Inquest: tax, political donations, conflicts and risk

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Former ACT MP Heather Roy does not support the introduction of a capital gains tax.

Instead Mrs Roy told Inquest she supports the introduction of a land tax, increasing GST and scrapping PAYE tax.

This week BERL chief economist Ganesh Nana told NBR the rich should pay more tax and he supports taxing capital gains.

“I am quite willing to pay a lot more as long as the government just takes that wellbeing perspective and actually starts delivering on those longer-term goals, which are probably going to hurt them short-term politically but that’s what I’m looking for. I’m looking for a leader,” Dr Nana says.

Mrs Roy does not think he will find the leader he is looking for and that the government will introduce a watered-down capital gains tax to avoid upsetting public opinion too much.

While she and Dr Nana likely disagree on how much tax people should pay, they do agree the tax debate needs to be more nuanced.

She says issues of fairness and equity always come up but the public debate looks at tax the wrong way around.

What's the role of government?

“What we should be doing is deciding what role government should play in people’s lives. How much should it spend its time and effort helping people and then how much tax do you need to do that? What we do is completely the opposite way around. We look at how much we can reasonably get away from taking away from people and then redistribute it and it provides the wrong incentives,” Mrs Roy says.

Dr Nana had something similar to say.

“You can’t set an appropriate level of tax unless you actually ask the question: What do you want the government to deliver? What is their role in life and if you actually want the government to start delivering for the next generation and future then your answer to the question about what the level of tax should be is a lot different if you only want governments to deliver a fiscal surplus next year,” he says.

Mrs Roy says lots of interesting suggestions have been raised in the Tax Working Group report but they have been lost in the sole focus on a capital gains tax.

As well as supporting a land tax and increasing GST, she says governments need to also seriously consider the services they offer the country’s wealthiest people. She questions why the children of the rich should get a free education.

The National Party has been relentless in its attack on the proposed capital gains tax but this week faced more problems when the Serious Fraud Office announced it was investigating donations made to the party.

Political donations

Former National MP Jami-Lee Ross alleged National leader Simon Bridges had broken the Electoral Act over a supposed $100,000 donation from Chinese businessman Zhang Yikun. He laid a complaint with police who have now passed that on to the SFO.

Mrs Roy says it is no surprise the police do not want to investigate the matter but she is surprised the SFO has picked it up because she does not believe the matter fits within the office’s criteria for investigating fraud.

She says it is a serious matter for National but political donations to all parties have been a fraught issue forever.

“You’ve got rules, so people try to find ways around them and no political party is immune from that. You know, the National Party might be in the fire line at the moment but there are others that could be I suspect.”

Mrs Roy says it is a vexed question about which form of political funding should be used. The Green Party advocates full public funding for political parties but that would be “a terrible waste” of taxpayers’ money.

The National Party was not alone in facing political difficulties during the week.

Jones' conflicts

Regional Economic Minister and New Zealand First MP Shane Jones also had to bat off National Party criticisms that he had not dealt appropriately with a conflict of interest over a Provincial Growth Fund grant to a Northland cultural education centre, the Manea Footprints of Kupe. He sat in on a meeting of ministers discussing the proposal despite having declared a conflict of interest although he says he was not involved deciding it should get the $4.6 million grant.

Mrs Roy says in governance people constantly consider conflicts of interest. In Mr Jones’ case he is an experienced politician and should have known better.

Meanwhile, though, Mr Jones has also launched a strong attack on Spark managing director Simon Moutter, to go along with earlier attacks on other business leaders.

Does he need to be reined in?

Mrs Roy thinks so.

“Shane has always been a controversial person who likes provoking discussions and poking the bear. I think that there’s a line though that, after you cross it, that it is very hard to be taken seriously and I think it’s almost getting to that point and you know his natural personality and his style, his political style, coupled with this huge amount of money he has to spend, is turning into a very problematic look for his party.”

More problematic for the government perhaps are signs that insurance giant IAG is limiting what householders it will insure in quake-prone Wellington.

Mrs Roy says the company, having taken over a number of smaller insurance businesses, is now over-exposed to risk in Wellington, given its 45% market share. She questions whether the Commerce Commission should have allowed the takeovers in the first place.

It also raises questions, she says, about whether other insurance companies will become over-exposed if IAG reduces its risk. IAG said it remained committed to insuring people in Wellington though would remain "prudent" on a case by case basis.