Geof Nightingale: Tax expert on the proposed increase in GST

A draft Inland Revenue briefing supports lifting the GST rate if required - and notes tax credits could help people on lower incomes.

The IRD briefing also brought up the lack of a capital gains tax, but did not endorse any specific view on it.

Tax expert Geof Nightingale told Heather du Plessis-Allan that lifting GST is a fast and efficient way to raise revenue.

But he says while quick, it's much harder on lower-income people.

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Episode Transcript

Speaker 1 (00:00):
Inland Revenue has recommended lifting GST higher in order to
pay for superannuation. It's released a report. It's a draft
report looking at the expected cost of supern It says
we can either we do one or two things. We
can either cut government spending or we can and this
is the tax man's pervert option, raise more tax. Jffna
Nightingale is an independent tax expert in with US.

Speaker 2 (00:19):
Now, Hey, jf Good afternoon, Heather.

Speaker 1 (00:21):
Now, they haven't said what they would prefer to lift
the GST to, but if you take a punt at it,
where do you think it would go?

Speaker 2 (00:28):
Well, it depends. The lifting GST is a very fast
and efficient way to raise revenue. Gsts about quarter of
our quarter to a third of all of our tax
so it's a very quick way. But it's got a
whole of problems that it's very regressive, it impacts much more,
much harder on lower income people, and you know, it's

(00:52):
a politically difficult thing to do. So all that doing
really is trying to explore if we can't halt the
track of increasing expenditure mainly driven by age, we will
need to raise more taxes or cut that expenditure. But
if we can't cut that expenditure politically too difficult, we
need to raise new taxes. So they're exploring what the

(01:13):
best mix of new taxes might be in a sort
of a prink piece.

Speaker 1 (01:16):
As you say, it is regressive, right, But what they
say is, rather than cutting the GST of groceries, which
is obviously the one everybody goes to, what could be
used instead as tax credits? Would you prefer that?

Speaker 2 (01:27):
Yeah? The problem. The problem with taking GST off food
or good things, if you like health care or education,
is that you're not always sure that those savings are
going to be passed on to consumers. Some of them
might get captured by the suppliers, and so it's a
bit slippery where the savings go. And the second thing
is that it causes real compliance difficulties. What's fresh food,

(01:49):
what's not fresh food? And there's some hilarious examples off sure.
So the other option they've suggested is that we raise
the GEST, keep it really broad, no exemptions, but we
rebate back a certain amount of the extra tax revenue
are extra GST revenue, we rebate it back to lower
to higher income support at the lower end in order

(02:10):
to offset the regressiveness. That's the system that I would
prefer if we have to go down that track.

Speaker 1 (02:15):
Yeah, now very quickly. Do you think this is the
case of a government department telling a government what it
wants to hear?

Speaker 2 (02:21):
No, No, I think this is the case. Under the
Public Finance Act, they have to do this every three years.
They have to think out loud about the future, and
that's what they're doing. They've been very careful not to
make any recommendations and they absolutely say it's the parliament.
It's the government's job to make the decisions. They're just
setting out the various options.

Speaker 1 (02:38):
Okay, good stuff, Jeff, Good to talk to you as always,
Jef Nightingale, Independent tax expert. For more from Heather Douplassy
Allen Drive, listen live to news Talks the'd Be from
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