Closing Tax Loopholes Essential Element Of Reform
May 14th, 2010
Another salient issue is how Bill English will deliver on his undertaking to align taxation income more closely with economic income, and on the extent loopholes such as the inability to look through trusts in determining eligibility for Working for Families and other benefits will be addressed. Specialists in the area will also be looking for an institutional framework which will impede the sloppiness which has characterised tax reform over the last decade. This is particularly pertinent in light of recent statements from Phil Goff suggesting Budget 2010′s tax reforms (except for the GST hike) could be quickly unravelled following a change in Govt.
While a ruling party cannot, and should not, be precluded from amending legislation (this is what a democracy is all about) reforms need to be undertaken against a coherent framework such as the Reserve Bank Act which imposes a much higher burden of proof the changes are in the best interests of the nation. There is concern in the business community Budget 2010 could contain some dangerous ad hoc measures such as a brightline test which would tax the sale of property sold within a certain period such as 2 years, the abolition of LAQCs and ringfencing of losses on rental and other property transactions. While these kinds of measures have superficial appeal and are quite easy to sell politically, history (primarily delivered courtesy of Sir Robert Muldoon), demonstrates they create many more problems than they solve and can do a lot of damage on the way through.
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Duncan Cotterill