Capital gains tax not a 'Robin Hood' tax, but close - Sir Michael Cullen

Sir Michael Cullen says the potential tax reform he's suggesting isn't quite Robin Hood taking from the rich to give to the poor, but it isn't far off.

"Well not quite like Robin Hood, but somewhere close - like making sure that if Robin Hood and the Sheriff of Nottingham got the same income, they pay the same tax," he told Newshub Nation on Saturday.  

"So, probably in the original version Robin Hood would have been paying more tax than the Sheriff."

Sir Michael chairs the working group set up to review New Zealand's tax system, and this week it released its initial recommendations, including two options for capital gains tax.

Capital income is the return on invested capital like interest dividends, rental income, gains after selling assets and the return on capital invested in a business.

The Government wants any changes to be tax neutral - meaning they won't increase overall revenue, focusing instead on improving income equality.

"You've got, effectively, under-taxation of those at the top end of the income and wealth scale, because there's under-taxation there. We have a tax system which is, by international developed country standards, a low level of redistribution via the tax system."

Taxes applying to capital gain could take two forms. The first would apply to the gain from the sale of assets at the marginal income tax rate. If introduced, it would not be applied retrospectively.

The second option involves subjecting income from assets such as rental property to annual tax. Tax wouldn't be applied when the asset was sold, because it'd be paid each year based on the equity of the property.

Sir Michael says claims that implementing capital gains tax would be 'political suicide', and that suggesting it has previously lost Labour elections, are overblown.

"Well, I'd like to claim that that was the only thing that lost Labour the 2011 and 2014 elections, but I would have to say, I think historians would find it a very strange argument to arrive at.

"There was no real sign, actually, that that had any great impact in shifting votes around in 2014."

Among the working group's other recommendations are heftier environmental taxes. Short-term measures could include expanding the waste disposal levy, strengthening the Emissions Trading Scheme and increasing congestion charging.

Sir Michael says the environmental taxes aren't just about raising money.

"It's not necessarily to raise huge amounts of money, because hopefully behaviour changes, so that the amount of money that you collect at the end of the day may not be much more than we collect at the moment. There's just a lot less waste going to landfill."

The working group will take public submissions until November, and will provide its final recommendations to the Government in February 2019.

Any recommendations adopted by the Government would not be implemented until April 2021.

Newshub Nation.

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