Bonus bite: Is our tax system fair? Labour's Barbara Edmonds

In this bonus from our conversation with Labour's Finance Spokeperson, Barbara Edmonds unpacks her approach to tax policy. 

Following our conversation with Finance Minister Nicola Willis, Barbara raises the question of fairness in how different types of income are taxed, and the need to reassess what's included in New Zealand’s “broad base, low rate” system.Barbara also weighs in on employee share schemes, saying they can lift productivity and give workers a real stake in the businesses they help grow—if the tax settings are right.

For more of this episode or our chat with National's Nicola Willis, head to http://linktr.ee/sharedlunch

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Episode Transcript

Speaker 1 (00:01):
You're listening to a share these podcast.

Speaker 2 (00:04):
I'm sure you don't want to announce any policy here today.
Maybe you can let us in on what kind of
process you might go through when you are determining your
tax policy.

Speaker 1 (00:13):
So the question I always ask, and it's a fairness question,
is that why should a salary and wage earner be
taxed for every dollar that they earn, but someone that
can dispose of their third fourth residential property or rental
property gets that profit tax free. There is a fairness

(00:34):
in there. Also. The element when it comes to tax
is we work in a tax system here in New
Zealand that is based off the framework of broad base,
low rate. You tax a whole bunch of things, a
whole lot of things at the base broad you make
it broad so that you can keep the rate of
tax low, so low rate, it's quite clear in New
Zealand that there are elements missing from that broad base.

(00:58):
And it's no secret that we are one of three
OSCD countries that doesn't have a capital gains tax. And
there's also no secret that actually only six jurisdictions in
the world have a wealth tax. And actually the conversation
around a wealth tax is starting to flare up a
lot more in other jurisdictions such as the UK for example.

(01:18):
We have to take all of that in our stride
as we develop our tax policy. Having a tax lawyer
that's in there helps with the policy decision making element
because I can say, if you tax this, this is
what the outcome is. These are the deductions that a
business or a person will should be applicable for, etc.
But ultimately we have to think about that in a

(01:40):
political sphere as well, because we want to win the
election and we know the tax system is unbalanced. We
know that there is unfairness for some people. So we
need to come to the country with a policy that
meets those objectives, but also one that we're not going
to scare everybody. Can reassure everybody that this is how

(02:03):
it's going to impact you. If I can't explain that
as a tax lawyer, then that's not great.

Speaker 2 (02:09):
Do you think that there's a path there that that
can be impactful and popular?

Speaker 1 (02:16):
I think so. I mean, and ultimately, the thing I
really give credit for to New Zealanders over the last
year since being the finance spokesperson and in particular the
business community, is they can see where the inequity lies
in some places. And there also if you'll see a
few quite senior business leaders have come out saying well

(02:37):
we need some changes in this space, or we should
have a capital gains tax, or this is why we
don't think a wealth tax might work, or or what
about land tax or something else tax. But again you
need to for me, as the finance spokesperson, I need
to look at it all as a package. What's the
society that we want to live in, the priorities, in

(02:58):
the basics, which person in New Zealand should be expected
to have, and then how we pay for it. And
that requires the using of the government balance sheet to
its full purpose, not just sort of superficial discussions around
you know, tax and spend debt, you know overspending or underspending.
All of that. We need to I take a very

(03:21):
considered look when I look at this together.

Speaker 2 (03:24):
You know, we run an employee share program. It also
helped many other businesses run employee share schemes. So that's
where your team get a portion of shares as part
of their remuneration package. And it's a great way to
kind of share the ups or the potential gains of

(03:44):
what's going on for the hard work that people are
putting in. Is anything on your mind around how we
might look at the tax around those employee share schemes
for people.

Speaker 1 (03:54):
So I've been around during two forms of changes quite
recent changes to employee share schemes. Is back when National
had put through some changes because there were integrity risks,
and then more recently when Labor had tightened it. So
I was in the Finance Expenditure Select Committee at time
those changes that kind of happened in twenty twenty two.
I have had some feedback from different businesses that they

(04:17):
do want to be able to get more employee share
schemes up and running, but sometimes the tax, the tax
element in the way that it was changed, is a
concern for them. So I'm more than happy to listen
to what people think should be changed. There is always,
like when I was working for the National government, that
integrity risk. But the other element, which I think we

(04:40):
also need to be mindful of is that there have
been employees share schemes that have worked overseas off shore,
but where the executives did really well, but you know,
for some reason the company whatever liquidated or it closed down,
where the executives did really well, but the everyday worker
didn't do well, So we want to be able to
protect some of those rights well. But I am open

(05:01):
and I think that it definitely has a place employee
share schemes because I think, as a worker, how cool
is that that you own part of this business that
you're working in and that actually there are productivity gains
from having those incentives that you want to do your
best job because you know that this is going to
return back to you through a return through your shares.

(05:23):
So definitely open to it. The tax stuff is always
complicated because integrity risks, et cetera. But open to hearing
solutions from those that practically work through it about some
of the challenges for them. Some of the integrity risks
that was brought up during my time when I worked
under a national government is that some particularly and sort

(05:44):
of more newer businesses, they were using it as a
form to be income without it being taxed. So that
was why the rules changed around twenty fifteen sixteen, so
there was a big discussion document on it. So it's
an element of where the integrity is that you're basically
using the share scheme to be a form of income

(06:05):
without it returning is income and therefore being taxable. But
I think some of that's changed. So I think some
of the rules that have been that have happened since
that those earlier days have tightened that integrity risk. It's
a question those where's the balance. Have we tightened the
screws too much on the integrity side and therefore we're
sort of mulling the productivity elements of what employee share

(06:27):
schemes are and I'm not quite sure. I'm still a
little bit out there as to where that balance is,
but really keen to hear from others around where there
should be some changes, because actually it's not about integrity,
it's actually about the productivity gain for the employees.

Speaker 2 (06:43):
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