4. Question No. 4—FinanceHon AMY ADAMS (National—Selwyn) to the Minister of FinanceQuestion No. 4—Finance4. Hon AMY ADAMS (National—Selwyn) to the Minister of Finance: Does he believe New Zealand's international competitiveness is an important consideration in setting tax policy?Hon GRANT ROBERTSON (Minister of Finance): I believe there are many considerations to take into account when setting tax policy. These include fairness across the tax system inequality simplicity and indeed competitiveness.Hon Amy Adams: Does he think that the Tax Working Group's recommended capital gains tax on 100 percent of the net gain at full marginal rates would be internationally competitive when that would give us the third-highest capital gains tax rate in the OECD and contrasts with Australia who only tax half the gain made?SPEAKER: There were three legs but the—Hon GRANT ROBERTSON: I think it's important not to isolate out any one part of the tax system. As the member will be well aware the top tax rate in Australia is significantly higher than it is in New Zealand. They also have other taxes both at a state and federal level and stamp duty. So I think it's unwise to pick out one part of the tax system when making those kinds of comparisons.Hon Amy Adams: How many of the OECD countries the Prime Minister referred to in question time yesterday tax inflationary gains or include no discount as part of their capital taxation regimes?Hon GRANT ROBERTSON: I don't have all of that information there but I know that there is a range of regimes some of which include discounts and some which don't.Hon Amy Adams: Well has he read appendix A of the Tax Working Group report which says that for the purposes of its recommendations assets are assumed to grow at a 3 percent nominal annual rate which is made up of 2 percent inflation and just 1 percent real growth?Hon GRANT ROBERTSON: I have indeed read that.Hon Amy Adams: Well then can he confirm that those recommendations mean taking one third of the capital gain in tax when the other two thirds is just made up of inflation and mean that the Government would be taking every single dollar of real gain made in tax?Hon GRANT ROBERTSON: No I wouldn't accept that. I'd want to go and test that more thoroughly. What I would be able to say to the member is that very few schemes around the world can find a way if they're going to be simple of accounting for inflation in the way that she wants. These are the recommendations of the working group that we'll work through. There are many other countries in the world—in fact in the OECD all bar us and Belgium—who have some form of scheme like this who make it work. We will look at the international examples as we consider the proposals of the working group.Hon Amy Adams: How can the Minister who has acknowledged that the Tax Working Group recommended 100 percent of the gain at full marginal rates be taxed and said that the capital gain is made up of two-thirds inflation one-third gain dispute that that means therefore that the 33 percent of the tax on 100 percent of the gain is the equivalent of every single dollar of real gain made?Hon GRANT ROBERTSON: I said that I wanted to go back and check the member's characterisation of the report. That's what I will do. But again I say to the member looking at that in isolation from the rest of the company tax regime that the owners of those companies will pay does not give a fair reflection of what the tax impact would be on any company or on any individual person who owns a company.Hon Amy Adams: How can he claim that he does concern himself with international competitiveness when considering tax when he is now actively considering a capital gains tax with the third-highest marginal rate in the OECD—twice the scope of Australia's—and one that the Tax Working Group's own modelling shows would take every single dollar of real gain made?Hon GRANT ROBERTSON: As I said we're considering international competitiveness alongside other issues—like fairness for example; like simplicity. I would note that we're not the first Government to have undertaken a tax working group. The 2010 Tax Working Group on which the previous Government based their decisions around for instance making changes to building depreciation meant that New Zealand had after that the highest effective tax rate for foreign investment into manufacturing plants in New Zealand as a result of a decision that the previous Government made. So international competitiveness hasn't always been at the top of the mind for previous Governments.