Here's a breakdown of what the Tax Working Group (TWG) has recommended.
Capital Gains Tax (CGT)
- TWG recommends a CGT on all gains and losses on land and improvements (except the family home), including shares and business assets
- The tax would not apply to personal items, like bikes, boats and art
- Capital gains would be lumped in with personal income, so gains or losses would be added or subtracted from wages to take a person to their tax bracket
- Gains would be taxed when the asset is sold
- Gains would be calculated from the date the new law was implemented
Capital gains example provided by the TWG: "Wiremu bought some shares for $40,000 after the new rules had been introduced. A few years later, he sold them for $50,000. That's a capital gain of $10,000. Wiremu also earns $48,000 in wages, so his total income in the year he sold the shares is $58,000. Wiremu's employer would have already sorted the tax on his wages, paying $7420 to Inland Revenue.
"At today's rates, his extra $10,000 would be taxed at 30%. Wiremu will have $3000 more tax to pay, because of the gain from the shares, for a total tax bill of $10,420.
"That's exactly the same as someone who earned $58,000 just in wages."
Environment
- TWG recommends a pricier Emissions Trading Scheme (ETS)
- The group wants the ETS it to be "more 'tax-like'... providing greater guidance on price and auctioning emissions units to raise revenue"
- It recommends that all emissions face a price, including agriculture
- An increase on tax on water pollution has been proposed
- In order to accurately tax water pollution, it recommends better tools to measure water pollution
- It also supports congestion tax reviews by Auckland Council and the Government
Tax cuts
- Nearly every earner's income tax would change under TWG recommendations
- Low income workers would be affected the most
- It recommends the bottom income tax threshold be increased from $14k to $20-$22.5k. The rate would continue to be be 10.5 percent on that bracket of income
- That would be coupled with an increase in benefit payments
- It recommends increasing the rate at which earners in the second income tax bracket are taxed
- Working for Families could be used to offset the increase for those in the second tax bracket
- To encourage saving, TWG recommends refunding tax paid on KiwiSaver contributors who earn less than $48,000/year and cutting KiwiSaver tax rates for low and middle income earners
- No tax cut for businesses
Newshub.
