Government looks to distract, but finds no circuit-breaker on pervasive tax talk
Source: https://www.stuff.co.nz/news/111027790/-

2019-03-09 00:01:20

OPINION: The devil was in the detail.

Or rather, the lack of it. That is how to know the Government's ticket-scalping announcement was nothing more than a shiny rattle, being jingled loudly enough to drown out any residual chatter about capital gains tax.

While the fightback from proponents of such a tax has begun, it's in all likelihood better for the Government if the tax conversation simply stops. It needed a circuit-breaker and fast.

So Prime Minister Jacinda Ardern began the week with a big announcement. The Cabinet had decided to do something about ticket-scalping and, more importantly, the kind of ticket fraud that has dashed the dreams of fanboys and fangirls across the country on platforms such as Viagogo.

The Cabinet has signed off on precisely nothing. A mere promise to begin consultation over what potential new laws should look like does not require the full weight of the executive behind it.

In a tight spot, it was still an astute political move.

Ministers perhaps needn't have bothered, though there was no way they could predict that jihadist Mark Taylor was about to burst back on the scene.

From the confines of a Kurdish prison on the northern Syrian border, it emerged that the "bumbling jihadi" was at least shrewd or useful enough to keep himself alive for nearly the entire duration of the so-called caliphate of the Islamic State.

And now he wants a bailout.

It's not the diplomatic conundrum some are making it out to be. Still, despite continued moments of exasperation over the CGT debate that will not die, Ardern got her tone on Taylor exactly right: New Zealand doesn't shirk its international responsibilities, but Taylor has made his bed with a terrorist organisation and he can lie in it.

To the extent that it provides Ardern with enough political points to cancel out the Government's weakness on tax, however? Not a chance.

The gain was short-lived and, distractions aside, CGT is the Government's weakness from now until the election. Certain tactical moves from relevant ministerial offices could actually add to the chains the Tax Working Group has placed round the Government's neck, rather than provide the bolt-cutter.

Continuing to pay the group's chairman, Sir Michael Cullen, more than $1000 a day, to effectively enter into a debate which is now political, could backfire.

The report stands on its own – if it couldn't, then that's often the hallmark of a bad report.

It's now up to the Government to decide what to do with it, and defend its position – even if that is effectively "no position".

Cullen's continuing presence undermines both his own independence and that of the working group's, in that he is now paid by the Government to protect the credibility of the recommendations it would seemingly like to implement but just can't say so.

And while some characterisations of an outright blitzkrieg in the House by National Party leader Simon Bridges might be a little generous, his performance has been good – as indicated mostly by the visible discomfort of the prime minister in answering certain questions.

The adage that explaining is losing is always relevant, and the Government is explaining far too much.

It might be out of frustration that National isn't exactly playing it clean. Attempts to draw Ardern into giving some kind of indirect comment on the Government's view of whether Māori should be exempt from a capital gains tax is indeed dog-whistling.

Technically, though, the questions have only centred on whether certain items are, or aren't, in the report, which is available for anyone check.

It may well be only a recommendation in the report, but "the Government is still developing its positions – you'll just have to wait and see" is a line overused by ministers in the weeks out from Budget day. It doesn't seem that difficult a tone to strike here.

More cynical moves from National, however – to claim $67,000 could be removed from some KiwiSaver accounts if a capital gains tax was applied – seem a little spurious when the party refuses to hand over its complete workings.

Still, there is absolutely nothing to suggest the country has done an about-turn on its views that a CGT is a total deal-breaker, so it's probably safe to assume that National is not concerned with cries of foul play. Just as long as everyone's still talking about it.

In that regard, some of the biggest damage inflicted on Labour could come from NZ First and the prolonged consultation period it has now embarked upon, via a survey on its website.

Leader Winston Peters is yet to have his say. But he did this week lay out some soft demarcation lines that serve as a handy set of exit clauses to agreeing to any wholesale change.

He will not agree to any distasteful swelling of the accountancy industry or IRD bureaucrats. Nor will NZ First allow the simple tax system to become overly complicated – that could mean anything.

Perhaps most telling is a dance around the timing of when any tax changes would be applied. Tax changes legislated before the election risk forcing Peters into at least a perceived endorsement of either Labour or National, depending on the position NZ First takes during the campaign.

At the announcement of the Tax Working Group in November 2017, Finance Minister Grant Robertson said the Government would legislate for the changes before the 2020 election, but nothing would hit until April 1, 2021.

It's a long time for Peters to hold out, but the other Government partners know by now that he won't be rushed into anything. It's an even longer time for Labour to continue talking about tax reform without having an agreed-upon policy.

If there is no legislation this parliamentary term, well, Peters would have just pulled the finance minister into line.

In the event of that, the Government would have more complex problems on its hands than simple tax reform.

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