Shewan on taxes

James Weir at Stuff reports:

New Zealand should move to a low-level land tax and cut personal tax rates, retiring PricewaterhouseCoopers chairman John Shewan says.

He also says the “elephant” of rising national superannuation costs means a rise in the GST rate to 17.5 per cent in coming years was “almost inevitable”.

Shewan had his last day as PwC chairman yesterday. PwC partner Jonathan Freeman has been elected the new chairman.

Shewan said a land tax rate should be low, perhaps 0.5 per cent of land value each year, and be assessed like a city council rate, with an offsetting fall in the personal tax rate of a few percentage points.

“I still think that is the right thing to do,” he said. That idea was rejected by the Government when proposed by the Tax Working Group, which Shewan was part of. “I regret that,” he said.

High taxes on personal incomes were the most damaging to the economy for growth and jobs. The most efficient taxes were those people could not avoid, such as tax on spending like GST or tax on land “because you can’t hide it”.

I agree with a land tax, so long as other taxes are reduced to compensate. Land tax is both unavoidable, but also encourages better economic use of land, unlike income taxes which actually discourage labour.

New Zealand’s tax system was a “complete wreck” in 1984, but was now one of the strongest and most robust in the world.

The basket cases of Europe, such as Greece, Italy, Spain and Portugal, shared a common thread of poor tax systems, with high levels of tax evasion and fraud. “They regard paying tax as voluntary,” he said.

In contrast, in New Zealand most felt they should pay their fair share of tax. Shewan said he was “very proud” of the tax system here.

It is one of the better ones around, so long as we resist the stupidities such as GST exemptions for fresh fruit and vegetables.