Possible new tax law

[harm_less]

https://youtu.be/L-0-ThcB9_I

A good clip from the AM show today.  This is a softening up to introduce either  wealth tax, CGT or both  - as the expert said the government is trying to change the narrative.  Hoping that people will think that the tax system is unfair even though is taxes everyone's income exactly the same way from a beneficiary to John Hart.

What is obvious from that discussion is that the average New Zealander very much thinks in an 'us and them' basis in terms of taxation. As any company owner knows their business is an entity separate from themselves which is taxed in its own right. If your company's trading year has been profitable it is then beneficial to transfer those profits to the entity that will be taxed least on them. If say one of the business's partners/directors has income from another source such as wages or salary then the amount that is to be allocated to that person should be limited so as to prevent raising that person's annual income into higher tax bracket. The inverse applies for a director that derives their income solely from that business.

Another method for minimising tax burden is to reduce company profits by purchase of major assets which in turn can contribute to business costs (losses) over time as those assets depreciate. That is the reason that many companies and also sole traders replace their vehicles just prior to the end of the financial year.

The same principal applies for simple family owned companies (such as the 'family farm') it does for as for large corporations.

The use of trusts, particularly in respect to family related assets, is also primarily to reduce tax burdens for those accumulating those asset bases and the use of trusts is widespread among far more than just the wealthy. The eligibility for superannuation and aged care contributions can be significantly improved if the person's financial worth has been siphoned off into a trust.

The adoption of a CGT would be one of the fairest and most simply exacted of any wealth tax. It would capture properties owned by individuals and trusts which otherwise are commonly treated as non-taxable investments. It would also bring these into line with business owned properties which are already taxed within company taxation structures.