will face this 2017 edition of the OECD’s annual welfare trap as the abatement rate is Taxing Wages report.2 According to set to rise to 25 per cent in the near the OECD, a childless single New future, together with a corresponding Terry Baucher Zealand worker earning the average reduction in the threshold to $35,000. Terry Baucher is the wage had the second lowest “tax director of his Auckland The OECD survey looks at income wedge” in the OECD’s 35 member based tax consultancy tax, but what about GST? This made countries. One-earner families with firm Baucher Consulting up $18.2 billion, or 26.1 per cent, of two children had the lowest tax Limited which he the total tax collected in the 2016 founded in August 2004. wedge in the OECD. year. GST’s percentage of the overall He has over 30 years’ Behind the headlines tax take places New Zealand second experience as a tax overall in the OECD .3 specialist in both Britain The low tax wedge is a combination and New Zealand. of relatively low income tax rates, no On average, GST or value added taxes social security taxes and transfers for represent about 20 per cent of tax Terry is a frequent commentator on tax social assistance, such as Working for revenues in other OECD countries. matters in the media and Families (WFF) tax credits. New Zealand’s higher GST take is is the co-author with because it has no exemptions or What the bald statistics hide is the Deborah Russell of Tax variable rates, making it the most effect of the “abatement” provisions and Fairness (Bridget comprehensive GST in the world. Williams Books 2017) for those receiving social assistance when they earn extra income. Under This is the result of the “broad base, the abatement provisions, the low rate” approach to tax policy amount of WFF assistance is “abated” that governments of both hues have by 22.5 per cent for every extra dollar followed since the mid-late 1980s. of income over $36,350. This means A broad base with no exemptions that as income rises, the amount of allows lower tax rates, and the GST assistance falls. This can have some system – which is regarded as a

1. Financial statements for the year ended 30th June 2016 https://goo.gl/ixI91s 2. https://goo.gl/AZS5O1 3. https://goo.gl/SXfgpl

Progressive thinking: ten perspectives on tax 32 New Zealand’s tax settings in an international context

model of this kind – best exemplifies The New Zealand Superannuation this policy. Fund is consistently one of the largest taxpayers in the country, Countries seeking to introduce having paid more than $4.6 billion Goods and Services Taxes are encouraged to follow the New in tax since its inception in 2003. Zealand approach. More than $3 billion of this tax has been paid since the government However, one problem with GST is stopped contributions in 2009. The that it is seen as a regressive tax for New Zealand Superannuation Fund low income persons as they pay a was established to help meet future greater proportion of their income superannuation costs, but it pays so in GST than higher income earners. much tax that it’s already covering This has prompted calls to zero-rate almost five per cent of the current fresh food, for example, as a means cost of New Zealand superannuation. of redressing this issue. Its colossal tax bills are very largely Such proposals address the down to the vagaries of the financial The absence symptoms, not the cause. Families arrangements and foreign investment struggling to meet the bills suffer fund (FIF) regimes, which operate as of a CGT from a lack of income, not over- de facto capital gains taxes. undermines the taxation. Boosting incomes for low and middle income families would broad base low Social spending relative to the be far more effective than an ill- rest of the world defined tax break. rate tax policy.” New Zealand’s social spending The broad base low rate approach on health, education and social can also be seen with corporate security and payments including income. Companies paid just over superannuation was $52.8 billion $11 billion in corporate income tax during the June 2016 year. At an for the 2016 year. At 4.4 per cent estimated 21 per cent of GDP, it is in of GDP, this is in the top five of the line with the OECD average. OECD. $12.2 billion (4.9 per cent of GDP) of However, the base is perhaps not the total social spending represented as broad as it appears. The four New Zealand superannuation, with Australian owned banks paid $1.65 health costing $15.6 billion (6.2 per billion between them in 2016, Air cent of GDP). New Zealand $200 million and the New Zealand Superannuation Fund Treasury expects superannuation $538 million on profits of $559 and health costs to rise to 7.2 and 8.3 million; an effective tax of 96 per cent of GDP respectively by 2045. per cent! Although these future costs would be

33 Progressive thinking: ten perspectives on tax New Zealand’s tax settings in an international context reasonable by comparison with other should broaden the tax base to meet OECD countries, they still represent future health and superannuation a 40 per cent increase from present demands and help address growing levels. wealth inequality. Consequently, future governments In a 2012 paper, Treasury saw “merit will face mounting pressure to either in a general capital gains tax…as raise taxes or cut services. Politically, possible revenue-raising reforms.”4 cutting services or means-testing Inland Revenue, in the same 2012 According to access to services and benefits paper, was less persuaded; arguing the OECD, a has proved difficult – witness the that evaluating a CGT “would be a abandonment of the New Zealand very substantial exercise”. For the childless single Superannuation Surcharge in the moment the politicians are siding New Zealand mid-1990s, and how the current with Inland Revenue. National government retained worker earning popular social programmes such as What’s remarkable about this debate the average WFF and interest-free student loans. is that the experiences of other countries’ CGTs are discounted, with wage had the On the other hand, both Labour the difficulties for a New Zealand second lowest and National have successfully CGT viewed in isolation. implemented increases in GST, and “tax wedge” the Labour government was elected CGT has its complications, but those in 1999 with a specific promise to already exist in New Zealand’s tax in the OECD’s raise the top rate of income tax. system in the financial arrangements 35 member and FIF regimes; probably the Lessons from overseas two most complicated parts of the countries. One- New Zealand’s “broad base, low rate” current tax system. earner families approach to tax policy is seen as The FIF regime is arguably the with two best practice. Nevertheless, are there most loathed part of the tax children had lessons from overseas tax systems for regime. In 2006, when the latest New Zealand? incarnation of the FIF regime was the lowest tax Yes, in the form of a comprehensive introduced, Parliament’s Finance and wedge in the capital gains tax (CGT). This would Expenditure Select Committee apply without the need to determine received over 3,400 submissions.5 OECD.” a person’s intent. Its introduction Only two supported the changes.

4. Inland Revenue & Treasury Joint Report: Taxation of Savings and Investment Income September 2012 https://goo.gl/Qp9gOy 5. Volume 2 of the Officials’ Report to the Finance and Expenditure Committee on Submissions regarding the Taxation (Annual Rates, Savings Investment, and Miscellaneous Provisions) Bill https://goo.gl/wXasfq

Progressive thinking: ten perspectives on tax 34 New Zealand’s tax settings in an international context

New Zealand is practically alone in the OECD in not having a CGT. The United States has treated capital gains as income since it introduced a Federal income tax in 1913. The UK has had a separate CGT since 1965, Canada introduced its CGT in 1972 and Australia has taxed capital gains since 1985. There are decades of practical experience about the implementation and operation Families of a CGT available from other jurisdictions. struggling The absence of a CGT undermines to meet the the broad base low rate tax policy. If bills suffer politicians and policy makers want to ensure New Zealand continues to from a lack of have one of the lower tax burdens income, not in the OECD, then this gap must be addressed. Otherwise future over-taxation. generations will face an unpalatable Boosting combination of higher taxes and reduced services.  incomes for low and middle income families would be far more effective than an ill- defined tax break.”

35 Progressive thinking: ten perspectives on tax Tax and family assistance

One of the least tractable concepts in tax is that of the effective marginal tax rate (EMTR). The official income tax rate applied to each dollar earned is not the only payment a family will make on that dollar.

There may be other losses and will understand what is actually government imposts that look and happening. They will know that at feel like taxes. Families with children the end of the year despite their extra are particularly affected. The overall work effort they are no better off, effect is a high EMTR that leaves a may actually be worse off and will parent little to show for the effort of undoubtedly feel despair. Susan St John earning that extra dollar, constituting Susan St John The EMTR effect, arising from the a strong disincentive to earn it in is an Honorary tax-transfer interface, is always in the first place. It is one of the major Associate Professor the too hard basket. In 2010 the Tax in the Department of reasons that child poverty rates are Working Group felt it was outside Economics University high in low income working families. their brief and passed the buck to of Auckland where she Let’s take the example of a parent a welfare working group. But when directs the Retirement Policy and Research on the minimum wage of $15.75 per the Welfare Working Group (2011) Centre. hour, earning $36,350 per annum. was established, it was explicitly There are some Working for Families forbidden to examine this issue. She has taught public policy for 30 years and and rent subsidies but increasingly Yet it is this interface that impacts published widely in the this family relies on foodbanks and intensely on the well-being of area of tax and welfare loan sharks. families with children, and their reform and is a founding ability to work their way out of Let’s say there is an opportunity to member of Child Poverty poverty. Action Group. earn another $10,000. Once tax and ACC are paid (18.71%), Working for It is important to understand how Families is abated (22.5%), student this debilitating problem has arisen. loan repayments are made (12%), The high tax rates of the early 1980s Accommodation Supplement were thought by economists to is reduced (25%) and KiwiSaver reduce the incentives of high income extracted (3%), the $10,000 has been people to earn and save. effectively taxed at 81.21%. Enter Rogernomics and the low flat- Furthermore, there may be a sudden tax broad base solution of the late drop in child care subsidies and 1980s. However, a comprehensive child support payments of between view of income was not achieved 18-30%. Every family is in a different because the capital gains part of the set of circumstances, and few package did not eventuate.

Progressive thinking: ten perspectives on tax 36 Tax and family assistance

Nor did flat tax solve the high Assistance in 1991 was tasked EMTR problem; it merely shifted it with designing a new ‘integrated’ from the top end to low and middle system of targeted social assistance. income earners. Low flat tax under Thus the 1991 budget announced a the ideology of the day was to be complex system of Family accounts accompanied by more user pays of based on aggregated family Welfare ‘only social provision. However a three- assistance and a constant bleed-out way iron rule applies. or abatement rate. 2 for the poor’ The greater the amount of social Unfortunately, while aggregating and low top assistance to be reduced as income assistance onto a family-based tax rates has rises, the longer the range of income smart card, abating at one before all assistance has been rate worked in theory, but the been the means bled out unless a higher rate of technocrats could not make it work abatement is imposed. Reducing in practice. One of the problems was of achieving the amount of assistance acts to that the typical modern family did intensify poverty, a long income an implicit, if not resemble the assumed nuclear range defeats the purpose of welfare family model. not explicit, only for the poor, while a high objective: more rate of abatement imposes severe Another was that the scale of disincentive effects. assistance to be targeted, even with wealth and the 1991 welfare benefit cuts, meant In advice to the incoming income for the government in 1990, Treasury assistance would be paid well up warned: the income scale even with a very top earners high single rate of abatement. and an ever- As a general rule, the more people facing higher effective marginal tax The integrated solution that had immiseration rates over longer ranges of potential been used to justify the low flat-tax and income, the greater the costs to user-pays approach had quietly society and the greater the probable disintegrated. Now all that was indebtedness loss of output.1 left was the welfare mess of a plethora of high and overlapping of low-income Treasury identified high levels abatements. families.” of benefits as a major factor preventing a more gradual While one might have expected a re- abatement system and benefits examination of the wisdom of the were cut significantly in 1991. The 1990s reforms, instead the welfare Change Team on Targeting Social morass has been intensified

1. The Treasury (1990). Briefing to the incoming government. Wellington, The New Zealand Treasury: https://goo.gl/YACrXO 2. Shipley, J. (1991). Social assistance: welfare that works. Wellington, Government Printer

37 Progressive thinking: ten perspectives on tax Tax and family assistance in the name of target efficiency.3 the tax credits ever more closely Welfare ‘only for the poor’ and low to low income families the EMTR top tax rates has been the means of problems are intensified. achieving an implicit, if not explicit, If there is no will to revisit the objective: more wealth and income ideology that drove the 1991 changes for the top earners and an ever- of flat low tax and user pays, then immiseration and indebtedness of mitigation of high EMTRs is the low-income families. urgent task. Unfortunately, current An alarming part of this picture policy, based on increasing target is way tax credits for children are efficiency, is going in quite the wrong treated. One of the requirements to direction. moderate the regressivity of a flattish For WFF, this sees the threshold for income tax system with a notably abatement heading back to $35,000 – high GST on everything, is a well- where it was in 2005 – and the rate of designed set of family-based tax The EMTR abatement going up to 25% over time. credits. Student loans are replacing student effect, arising The New Zealand system, known allowances, so repayment of larger from the as Working for Families (WFF) student loans applies for long periods operates to offset taxes paid by the of time, especially for women. The tax-transfer family, thus improving horizontal thresholds for loan repayment have interface, equity – at least for low income been frozen, as has the threshold for families – by acknowledging that the parental income test and the cap is always in children reduce the ability to pay for the Accommodation Supplement. the too hard tax. The progressivity of the overall An innovative set of policies that tax structure is further enhanced basket.” reverse the recent cuts and enhance because tax credits are ‘refundable’ the programmes that help families, when they exceed the taxes paid by a including a debt forgiveness low income family. programme is urgently required. WFF tax credits are a major Better still, a revisiting of the low flat- mechanism to alleviate and prevent tax broad-based dogma is child poverty. Just as older people well overdue.  need tax-funded support, so do families, especially when on a low income. It is critical such child tax credits are understood, supported and enhanced. When policy confines

3. St John, S. and K. Rankin (2002). Entrenching the welfare mess. Auckland, Economics Department Auckland University: https://goo.gl/JxNjsN

Progressive thinking: ten perspectives on tax 38 A light touch on foreign trusts and companies

New Zealand ranks highly in international rankings of transparency, low corruption and ease of doing business. For the most part, the praise is well deserved. But there are some parts of our rules and regulation that are not as transparent nor as fair as they should be.

The Panama Papers exposed how shadowy world of the rich hiding their our light touch regulation of foreign money from prying eyes, tax evasion trusts can be abused. The rise of and money laundering by criminals. global online businesses, but not the Shamubeel For New Zealand to be caught up taxes paid, shows how our tax system in it is, at face value, surprising. Eaqub is not keeping up with change. The We are after all one of least corrupt Shamubeel is an UK and Australia have led the way in countries in the world. Our rules and economist, columnist collecting taxes from multinationals regulations are meant to reflect our and author. like Google and Facebook, who moral fortitude, based on principles of He works at Sense generate significant revenues but fairness and transparency. Partners, a boutique don’t pay much tax. New Zealand economics consultancy. is approaching slowly alongside an But these are not always the case. He lives in Auckland OECD review. Perceptions can mislead. The with his wife and son. corruption and rot that we have – all A thorough review of the foreign trust countries have them – are much regime by John Shewan highlighted subtler and more white-collar than the problems, and the need for greater the most blatantly corrupt countries. regulation. This has not happened. Corruption cases here are often about Even when the problems are clearly nepotism, the subtle use of loopholes highlighted and solutions proposed, in rules and regulations, and the low policy change is slow. numbers of prosecutions for white- There is a lethargy in improving the collar crimes with lenient penalties. tax system in New Zealand. Like many New Zealand’s role in the policy issues – tax, housing or poverty, international scandal is real. Our for example – political leaders are offshore trusts have been used by entranced by the tranquillising drug those looking for anonymity, because of gradualism. if the beneficiaries and their incomes are offshore, there is no requirement Transparency and Panama for informational disclosure. By Papers running money through various tax A massive leak of documents from law havens and vehicles like New Zealand firm Mossack Fonseca sheds light on a trusts, the ultimate beneficiaries

39 Progressive thinking: ten perspectives on tax A light touch on foreign trusts and companies are hidden, and their tax liabilities institutions, even large banks are not avoided. This very likely facilitates well prepared for the AML duties. money laundering in some instances. Expecting accountants and real estate agents to do so seems fanciful. New Zealand doesn’t demand a detailed and transparent register of The reality is that we are soft on these trusts because they wouldn’t be white-collar crime and we aren’t good paying tax in New Zealand anyway. at regularly updating our rules and So there is little threat to our tax regulations. base, but it would cost money to Rules and regulation understandably administer the register. take time to change. But the truth is And so our foreign trust rules are that there’s no ‘finish line’ when it Even when firmly in a moral grey zone. Our own comes to rules and regulations. The the problems citizens are unlikely to be much backdrop is always changing and very affected by them, but we have a clever people are working hard to find are clearly moral duty to ensure our rules and ways to work around the rules all the highlighted regulations do not facilitate dishonest time. Rules and regulations can never practices by others. be perfect. We have to take a Kaizen and solutions approach to our regulatory approach These New Zealand rules have been – constant improvement. proposed, in place for some time. So it is not the policy change fault of any one particular political Multinational tax avoidance is slow.” party. But the immediate reaction Taxes – nobody likes paying them. from our current government that But they are a useful way of co- there is no problem, that we have ordinating and paying for things been cleared by the OECD (we we value and would not otherwise haven’t) and that there is little need happen: justice, health and education, for change – that’s where the problem for example. Making sure everyone is. Our politics is incremental and the pays their fair share means that the knee-jerk reaction is to stop, stymie burden is spread across the many and discredit criticism and maintain rather than the few. the status quo. But not everyone is paying their There is a glaring absence of share. Perhaps the most galling leadership when it comes to tackling are the large and highly profitable issues that are difficult. The Shewan multinationals that book their report called for much greater revenue in other tax jurisdictions transparency alongside upcoming to reduce their tax payments. It has changes to anti money laundering become known as a ‘Google tax’, (AML) rules. While the AML umbrella as Google has been booking its ad is being widened from financial revenues in low tax jurisdictions like

Progressive thinking: ten perspectives on tax 40 A light touch on foreign trusts and companies

Singapore to avoid paying higher taxes With our closest economic partner, in places like New Zealand or Australia Australia, and the historically where they are selling these ads. connected UK cracking down on multinational tax avoidance, we are out But some countries are fed up and want of step. to crack down on it. Our approach to multinational “Everyone has to pay their fair share corporate tax avoidance has been to of tax, especially large corporates persistently point to a review being and multinationals, on what they done by the OECD, a club of rich earn here in Australia,” said Scott countries. The reaction was the same Morrison, Australia’s Treasurer, in his to the initial release of the Panama annual Budget speech. “Multinational Papers, which showed that our foreign corporations that attempt to avoid trust rules were allowing foreigners to The reality is tax by shifting profits offshore will use New Zealand structures to flout be subject to targeted anti-avoidance that we are soft their tax obligations. measures and high penalties.” on white-collar Tax policy isn’t sexy and often too Australia follows a similar crackdown complex to lend to pithy straplines. crime and we in the UK last year. The penalties for In poll-driven politics, this makes tax profit shifters will be more severe aren’t good policy a low priority. though – Australia will charge a at regularly penalty tax rate of 40 per cent, Tax policy is difficult and a measured updating our compared to 25 per cent in the UK. approach makes sense. It also makes sense to act early, rather than wait for The Treasurer believes that the new rules and some consensus – which inevitably policy will net them nearly AU$4 takes too long and gets too diluted by regulations.” billion in revenue over four years. This the time all the special interest groups is money they will not have to raise are appeased. The Australian Budget from other parts of the economy, or has gotten on a jump on New Zealand borrow, to fund planned spending. on tax policy. It should be a catalyst Cracking down on multinational for us to speed up tax reform in New taxes isn’t cheap, nor easy. They are Zealand and make it a pivotal issue for investing in a 1,300 person and AU$679 the election this year.  million funded taskforce to implement this. Perhaps we could throw some resources at this Australian taskforce and look at harmonising our approach, to leverage their investment. The gains would be large relative to the investment.

41 Progressive thinking: ten perspectives on tax Our contributors

Morgan Godfery Dr Lisa Marriott Bill Rosenberg Max Rashbrooke Morgan (Te Pahipoto) Lisa Marriott is an Bill Rosenberg was Max Rashbrooke is a is a writer and trade Associate Professor appointed Economist research associate at the unionist based in of Taxation at and Director of Policy at Institute for Governance Wellington. Victoria University of the CTU in May 2009. and Policy Studies, and Wellington’s School the author of Wealth and He’s also a non-fiction He holds a B.Com in of Accounting and New Zealand. judge for the Ockham Economics, a BSc in Commercial Law. New Zealand Book Mathematics and a He has written Awards and sits on the Lisa’s research interests PhD in Mathematical extensively on income Legal Issues Centre include social justice Psychology. and wealth inequality, board at the University and inequality, crime and has worked as a Bill was previously of Otago. and the tax system, and journalist in both the UK Deputy Director, the behavioural impacts and New Zealand. He tweets at University Centre for of taxation. @morgangodfery. Teaching and Learning at the University of Canterbury, a Commissioner on TEC, and a member of the Regional Land Transport Committee of Environment Canterbury.

Progressive thinking: ten perspectives on tax 42 Our contributors

Keith Ng Bob Stephens Paul Young Keith Ng is a Bob Stephens Paul Young is a data visualisation retired from being an researcher and writer consultant by day Associate Professor with the Morgan and data journalist in the School of Foundation focused by night, using data Government in 2010. on climate change to understand and While at Victoria and environmental explain complex University he issues. issues and policies. published widely in Paul has worked He also has the the areas of taxation, voluntarily and prettiest tax social policy, including professionally on spreadsheets you’ve co-establishing climate change ever seen. the NZ Poverty issues for eight years, Measurement and co-founded Project, and income Generation Zero in distribution. 2011. He is still involved Paul holds a MSc in in these areas at physics. the Institute of Governance and Policy Studies.

43 Progressive thinking: ten perspectives on tax Our contributors

Susan St John Shamubeel Eaqub Terry Baucher Susan St John Shamubeel is an Terry Baucher is is an Honorary economist, columnist the director of his Associate Professor and author. Auckland based tax in the Department of He works at consultancy firm Economics University Sense Partners, a Baucher Consulting of Auckland where boutique economics Limited which he she directs the consultancy. founded in August Retirement Policy and He lives in Auckland 2004. Research Centre. with his wife and son. He has over 30 years’ She has taught public experience as a tax policy for 30 years specialist in both and published widely Britain and New in the area of tax and Zealand. welfare reform and is Terry is a frequent a founding member of commentator on tax Child Poverty Action matters in the media Group. and is the co-author with Deborah Russell of Tax and Fairness (Bridget Williams Books 2017)

Progressive thinking: ten perspectives on tax 44 Public Service Association Te Pūkenga Here Tikanga Mahi

The PSA is New Zealand's largest union, representing over 62,000 workers in central government, state-owned enterprises, local councils, health boards and community groups. We're proud of our history of sponsoring and publishing writing and thinking on the role and health of the state. Over the past decade this has included: • Re-imaging Government – Putting people at the heart of New Zealand’s Public Sector (commissioned in 2006 from UK think tank Demos) • Reviving the Public – A new governance and management model for public services (commissioned in 2006 from David Coats of the UK’s Work Foundation) • The Chief Executive as Employer: Reinforcing the New Public Management Silos (paper presented by G. Barclay & B. Pilott in 2008 at the After the Reforms conference) • State of the Future – strong public services for tough times (published in 2009 in response to the global financial crisis) • Why We Need Public Spending (commissioned in 2010 from David Hall of Greenwich University) • Modern Public Services (policy paper series published in 2011) • Rethinking the State Sector Act (published in 2014 in collaboration with the New Zealand Fabian Society)

Freephone: 0508 367 772 E-mail: [email protected] Stand Together Postal Address: PSA, for a better working life PO Box 3817, Wellington 6140 Website: www.psa.org.nz www.standtogether.co.nz Progressive thinking: ten perspectives on tax 47