Government dismisses accountants' fear that tight timeline could botch tax reform

There is not enough time to get tax reform right before the next election, chartered accountants fear.
There is not enough time to get tax reform right before the next election, chartered accountants fear.

The Government has brushed off concerns that it would run out of time to properly implement a capital gains tax before next year's general election.

John Cuthbertson, New Zealand tax leader for Chartered Accountants Australia and New Zealand (Caanz), said he had written to Finance Minister Grant Robertson and Revenue Minister Stuart Nash urging them to consider "deferring the introduction date of a capital gains tax and to stage its application, starting with income-producing land".

The Government will release a report by the Tax Working Group on February 21 that endorses a broad-based capital gains tax.

Although the Government has not committed itself to implementing the working group's recommendations, Robertson said last week that it planned to fully respond by April and intended to pass any legislation that did stem from the report "before the end of the parliamentary term", so any changes could take effect from April, 2021.

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Cuthbertson said good tax legislation took time.

"From what we can see at the moment, there is not enough time for the Government to fully consult and then legislate, to meet their own deadline," he said.

A spokeswoman for Robertson said ministers "were comfortable they could achieve the timeframe outlined".

John Cuthbertson has urged the Government to delay any tax changes.
SUPPLIED
John Cuthbertson has urged the Government to delay any tax changes.

Cuthbertson said a capital gains tax would be a big change for taxpayers. "It's crucial that the necessary legislation is concise, efficient and clear."

Public consultation was extremely important to ensure any changes got support from the public and were well designed, he said.

"It's these early consultation and design stages, where stakeholders and the public have the opportunity to share their views on a capital gains tax, that are at risk of being dangerously shortened to squeeze in this process before the election.

"When you consider that Inland Revenue also needs time to draft discussion documents and legislation, the timeframe is inadequate," he said.

Capital gains tax legislation would be complex and lengthy, he said.

"For example, there needs to be a careful weighing up of what assets are included in a new capital gains tax regime, the extent of relief available when assets are transferred and how the regime will interact with income tax legislation.

"Our expectation is that the group will continue with a 'valuation day' approach. The most notable concern here is the capacity of the valuation industry to meet substantially increased demand for tax valuations," he said.

Robertson has previously said that deferring the Government's full response to the Tax Working Group's report until April would provide time for "detailed discussions with officials and consultation between government parties".

But National Party finance spokeswoman Amy Adams also said last week that the Government would be leaving itself little time to pass complex legislation.

"It's starting to look like a very short runway, which indicates it could be quite a rushed process which only increases the risks to the complexity and difficulties and unforeseen consequences," she said.

"The timing is starting to look really, really uncomfortable and complicated. It's not a yes, no, shall we do it or shan't we issue, there's a range of things to decide."

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