NZ may look to follow transaction tax
Denmark was one of the first countries to introduce a so-called "fat tax", writes Murray McClennan in Taxing Times.
That is, food types that caused obesity, such as fast food, butter and sugar, were subject to additional taxes.
This week, however, the Danish tax authorities announced that the "fat tax" would be repealed as it was both inflationary and hard to enforce.
I suspect that the first reason was merely a smokescreen and that the real reason was the difficulty in ensuring compliance. Avoidance of the fat tax ranged from buying butter and fats over the border in Germany through to the under-recording of sales of certain products to understate the fat tax owing.
The European Union (EU) proposes an FTT financial transaction tax imposed on the sale or other transfer of shares, bonds and derivative contracts to be introduced in 2014. The EU believes that an FTT would raise €57 billion (NZ$89.8b) each year. Any FTT would be difficult to avoid as all financial institutions would have clear and more robust audit trails. Also, and importantly, it may be easier to "sell" the FTT to the public than a fat tax as the FTT could be perceived to be paid by the "rich". Only some of the EU countries support an FTT. A notable opponent is Britain, which has a large and economically important financial services sector.
There may be practical considerations such as whether financial institutions in other countries, notably in Switzerland, would be subject to an EU FTT on financial transactions involving financial products in the EU and/or EU residents.
While there has been support for imposing an FTT in New Zealand, the current government is opposed. Given, however, that the tax take is lower than forecast and that the government is committed to achieving a fiscal surplus, the prospect of new taxes such as an FTT should not be totally discounted.
» Murray McClennan is director of Tax Central Ltd, a specialist tax consulting firm.
The Southland Times