By Peter Wilson*
Opinion - The Tax Working Group's recommendation for a broad-based capital gains tax will test the strength of Labour's coalition with NZ First.
New Zealand First leader and Deputy Prime Minister Winston Peters Photo: RNZ / Diego Opatowski
Labour is heavily committed to a more fair tax system and will see the recommendation for a broad-based capital gains tax as a way of achieving that.
It's at the core of the Tax Working Group's report, covering holiday homes, land, most shares and business assets.
The Greens have already embraced it, but to get it into law Labour must deal with a very different and much more difficult party.
Without NZ First it hasn't got the numbers to get the legislation through Parliament.
Check out RNZ Tax Working Group coverage
- The Tax Working Group unveils final report, recommends a capital gains tax
- Capital gains tax recommendations: Opposition comes out swinging
- Look back on RNZ's live coverage of reaction to the recommendations
- The Tax Working Group to release findings: What to expect
Sir Michael Cullen, the Tax Working Group chair at the release of the recommendations yesterday. Photo: RNZ / Rebekah Parsons-King
The party's leader, Winston Peters, is on record as a strong opponent of a CGT. He has said it doesn't work in other countries and won't work here.
In recent days, some of his MPs have been saying the same thing privately. Mr Peters doesn't swallow dead rats. There's no way he's going to change his mind to the extent necessary for the government to get this through in the form presented by the Tax Working Group.
This is the problem Finance Minister Grant Robertson has to deal with in the weeks ahead, before the Cabinet signs off on its intentions in April.
Finance Minister Grant Robertson. Photo: RNZ / Rebekah Parsons-King
He's in for a tough time, because Mr Peters will play this for all it's worth. He'll want concessions, and his demands will be focused on NZ First's voter base in the regions and among older people.
He'll almost certainly insist that farmers are exempt, and perhaps small businesses as well.
We've seen it before with the changes Labour had promised to employment law, which NZ First watered down to a level that greatly reduced their impact.
If Mr Peters goes through a similar exercise with a CGT he'll be a hero to those he has saved from it and his party could reap the rewards at the ballot box.
It will also test Prime Minister Jacinda Ardern's leadership. She will have to decide just how far she can push Mr Peters without a meltdown, and what she's prepared to give up to get NZ First's votes.
And that's not all she has to worry about.
National is already fiercely attacking the CGT recommendations as "an assault on New Zealand's way of life" and is vowing to repeal it.
It's well known around Parliament that National believes imposing a CGT would be political suicide for the government. It's been hoping for that since the Tax Working Group was established.
When the government does decide what it's going to do it will prepare legislation that can be passed before the 2020 election and come into force after it.
It will dominate the campaign, and imposing any new tax is always a very hard sell.
It's easily attacked, and it's easy to scare people.
There are sure to be furious rows about what information is accurate and what is deliberate misinformation about its impact.
The government will have to be very careful when it considers all these issues, because they could be vital to its chances of winning a second term.
* Peter Wilson is a life member of Parliament's press gallery, 22 years as NZPA's political editor and seven as parliamentary bureau chief for NZ Newswire.