- In the lead-up to the 2020 election, CA ANZ is concerned about New Zealand’s long-term financial stability.
- Income tax revenue is likely to shrink due to advances in technology, which could trim work hours, and an ageing population.
- As part of CA ANZ’s election-year advocacy, it will be seeking members’ views on key election issues.
The year is still young, and some may say it’s too soon, but 2020 is an election year in New Zealand, and it’s already time to identify the big election issues.
At Chartered Accountants Australia and New Zealand (CA ANZ), we advocate for what is in the public interest. We do that because, generally, it aligns with what is in the best interest of our members.
In our election advocacy we will focus, as we do in all our policy work, on areas that affect the businesses and communities where our members live and work. At the forefront of our thinking are topics including tax, increased productivity and growth, fiscal sustainability, climate change, and effective financial markets.
CA ANZ avoids being party political. We advocate for evidence-based policies that contribute to New Zealand’s long-term prosperity. We look to the next 30 years, rather than the next three. In that regard, we have an easier job than governments who live or die by what they achieve in a short three-year election cycle.
So, with that in mind, what will be CA ANZ’s policy prescription for 2020?
Capital gains tax and other worries
Our tax position paper before the 2017 election was subtitled: “The quest for certainty and coherence”. Three years later, that phrase still accurately sums up our approach across a broad range of policy areas.
Back in 2017, CA ANZ pushed politicians to take a considered approach to tax to avoid the sort of ad hoc changes that met short-term political objectives but had little to do with principles of sound tax policy design.
The lead-up to the last election saw calls for “taxes” on capital gains, land, transport, water, beds and tourists – really a mix of taxes, user charges, levies and royalties. A capital gains tax is now off the table, but the political pressures that generated that odd-ball mix of requests in 2017 are again building up steam.
While it’s true New Zealand’s relatively narrow tax base needs to be broadened, we must also consider two questions: are such changes compatible with our existing tax system and social assistance programs, and will taxpayers buy into them?
The tax question dovetails into another uneasy topic: New Zealand’s fiscal stability. For the past two elections CA ANZ has expressed our concern about the nation’s fiscal sustainability. That worry remains.
In New Zealand, we rely on a relatively small number of individual taxpayers to provide the single largest source of tax revenue. Income tax provides more than 40% of our total tax take.
But we face the very real prospect of a shrinking income tax pool, thanks to advances in technology – which may change the nature of jobs and reduce work hours – and a rapidly ageing population.
At the moment, this problem is buried deep down in our politicians’ too-hard basket. But those issues are not going away and will have to be confronted.
Either New Zealand’s tax base will need to be broadened or our tax rates increased. But that’s a message you’re unlikely to hear from politicians this year. Political expediency will prevail.
“Either New Zealand’s tax base will need to be broadened or our tax rates increased. But that’s a message you’re unlikely to hear from politicians this year.”
Policy dots need joining
The current government is determined to get runs on the board ahead of the election, to deliver on its promise of “a year of delivery”. That’s created a situation where some of the policy dots are not being joined.
For example, New Zealand’s proposed new regime for companies to assess and report climate-related financial risks is world leading. However, it treats climate-related risks in isolation. It is not accompanied by any real dialogue regarding broader non-financial risk disclosures, including cybersecurity or conduct and culture.
Leading organisations take a more holistic approach to sustainable value creation and reporting. CA ANZ is encouraging the government to look at key international developments such as integrated reporting and the UK’s strategic report. Both these reporting approaches give shareholders a meaningful picture of a company’s strategy, business model, culture, performance and prospects, and highlight how one area affects another.
As part of our election-year advocacy, CA ANZ will be seeking members’ views on key election issues. Please get involved.
An election year really is the pointy end of policy work.
GET IN TOUCH
To let us know what election issues are of interest to you, email Peter.Vial@charteredaccountantsanz.com
No surprises in NZ Budget 2018
The Coalition Government’s first Budget set out a plan for the New Zealand economy to face future challenges, but deferred changes to the tax system.Recap the first Ardern budget
How does NZ’s Wellbeing Budget measure up?
When it came to measuring returns on investment, NZ’s 2019 Budget did well on some items but was absent on others.Recap the Wellbeing Budget