Andrea joins Terry to talk about what it was like working as the independent advisor to the Tax Working Group.  They discuss whether Inland Revenue is under-resourced; The differences between the 2001, 2008 and 2018 Tax Working Groups as Andrea was involved with all three and whether it was all “worth it”.

Episode transcript

The audio from the first part of the episode was incomplete so the audio is just the last 8 minutes – but the full transcript is below.

The Week in Tax 26th April with Andrea Black and Terry Baucher

Good morning!

Terry Baucher here.

Welcome to The Week in Tax! It is the 26th of April.

Today, I have a very special guest joining us – Andrea Black, the former independent advisor to the late Tax Working Group and author of a very good blog on tax – it’s the best blog on tax, in fact – called “Let’s Talk About Tax.” Andrea is here to talk with us and, naturally, the subject this week is the workings of the late Tax Working Group.

Kia ora, Andrea! Welcome!

That comes to a point raised by Bruce Bernacchi of KPMG on Breakfast TV saying, “There is not much to see here at the end of the day – Business as Usual for the Inland Revenue”.  He said two points, he thought that Inland Revenue was possibly a bit over-mighty in the policy space but, at the same time, it was under-resourced. 

So you were saying that Inland Revenue is possibly a bit under-resourced.

ANDREA BLACK:

Yes. I mean, that comes up quite often.

In my view, the tax work program, the kind of demand for legislative change is very similar to the demand for health services. It’s largely infinite. You can increase tax policy resource. I’m going to say it like that rather than Inland Revenue. But, ultimately, there’s only one minister, there’s only one cabinet. I mean, while the private sector is kind of large, there’s only kind of one private sector that can comment on everything.

I’m not sure that necessarily increasing Inland Revenue’s resource is the thing. I think what people often mean when they say Inland Revenue needs more resource is that people are saying Inland Revenue needs to be working on the things that I want them to be working on. I think it’s just one of life’s tensions and trade-offs and that is for the minister and cabinet to prioritise the issues they want their officials to work on.

Also, there’s the other issue because there’s the tax policy work programme but the there’s the government’s work programme in total and how much of the government’s work programme do they want tax to be part of because, again, the cabinet has only got a certain amount of bandwidth, so how much do they want tax to be part of that?

TERRY BAUCHER:

Finally, was it all worthwhile? This was a year of your life – more than a year of your life!

ANDREA BLACK:

More like 17 months of my life.

Was it worthwhile?

I’ve had a bit of time to reflect on that. The way I would look is this.  The tax system is really, really important in terms of government and society. And so, in my time in tax, it seems to be, when you get a new government, you get a tax review in some sort – an independent tax review.

I think that that’s right and I think it’s right that new governments should start their term in office with a review of the system that’s going to bring in the money for them to do things. I think, inherently, always having every sort of ten years or so an independent look at the tax system, I think, is a very good idea.

Now, in terms of the comments of what’s come out of it is a lot of business as usual, the inference behind that is that that’s somehow bad when another way of looking at it is, yes, the government has said a lot of things are being worked on, but isn’t that good? Isn’t it good that the direction of tax policy is largely fine?

There are lots of things that are being worked on like withholding taxes for contractors and things like that which will have a huge impact on the hidden economy. I’m speaking personally, my first time in the tax system properly. You know, I had withholding taxes come out of my money. Brilliant. I’d hate to think what would have happened if I’d had to kind of manage it through provisional tax.

There are a lot of things going on already, so I think just because there’s not major change did not mean that it wasn’t worthwhile. I think having an independent look is good, and I don’t see that a lot of the things that have been adopted are already business-as-usual is bad. I think, actually, it’s great and we can take a lot of comfort that things are going in the right direction.

TERRY BAUCHER:

Fantastic.

The final comment on the nature of a Tax Working Group, you actually work now and have been involved either through Treasury, Inland Revenue, or as an independent advisor with the last three tax working groups. Would that be right? And this would be possibly the most substantial of them all, would that be fair?

ANDREA BLACK:

I don’t know if it’s my involvement. I was a junior during the 2001 working group. I was in the field during the 2008 one.

I think it’s comparable to the 2001 working group because they went back to first principles in a lot of cases. I think, actually, a lot of the concern was that this working group wasn’t duplicating the work of the previous one. I don’t think it was any more substantial or whatever than any of the others. It’s just more recent.

TERRY BAUCHER:

The 2010 group – the Bob Buckle-led group – which reported in 2010 suggested that there was perhaps a need for a permanent working group on these areas. What are your thoughts about that?

ANDREA BLACK:

Well, if you actually want independent people, I don’t think you can make them permanent because the advantage of this group is that they were knowledgeable people, but they weren’t insiders. If you start becoming permanent, how are they different to the officials? Or how are they different to senior officials who were reviewing work?

I think there’s a lot to be said, for every new government, a really good look because it is a lot of time and a lot of kind of emotional and intellectual bandwidth. It’s not something that springs to my mind as being necessarily a desired state because, also, if you think about it, the members are quite different from the 2001 to 2008 to this one. It’s good. Each government can kind of put their gloss or their direction on the types of people they want to do the reviewing.

TERRY BAUCHER:

Fantastic.

Well, thank you very much, Andrea! It’s been an absolutely riveting episode, I believe.

If you’re a tax nerd, it’s really, really interesting to hear your side of things and a brilliantly different perspective on what’s gone on is the point about the mix of how the group worked together, the living standards framework, and particularly just how progressive our system is. That alone shows that there’s still scope for what might be seen as quite radical change even though it’s not – for want of a better word – a snappy thing such as a capital gains tax. That’s been fascinating.

That’s it for this week.

This has been Terry Baucher and Andrea Black on The Week in Tax.

Thank you for listening!

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Thank you again.

Ka kite anō!