Labour unveils vision for fairer tax, future-proof economy

As Labour deliberates on the tax reforms, its finance spokesperson, Barbara Edmonds, has offered insights into the party’s evolving stance on taxation, particularly the possibility of a capital gains tax (CGT).

Edmonds has revealed that they are open to tax discussions previously avoided.

Speaking on Pacific Mornings, Edmonds argued for a more progressive approach that protects Kiwis planning for future public costs.

“A capital gains tax, lots of countries in the world have them, New Zealand is one of the very few countries that doesn't have a capital gains tax,” she said.

“The really big economic organisations across the world, the OECD, the International Monetary Fund, they've also said New Zealand should put in a capital gains tax.

“The reason why they say this is because, one, it's an area that we don't tax currently.

“We've got a couple of rules which cover some areas, such as foreign investment funds or Brightline test, which is now two years under National. But overall, New Zealand doesn't tax income that's derived or made through a capital gain.”

In 2019, the Labour-led coalition government decided against the Tax Working Group’s recommendation for a capital gains tax.

Then Prime Minister Jacinda Ardern said it would not be considered again under her leadership.

Introducing CGT to New Zealand would mean tax would be applied to the difference between the purchase price and the sale price of an asset.

In 2018, the Labour-led coalition government, led by Jacinda Ardern, established another Tax Working Group chaired by former finance minister Sir Michael Cullen. The group’s 2019 report strongly recommended introducing a broad CGT covering assets like property (excluding the family home), shares, and businesses. Photo/ Hannah Peters/Getty Images

Edmonds said the tax would address concerns over New Zealand’s looming fiscal challenges, specifically the cost of healthcare and superannuation by 2060 generating additional revenue.

“In 2060, when the next generation, like when my children retire, the health cost and the superannuation cost will almost cover most of the government spending.

“We need to start planning for these longer fiscal challenges.”

Edmonds also discussed the potential effects of a CGT on Pacific communities and homeowners, saying the tax would target wealthier individuals and investors rather than ordinary Kiwis.

One in five Pacific households are homeowners (21 per cent), Māori are at 31 per cent, and New Zealand Europeans at 60 per cent.

“For our Pacific people, if they're a homeowner, they've got one home, then potentially they won't be covered under a capital gains tax if you look at that 2019 and 2014 proposal,” Edmonds said.

“But if you also potentially invest in business, some countries in the world have what's called a comprehensive capital gains tax.

“It's not just housing. It covers if you sell a business or if you sell shares, then you might have a capital gains tax on that.

“So how it will impact Pacific people will depend on what a capital gains tax looks like.

“But it's really clear over the last decade, since people have been looking at a capital gains tax, New Zealanders have come out quite strongly saying that the family home should be protected.”

Most recently, Prime Minister Christopher Luxon “attacked” ANZ Bank chief executive Antonia Watson’s support for CGT, saying that “you don’t tax your way out of a recession, you grow your way out of a recession”.

Luxon told RNZ "As a former CEO, I understand what she's doing... the big Australian banks make a lot of money off the New Zealand public, and I would just suggest to her that maybe taking more money off New Zealanders isn't the road forward." Photo/Ala Vailala

Edmonds emphasised on the need to modernise the tax system to ensure fairness to all.

“For Luxon, he's attacked [the idea of] basically having a capital gains tax... He says that you need to just grow the pie, as they would say, you need to produce more and tax less.

"I think the government and their approach of being quite defensive and also then personally attacking those that come out, say that maybe we should think about this, is the wrong way to go."​

CGT or other forms of wealth tax could also be part of future election promises for Labour.

“We are definitely looking at the tax system, the broader tax system... Labour is seriously having that conversation internally.

"We want to make sure we have a fairer tax system.

"Why should a cleaner or a bus driver or a security driver in Porirua or in South Auckland, why should it be that every dollar that they earn is taxed? But yet, if you invest in capital and you sell that capital, you don't get taxed at all?"

As New Zealand grapples with the balance between revenue generation and economic growth, the outcome of these discussions could have significant implications for future generations.

Whether Labour will bring the capital gains tax back to the political forefront remains to be seen, but the call for a fairer tax system has never been louder.

Watch the full interview here