Business consultant and Treaty commentator Joshua Hitchcock looks at the terms of reference for the new Tax Working Group and asks: how can the tax system create a more equitable outcome for Māori?
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Following last year’s election win, the Labour government announced the establishment of a tax working group to review the New Zealand tax system. Well, parts of it. It is not a fully comprehensive review, with many components of our tax system – such as the levels of individual taxation and capital gains on the family home – left out of the terms of reference, but it does explore many topical taxation issues and has a mandate to discuss how we can produce a fairer system of tax while maintaining the general overall levels of taxation throughout the economy.
So while the Tax Working Group does not promise radical change to our system of taxation, it does raise some important questions for Māori to engage with. Central to this discussion is the intergenerational fairness of the tax system and how the changing dynamics of the Māori economy over the next 30 years will influence, and by influenced by, the tax system.
The Tax Working Group has posed two main questions for Māori to consider. First, whether there are parts of the current tax system that warrant review from the point of view of te ao Māori, and second, how tikanga Māori might be able to help create a fairer, more future-focused tax system. Noble aims, no doubt, and while Māori perspectives about tax have long been absent from tax policy discussions, these are the wrong questions to be asking. The question should not be how can tikanga Māori help create a fairer, more future-focused tax system; but rather how can the tax system be designed to create a more equitable outcome for Māori?
A particularly striking impact is likely to be experienced by the next several generations of Māori. As Pākehā New Zealand grows older and enters retirement, the youthful Māori population comes of age and enters the workforce. The Tax Working Group have acknowledged this shift in demographics and in its call to action for Māori notes that “we will have an increasingly older Pākehā population that will be dependent on a larger and younger proportion of working age Māori.”
How equitable is a tax system that relies on Māori paying for the retirement of Pākehā after providing the land and resources for Pākehā to flourish in New Zealand? How equitable is a tax system that asks Māori to provide more and more of the general taxation to support retirement incomes, when Māori life expectancy is seven years less than the New Zealand average? In order to ensure that these 30 years of Treaty settlements, and the return of a fraction of the assets stolen from Māori is not an exception in the general history of New Zealand, we need a tax system that does not revert to the theft of our resources for the benefit of Pākehā, and a system of government that works to provide equitable opportunities for Māori.
Because the flip side of taxation is the benefits that taxation provide. When Māori are at the negative end of almost every social indicator, when we are more likely to be unemployed, more likely to be suffering poor health, more likely to die earlier, more likely to be in prison, more likely to be on some form of benefit, more likely to be renters on our own land, when Ngāti Whātua Ōrakei step in to provide private health insurance to its members and Ngāi Tūhoe want to assume responsibility for the welfare system within its rohe; it is impossible to argue that the benefits of taxation have flowed equitable towards Māori. The benefit of taxation needs to be explored, alongside models of how better outcomes for Māori can be achieved. In the ideal world, taxation is used to fund the services that Māori require, but these are provided by Māori.
Following on from the general discussion around the fairness of the tax system, the Tax Working Group are engaging with several specific questions around the tax system and the potential implementation of new taxes to broaden the tax base. The highest profile issue is whether a capital gains or land value tax should be implemented in New Zealand. What, then, is the impact of a potential capital gains tax or land value tax on Māori assets and Māori land? Our land and our assets are taonga, and the likelihood of them being sold is small; but either a capital gains tax assessed on an annual basis or a land value tax has the potential to destroy Māori wealth.
If the government can make the political decision to exempt the family home from this discussion, it should also be able to exempt Māori land from it as well. One of the contributing factors to the loss of so much Māori land in the late 19th and early 20th century was the loading of rates onto Māori land, and the subsequent debt that kept accruing because these rates were unable to be paid. To do so again with a capital gains or land value tax would potentially open up a new round of Māori land losses. The Tax Working Group asks if there is a workable model to consider a capital gains or land value tax on Māori land. The simplest, and most equitable, model is that it is exempt entirely.
The Tax Working Group is taking submissions through until 30 April. We have a once in a generation opportunity to discuss and influence tax policy, a once in a generation opportunity to design a tax system that is not only fair and equitable for New Zealand, but one that is also fair and equitable for Māori. And while there is every likelihood that the recommendations from the Tax Working Group will go nowhere, much like the review undertaken by the previous National government, we are now working with a government that is openly talking up its commitment to Māori. Let’s make sure our voices are heard.