Bruce Bernacchi: Dentons Kensington Swan partner says it's time for an honest discussion about tax settings

A tax expert believes we need to have an honest discussion around key tax settings. 

Labour leader Chris Hipkins has opened up a debate around tax – suggesting all options are back on the party's table looking to the 2026 campaign – as the population grows older. 

Dentons Kensington Swan partner and tax expert Bruce Bernacchi told Mike Hosking this has been a political football for too long. 

“But in terms of things like means testing, entitlement ages and basic design settings – we need bipartisan support on that.” 

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Episode Transcript

Speaker 1 (00:00):
In a way, I guess you've got to admire. And
Chris Hipkins has begun won the long road back to
power by two. Talking about taxing is more trouble, as
he sees it, because more of us are getting old.
You can't say to people over the age of sixty
five that they can have everything that we gave to
people when there were fourteen percent of them, When there's
twenty one percent and not increased government spending.

Speaker 2 (00:19):
The numbers just simply won't add up.

Speaker 1 (00:20):
So the Labor Party trying to work out what sort
of tax policy they take to the campaign of twenty six,
Denton's Kensington Swan partner and tax expert Bruce Binaki is, well,
there's Bruce, very good morning to you.

Speaker 2 (00:31):
Good morning.

Speaker 1 (00:32):
Is there a case can you make a cogent, cohesive
case to take more money from me?

Speaker 2 (00:40):
Oh? Look, I think there is a case there that
Hipkins has raised that in ten years time, we're going
to have three workers for every retired person compared to
four today, and in forty years time we'll have only
two working age people for every one retired person. So
there is a case for looking at our tax system
and trying to raise more revenue to pay for that,
because in our current settings it is unaffordable. But I

(01:01):
think what Hipkins has disingenuously not talked about is the
fundamentals of the underlying system. The fact, you know, we've
got a relatively low entitlement age now by world standards
at sixty five, and the fact it's not means tested.
So he's wanting to tax us more without looking at
the overall design of the system.

Speaker 1 (01:21):
Right, So there are plenty of ways to skinnicata, is
what you're suggesting.

Speaker 2 (01:25):
Yeah, Look, I think when you think about this, there's
probably six levres a government can poll, right, so you know,
it can tax us more. You can borrow more, which
is what Hipkins has faulted to. You can raise the
entitlement aids, which both labor you know, labor has been
in favor of in the past, and that's actually did
in twenty seventeen legislated that and then it got unwhelmed.
You can you know, means test, You could reintroduce the

(01:46):
third tax that we had back in the eighties. You
can raise the immigration levels bring in a lot more
working age people to support the tax base, or you
can you know hard but you can try and you know,
governments can try and do something to increase birth rates.
So it's not just a tax and borrow discussion. It's like,
let's have a look at the overall design of the
system and how we're going to afford it. Yeah.

Speaker 1 (02:05):
See, I'd been favored of growing stuff and making more
and just keeping tax the way it is because and
we don't seem to talk about that enough. But that's
as doable as grabbing money off of the small the
smaller piece of pie, so to speak, isn't it.

Speaker 2 (02:18):
Yeah, absolutely it is. And you know the projections going
forward that over the next ten years, the cost of
superannuation is a percentage of the tax take will go
from seventeen percent to twenty one percent. And that's what
the cost of super doubling over that period. But assuming
an increase in the size of the tax take, Now,
if you can actually make this country a more business

(02:41):
friendly place to do business, get more activity, grow the
tax base, and that will also, as you say, become
more affordable.

Speaker 1 (02:48):
So the politics of it all then comes into it,
doesn't it. I mean the idea that I mean, it's
the selling of the idea, not the mathematical mechanics of it,
isn't it really? I mean, that's the crux of it.

Speaker 2 (03:01):
And as I said, I think our politicians have done
us a disservice in this regard. I mean everyone now
seems too too scared to face into this issue, to
start talking about raising the entitlement age again, to look
at means testing, and to have an honest discussion maybe
about things like capital gains tax. You know, we've had
a full review of the tax system we did back
in twenty nineteen where the Tax Working Group recommended a

(03:22):
capital gains tax. We've got offshore organizations IMFOECD saying we're
an outlier and not having a capital gains tax. I
think we need to have an honest discussion as a
country about how we're going to afford this and making
sure people have dignity and retirement while not strangling the
life out of the economy.

Speaker 1 (03:40):
Isn't there a sort of some cute dos to be
gained by being an outlier just because somebody's got a
whole bunch of taxes. Why do you automatically want to
join that club?

Speaker 2 (03:49):
Well, because I think it shows it's effective, and personally
I would be far more in favor of us having
a capital gains tax, which has proven worldwide that it works,
as opposed to going down the rabbit holes of wealth
hat taxes and inheritance taxes and messing with the GST
system and all these other weird and wonderful ideas that
cropped up at the last election, and you know, continue
to pop up. I think a capital gains tax works

(04:11):
and are shown to be works, and it'd be far more,
far less disruptive and potentially economically damaging than a wealth tax.

Speaker 1 (04:18):
This could be one of those things that you know,
when they talk about infrastructure and getting cross party support.
This is a cross party support type discussion. So you
send it off to a bunch of experts to have
a look at it. They make a recommendation two main
parties go actually in the you know, for the benefit
of this country overall. This is the bit we agree on,
because that's the only way you're going to get across
the line, isn't it.

Speaker 2 (04:37):
I think so. And as I said, this has been
a political football for too long. I have vague recollections
of the superinnuation of the card back in the early
nineties and Bolder and war and getting together and it's like, well,
it's obviously all fallen apart. We need something like that.
We need some settings that are there for the long
term and are taken out of politics. And you know,
people can disagree about the specifics of the tax system

(04:58):
and how we pay for it, but terms of things
like means testing, entitlement ages and basic design settings, we
need bipartisan support on that good stuff.

Speaker 1 (05:07):
Bruce, appreciate your expertise, Bruce Bernaki, who's Denton's Kensington Swan
partner and tax expert.

Speaker 2 (05:13):
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