What does Capital Gains and tax reform mean for Maori
The Governments tax working group has reported led by former Finance Minister, Michael Cullen, and it’s a mix bag. For Maori the lowering of any personal income tac threshold is a good thing and while many are focused on the impacts of a Capital Gains Tax the package itself is extensive. Changes to tax policy only comes around in a generation and many Governments are not wanting to go wholesale instead opting with tinkering around the edges. The Tax Working Group, however, wasn’t focused on the public appetite for change, instead that’s the job of the Government – to take the recommendations and sell them – at least those its wants to take on. The implementation of a capital gains tax would come at a time when there already changes to the rental market and questions are being asked on the impact to small business, property owners and also those who might have the odd bach in the family.
For more, who’s rate home ownership is very low compared to non-Maori the question becomes what happens if the Maori economic agenda pays off, land reform is introduced and more of us are building homes and entering the property market? Then there is the impact to Iwi and hapu when it comes to the broader question of the Maori estate already under ownership and management. The Group has embraced the wide range of feedback about the value that Tikanga Māori can bring to thinking about the evolution of the tax system. The result of this has been the development of the framework He Ara Waiora - A Pathway towards Wellbeing.
The Group has asked the Treasury to take He Ara Waiora forward as part of their Living Standards Framework programme to realise the framework's potential as a core policy tool for the Treasury. In taking this on, the Treasury is carefully considering how to maintain ongoing meaningful dialogue with Māori in further development. There are a range of findings and recommendations on issues many of you indicated views on, such as extending the taxation of capital income, Māori authorities, charities, and the environment. A range of other issues were also raised through the engagement process, such as recognising through the tax system efforts to preserve and develop natural ecosystems and the extensive amount of unpaid work done by Māori. The messages we heard have been raised with the appropriate government departments and are expected to be explored through those departments’ work programmes.
For Māori Freehold Land under Te Ture Whenua Māori Act, the Group recommended specific treatment for this land, which could take the form of an exclusion or rollover relief. The Group has recommended further engagement on this issue by the Government (see para 43 of vol II).
Rollover relief has also been recommended for:
transactions within overarching iwi and hapū structures should also not trigger an immediate tax liability via rollover relief (under what’s called the ‘same economic owner’ principle)
transactions relating to recovery of ancestral land lost as a result of Crown action and for a time-limited period after an iwi settles its historic Treaty claims.
There is a lot to understand when it comes Maori and the land we own and the land we could own as a result of Treaty Settlements. The key is for Iwi and Hapu to better understand the dynamics but more importantly build a frame of reference of what any changes might mean to future settlements. The only way tax reform will benefit Maori is when we are not excluded from its design. IRD and the Treasury need to beef up there engagement with Maori organisations and representatives while at the same time Maori need to increase our skills base when it comes to finance, investment and accounting.