Tax system not broken, so doesn’t need to be fixed

01 May 2018

New Zealand’s tax system is admired for being simple, efficient, and fair, and Horticulture New Zealand chief executive Mike Chapman says adding new taxes will undermine this.

Horticulture New Zealand has made a submission to the Tax Working Group on the Future of Tax saying it does not support land tax. The submission is endorsed and supported by a further 17 organisations.

"Any land tax would be a double tax, as land owners already pay rates to local government based on the value of their land," Chapman says.

As supported by the NZIER report Taxing times, Horticulture New Zealand says that using the tax system to create housing affordability, reduce the cost of productive land, and drive environmental outcomes, is asking too much of the tax system, will result in distortions, and create further unintended consequences.

"The value of land used for primary production is the key ingredient for the lending of money to support that same economic enterprise. Any reduction in the value of land will quickly translate into less funding being available to support growth, and the financial viability of the business. For that reason alone, we submit that a tax on land will have counterproductive effects that will reduce the overall taxation received by the Government," Chapman says.

"We are of the view that one category of tax payer should not be singled out and taxed in ways that all other taxpayers are not. This raises concerns about equity and fairness.

"We do not believe the Submissions Background Paper from the Tax Working Group makes a case for substantive change away from the current broad-based and low-rate structure.

"The critical advantage of the current tax system is that it uses the total economic income of individuals and organisations as the unit of comparison. To change that focus to what the source of the income is, and from what sort of assets that income has been generated, will not only make the tax system more complex, but it will create unintended and uneven consequences.

"We believe the best way to address income inequality is to have a tax system that promotes employment."

Horticulture New Zealand said exemption from GST on certain categories of goods, such as fresh fruit and vegetables, could be looked at, but that any change should be based on the tax principles identified by the Tax Working Group.

"We understand this is the first step in this comprehensive review of New Zealand’s tax system, and we want to remain in the conversation," Chapman says.