Catering For The 21st-Century Customer: Tips To Modernize Your Business

The world of business is changing at lightning speed. With customer demands and consumer habits evolving continually, modernization is key. If your business is lagging behind, and you’re keen to ensur...

News Company - avatar News Company

Treating suspected autism at 12 months of age improves children's language skills

The theory is that if therapies are started early enough, it might be possible to alter the trajectory of autism.ShutterstockTherapies given to infants before they receive a diagnosis of autism may le...

Andrew Whitehouse, Bennett Chair of Autism, Telethon Kids Institute, Univeristy of Western Australia, University of Western Australia - avatar Andrew Whitehouse, Bennett Chair of Autism, Telethon Kids Institute, Univeristy of Western Australia, University of Western Australia

Team-building exercises can be a waste of time. You achieve more by getting personal

The key to an effective team-builiding exercise is understanding a team is a social network built on connections between individuals.www.shutterstock.comSomeone we know recently told us about a team-b...

Julien Pollack, Associate Professor, University of Sydney - avatar Julien Pollack, Associate Professor, University of Sydney

Changing the Australian Constitution was always meant to be difficult – here's why

Debates about constitutional change in Australia inevitably raise the poor success rate of referendums. Only eight out of 44 attempts have ever succeeded and there has not been a successful constitut...

Anne Twomey, Professor of Constitutional Law, University of Sydney - avatar Anne Twomey, Professor of Constitutional Law, University of Sydney

Lights out! Clownfish can only hatch in the dark – which light pollution is taking away

Some 22% of the worlds' coastlines are exposed to artificial light at night. Emily Fobert, Author providedClownfish achieved worldwide fame following Finding Nemo, but it turns out these fish don&rsqu...

Emily Fobert, Research Associate, Flinders University - avatar Emily Fobert, Research Associate, Flinders University

An electronic chip that makes 'memories' is a step towards creating bionic brains

Researcher Taimur Ahmed holds the newly designed chip.Author providedWhat better way to build smarter computer chips than to mimic nature’s most perfect computer – the human brain?Being ab...

Sumeet Walia, Senior Lecturer and Vice Chancellor's Fellow, RMIT University - avatar Sumeet Walia, Senior Lecturer and Vice Chancellor's Fellow, RMIT University

As the federal government debates an Indigenous Voice, state and territories are pressing ahead

The Queensland treaty process is still in the early stages and negotiations will not begin for several years. But it's still a historic step forward for Indigenous communities.Tracey Nearmy/AAPQueensl...

Harry Hobbs, Lecturer, University of Technology Sydney - avatar Harry Hobbs, Lecturer, University of Technology Sydney

Your body as a weapon: the rise of the 'revenge body' online

A 'revenge body' is built to show someone how well you are doing without them. With the advent of social media the phenomenon is increasingly popular.ShutterstockMonths after a public breakup with her...

Mair Underwood, Lecturer in Anthropology and Sociology, The University of Queensland - avatar Mair Underwood, Lecturer in Anthropology and Sociology, The University of Queensland

Stop worrying about screen 'time'. It's your child’s screen experience that matters

Guidelines advise children under two shouldn't have any screen time, but most do anyway.Photo by Jelleke Vanooteghem on UnsplashMost (80%) Australian parents worry children spend too much time with sc...

Brittany Huber, Postdoctoral researcher, Swinburne University of Technology - avatar Brittany Huber, Postdoctoral researcher, Swinburne University of Technology

Finally, the NDIS will fund sex therapy. But it should cover sex workers too

Whether sex therapy should be a funded disability support has been controversial since the NDIS was rolled out.From shutterstock.comThe Administrative Appeals Tribunal recently granted a woman with mu...

Matthew Yau, Adjunct professor, College of Healthcare Sciences, James Cook University - avatar Matthew Yau, Adjunct professor, College of Healthcare Sciences, James Cook University

Politics with Michelle Grattan: Megan Davis on a First Nations Voice in the Constitution

Last week on this podcast we talked to Ken Wyatt about the government’s plan for a referendum – hopefully this parliamentary term – to recognise Indigenous Australians in the Constit...

Michelle Grattan, Professorial Fellow, University of Canberra - avatar Michelle Grattan, Professorial Fellow, University of Canberra

Team-building exercises can be a waste of time. You achieve more by getting personal

The key to an effective team-builiding exercise is understanding a team is a social network built on connections between individuals.www.shutterstock.comSomeone we know recently told us about a team-b...

The Conversation - avatar The Conversation

Americans focus on responding to earthquake damage, not preventing it, because they're unaware of their risk

Heavily built-up areas can experience more disastrous damage in an earthquake.AP Photo/Marcio Jose SanchezOn July 4 and 5, two major earthquakes, followed by several thousand smaller ones, struck Sout...

Matt Motta, Assistant Professor of Political Science, Oklahoma State University - avatar Matt Motta, Assistant Professor of Political Science, Oklahoma State University

Did we mishear Neil Armstrong's famous first words on the Moon?

It's the case of the missing 'a.'Nick Lehr/The Conversation via NASA, CC BY-SAOn July 20, 1969, an estimated 650 million people watched in suspense as Neil Armstrong descended a ladder towards the sur...

Melissa Michaud Baese-Berk, Associate Professor of Linguistics, University of Oregon - avatar Melissa Michaud Baese-Berk, Associate Professor of Linguistics, University of Oregon

As part of a major review of New Zealand’s tax system, the government’s Tax Working Group recommended a comprehensive capital gains tax. New Zealand is one of few countries without a capital gains tax, and the proposal has generated outrage.

Commentators have described the proposed tax as a “mangy dog”, “an envy tax”, an “attack on the kiwi way of life” and “offensive to New Zealand values”.

Digging deeper beyond the headline-grabbing rhetoric, some commentators have expressed concern the proposed tax will have a detrimental impact on the economy by distorting investment decisions and creating an excessive administrative burden on taxpayers and the Inland Revenue Department (IRD). There are also claims about the lack of fairness in taxing “hard earned gains” that have been built up for retirement.

Missing from the debate is the fact that a capital gains tax should reduce income taxes for most New Zealanders.

Read more: Stranger than fiction. Who Labor's capital gains tax changes will really hurt

A fair tax system

The debate strikes at the heart of two essential elements used to assess the quality of a tax: equity and efficiency.

In order to be equitable, a tax should treat people with similar economic situations in a similar way. This is called horizontal equity. Equally, taxation should fall more heavily on those who have the ability to pay. This is referred to as vertical equity.

These are the principles set out by the great Scottish economist Adam Smith in his 18th-century magnum opus The Wealth of Nations. In order to evaluate the tax proposals, New Zealand’s Tax Working Group used Smith’s principles of fairness alongside two distinctly New Zealand frameworks: Te Ao Māori (Māori worldview) and the Living Standards Framework. These two frameworks have been developed to guide policy makers toward the objective of inter-generational well-being, including the effect of policy on growing inequality and non-economic factors such as social and environmental capital.

Not taxing capital gains results in a failure to achieve both horizontal and vertical equity.

Taxing passive gains

Currently, in New Zealand, some income is taxed and some is not. The income that is taxed is typically derived from personal services (“hard work”) and from investments of capital (interest, rent and dividends). The income that is not taxed is typically derived from market movement, such as capital gains on assets.

On the whole, we have a counterintuitive approach to taxation in New Zealand where we tax “hard work” and fail to tax gains that accrue passively. Two people in similar situations are taxed differently. A person who invests in a small business that produces goods and services pays tax on all their profits, while another who invests in property that accumulates passive gains, does not.

In a world where the accumulation of capital through passive gain is increasingly being held by a smaller group, the need to tax those gains is becoming more urgent.

Statistics provided by the Tax Working Group indicate the taxation burden is flat across all income groups. This means our tax system does not operate according to Smith’s ability-to-pay principle. We have progressive tax rates but those in the highest income deciles enjoy much of their income in the form of tax-free capital gains. New Zealand’s failure to tax capital gains is inequitable.

Tax efficiency

The claims that a capital gains tax is inefficient centre around administrative issues and investment distortions. The first claim has some merit – new taxes usually result in additional administration, especially early on. The second has no merit whatsoever.

For New Zealand’s economy to thrive, greater investment in the production of goods and services is required. However, these investments are often risky. And they are taxed when profitable. Hence it is a far more attractive investment proposition to invest in low-risk assets that attract little or no tax, such as land.

Contrary to popular belief, land investment, in itself, is not a productive activity. The land is there regardless of who owns it. Someone may conduct productive activity on the land, such as farming or building houses, but the ownership itself does not produce goods or services. A capital gains tax would reduce distortion in investment choices, not increase it.

If tax applies to gains on investment in assets as it does to business profits, it will encourage investment decisions based on where the greatest return can be made, not where tax-free gains are derived. The lack of capital gains tax has been distorting investment decisions for decades.

Impact on economy

In the longer term, it would be a positive outcome to attract some investment out of property and into production of goods and services, regardless of any possible adjustments that might occur in the short term.

And the tax cuts? Missing from this debate entirely has been recognition of the Tax Working Group’s recommendation that the additional tax collected from a capital gains tax should be used to reduce income taxes. This is not a “tax grab” but a reallocation of the tax burden.

If the government were to implement the recommendations of the Tax Working Group report, most New Zealanders would find themselves with an increase in their after tax income. Greater equality would seem to be more consistent with kiwi values than the status quo.

Authors: The Conversation

Read more http://theconversation.com/why-a-proposed-capital-gains-tax-could-mean-tax-cuts-for-most-new-zealanders-112852