MMP in action: ​Jenée Tibshraeny on the politics of the Government putting a Capital Gains Tax to bed

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New Zealand First is the only political party to emerge from the Capital Gains Tax (CGT) debacle a winner.

Prime Minister Jacinda Ardern on Wednesday afternoon said the Coalition Government’s inability to form a consensus on the Tax Working Group’s (TWG) recommendation to implement a broad base CGT meant the policy would be canned.

“Ultimately this is MMP. We are not the only party in government here,” she said.

Peters’ power

NZ First Leader Winston Peters – the clear spanner in the works – tried to downplay assertions from media his party was the most powerful in government or that the tail was wagging the dog.

“This is not about your macho game of politics,” he said at a press conference.

“It’s about a very serious issue on which we discerned at the beginning. But we were happy to see the public’s response [to a CGT] that there wasn’t sufficient agreement in the country…

“Politics and coalitions are difficult to operate. This has been a most successful coalition in an unexpected way and it’s not a matter of being happy, or who won or who lost. What really matters is, have we got the right policy?”

Peters said the complexity of the CGT and lack of international evidence that it solved the problems it set out to address, were behind his opposition to it.

He acknowledged New Zealand’s tax system wasn’t as fair as it could be and voiced his support for tax changes to crack down on multinationals and land bankers.

Shaw: ‘We are a bold government’

While Peters refrained from exuding too much smugness, Green Party Co-Leader James Shaw emerged the neglected younger brother putting on a brave face.

He simply said he was “disappointed” the Greens had missed its first real shot at implementing a policy it had campaigned on for two decades.

He tried to emphasise the positives: “I completely believe and continue to believe that we need to tax income the same way that we tax income from capital.

“When I said that I was making a call for bold action, and when you look at what this government is doing on climate change, on cleaning up our rivers, on ending homeless – we are a bold government and a transformational government…

“You win some, you lose some…

“It is harder to make something happen than not happen, but the whole point of MMP is that you’ve got coalition governments and they’re a moderating force on each other.”

Labour lost a battle it never fought  

Shaw wouldn’t be drawn on whether the Government’s political management of its tax review contributed to it being a flop on the CGT front.

He avoided criticising his Labour colleagues for doing nothing to sell a CGT and accompanying income tax cuts, or his NZ First colleagues voicing concerns around the impacts on farmers and small businesses.

He also avoided saying whether the vacuum left open by the Government deciding to announce its decision on tax two months after the TWG released its recommendations, was in part to blame for the outcome.

Since in government, Labour Party ministers have avoided voicing their support for a CGT. Instead they’ve passively said they’d consider the TWG’s recommendations, with Ardern repeatedly saying her job was to build “consensus” among the parties in government.

On Wednesday – when it was too late – she was explicit: “I genuinely believe there are inequities in our tax system that a capital gains tax in some form could have helped to resolve. That’s an argument Labour has made as a party since 2011…

“While I have believed in a CGT, it’s clear many New Zealanders do not. That is why I am also ruling out a capital gains tax under my leadership in the future.”

It appears Labour’s strategy has been to test the waters and gauge public opinion.

But pawning off responsibility to TWG chair Michael Cullen to come in to bat for a policy that was always going to be a hard sell, was never going to be good enough.

Let’s actually do this

Ardern said she was a “pragmatic idealist” and there was “disappointment but acceptance” among her colleagues in caucus over the CGT being off the table.

Her challenge now is to prove she has enough pragmatism to get stuff done.

The Government desperately needs to get runs on the scoreboard.

It needs to up the ante reforming the Building Act to streamline the consenting process for prefabs, kick the Housing and Urban Development Authority into gear, prove the Provincial Growth Fund is more than a slush fund, clarify its population policy, more clearly illustrate how the “wellbeing budget” will truly be transformative, detail how it’s reducing child poverty and the list goes on.

Ardern has the leadership skills. She now needs to convince the public she has the authority.

As for the Greens, it’s been gazumped by NZ First on tax. And while the Provincial Growth Fund was allocated $3 billion, its Green Investment Fund was only given a measly $100 million.

It will keep claiming the ban of new offshore oil and exploration as a win, but the sheen will removed from this victory if MBIE’s advice is correct and a gas shortage sees us burn more coal and pay more for electricity.

Shaw, now more than ever, needs to get NZ First on board its Zero Carbon Bill, which aims to create an independent agency to manage climate change.

National stripped of ammo

At the start of this piece I said NZ First was the only winner. National is no exception to this statement.

The Government canning a CGT has stripped it of nearly all its ammunition going in to the 2020 election.

Bridges on Wednesday continued down the scaremongering path, saying a vacant land tax, an agricultural tax and a waste tax were still on the table.  

“Prime Minister Jacinda Ardern says she personally still wants a CGT and that our tax system is unfair. New Zealanders simply can’t trust Labour when it comes to tax,” he said.

However the tax-related press releases National sends out on an almost daily basis will carry even less weight with a CGT off the table.  

Bridges also attacked the Government for in its “so called year of delivery” dropping its “flagship tax policy”.

“It’s a humiliating backdown,” he said.

Sure – but a backdown is what he wanted. This rhetoric will only get him so far.   

National now needs to get its own house in order and show it has some other strings to its bow, as it fires shots at the Government.

It can no longer bet on a CGT seeing Labour lose the election.

As for NZ First, the question will be whether it sees its victory as being big enough for it to sit back and let Labour and the Greens claim a few wins, before securing another victory at the 2020 election.  

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