Political commentator weighs in on reluctance to shake up tax system

A political commentator says politicians are "reluctant" to shake up the tax system because they are "scared of losing votes".

Political commentator Bryce Edwards says IRD's new report into Aotearoa's tax system is a "major wake-up call" for Kiwis about the unfairness of the taxation system.

Edwards told AM Early the question left hanging over the report is whether Labour will actually release a policy before election 2023 hits.

"They might come out with something, but National will be wanting to fearmonger about that, but as we saw with the 2018 debate on capital gains taxes, Labour's generally very reluctant to get into a big fight about tax. They're a bit scared of you know being painted as a big taxing party."

Edwards said former Prime Minister Jacinda Ardern's position on capital gains tax is a good example of reluctance. 

"We saw Jacinda Ardern, she strongly believed in the need for a capital gains tax, but then she just ruled it out completely."

He said the unwillingness is partly because the tax debate is dry and there are far more sexier issues for the public and politicians to debate over. 

"But also it's because it needs a big debate and the politicians need to invest a lot of time and political capital to convince the public of the need of paying different types of tax, and that's a hard debate to have."

Edwards told AM early it boils down to the fear "of losing votes". 

"They really give it up and then they allow, by doing that, the vested interest, the wealthy to fill that void and it means they basically block any real reform from happening, vested interests will win the day normally."

The political commentator said Revenue Minister David Parker is "pretty angry", "disappointed" and "uncomfortable" with the current tax system, and while he's not yet ready to share what Labour will do about it, Edwards said there's still time before the election.

"David Parker might bring in some sort of new wealth tax and at the same time reduce taxation, give us a tax cut in different areas. And so it's the selling of the tax increase that would be the big difficult task for David Parker."

Edwards told AM Early capital gains tax is almost seen as a third rail in Aotearoa's politics, "it's too dangerous to touch".

"So maybe some other sort of tax on wealth might be worth pursuing for Labour instead."

Watch the full interview above.