Tax Simplification Not Needed In New Zealand

By Global Tax Weekly

According to the conclusions of a public consultation by New Zealand’s Tax Working Group, the majority of New Zealanders want major changes to the tax system. Who doesn’t! Will they get them? Probably not – but why so sure? Recent history of tax developments, say over the last 20 years or so, is littered with discarded “root and branch” tax reviews, undertaken by panels of independent experts and other worthies, whose conclusions ultimately get shelved, kicked down the road, or punted into the long grass.

Furthermore, recent experience has taught us that the simplification of tax regimes isn’t as simple as it first sounds. Few would argue convincingly that the US tax code is much simpler because of the Tax Cuts and Jobs Act, especially for individual taxpayers with their own business, which, apart from multinational businesses, tend to have the most complicated tax affairs. In fact, by all accounts, for some professions, the situation has gotten much worse, rather than better.

Across the Atlantic, the United Kingdom’s Office of Tax Simplification has had eight years of simplifying time since its formation by the Government in 2010. However, here too, anecdotal evidence from tax practitioners and taxpayers is that tax legislation has got a great deal more intricate. But what do you expect with finance bills several-hundred pages long these days? Not that that’s the OTS’s fault. It’s the Government’s. Indeed, I propose renaming Her Majesty’s Treasury “the Office for Tax Complication.” I’m not sure how Her Majesty would feel about it, but at least it would be an accurate description.

So, New Zealand, perhaps you should be careful what you wish for. You’re a country that is already highly rated by international analysts and investors on tax, regulation, and other factors, which have a bearing on how easy it is or otherwise to do business in a given jurisdiction. Indeed, the World Bank rates New Zealand as the best place in the world for doing business, and it’s in the top-ten for ease of paying business taxes, according to PwC’s Paying Taxes Index. Therefore, perhaps it’s the case that there is considerably more scope for making New Zealand’s tax environment worse than for making it better. This isn’t to say that efforts shouldn’t be made to improve things. And engagement with the public by government on any area of policy has to be a positive development. But, on the other hand, even simple tax regimes can have complexities, and maybe taxpayers at large are not best placed to know how to fix them.

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