The Government's Tax Working Group is expected to recommend some form of capital gains tax, Finance Minister Grant Robertson acknowledged today on TVNZ1's Breakfast.
While not specificially tasked with looking into capital income tax, which is a tax on the increase in value of an asset, the group has been asked to look at the whole tax system and the balance across the system.
Mr Robertson said today that he asked the group if it was going to recommend some form of capital income tax, and if so, what other changes in the tax system could be made to balance off against that?
"Some people don't pay tax on income that they earn from selling their second of their third rental property," he said. "That's a legitimate question to ask: Is that fair, and what can the system look like?"
The group is expected to come back with a range of options, which the coalition Government would work on, Mr Robertson said.
"We want to look at those packages before we make our final decision," he said.
The Government is also looking into loopholes people and companies have used to avoid paying their fair share, Mr Robertson said.
In May, IRD was given an increased budget to "crack down on those loopholes", especially multinational companies, he said.
"Those loopholes are important to close," he said. "It's important that New Zealanders have confidence in the integrity of the system."
Labour pledged before the 2017 election it would introduce no new taxes until after the 2020 election.
The idea of a capital gains tax has been been adamantly opposed by National.
"The Government already takes about $50,000 a year in tax from the average New Zealand household and has worked quickly to increase that burden with more taxes on everything from fuel to residential property," National's finance spokeswoman, Amy Adams, said in a statement last month.
A capital gains tax will see New Zealanders pay more tax on their small businesses, baches and investments and are known to be very difficult and expensive to apply, she argued.
It's not the only area of the tax code that advocates want to see changed.
Yesterday, tax specialist Terry Baucher told Breakfast that tax brackets are sorely in need of revision for the first time in a decade.
Since 2008, New Zealand's highest personal income tax bracket has been applied to earnings over $70,000, with some experts saying that does not reflect high earnings.
"The problem with fiscal drag, where brackets aren't adjusted for inflation, is that it pulls people into higher tax brackets as average earnings rise," Mr Baucher said. "People start paying a lot more suddenly."
When asked today if he thought the tax brackets were too high, Mr Robertson deferred - saying he would wait and see what the Tax Working Group has to say about the overall mix of the tax system.
"We didn't just ask them to go away and look at one piece of the tax system," he said. "We said, 'What does a balanced and fair tax system look like across the board?'"
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