Tax Working Group warned off recommending new environmental taxes

Tuesday, 7 August 2018

There may be a case for applying fringe benefit tax to the perk of company car parks, officials suggest.

The Tax Working Group chaired by Sir Michael Cullen has been warned off recommending specific new environmental taxes by government officials.

But they noted other government reviews could result in additional 'green' taxes.

An example was a review of local government funding by Internal Affairs that could pave the way for new regional fuel taxes or congestion charging, they said.

Separate moves to consider how best to combat climate change could also result in areas of overlap, they said.

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But the officials from Inland Revenue and the Treasury suggested the working group could look at whether company-owned carparks should continue to be exempt from fringe benefit tax.

It could also consider whether special favourable tax depreciation rules for the oil industry and some types of farming expenditure could be reviewed 'to establish if they are delivering sufficient benefits to justify the foregone revenue', they said.

The working group was set up by the Government to consider tax changes that could apply after the next election and is due to publish its draft recommendations next month.

Cullen has previously suggested other taxes such as GST could fall if the working group recommended new resources taxes to improve people's environmental behaviour.

But he has said the group was only like to come to a conclusion there was a case for new environmental taxes after 'quite a long debate'.

Examples of environmental taxes include taxes on petrol, water consumption and waste sent to landfills.

The officials advised the working group to either conclude there was no case for using tax to achieve particular environmental objectives, or to develop a 'high level' framework for taxing the negative effects of economic activities.

Recommending specific new environmental taxes would involve a lot more policy work that could mean sacrificing 'other items on the forward agenda', they said.

The officials said there was not much to be gained from changing the royalties payable by new mines and oil fields.

While the working group could consider increasing the relatively low royalties paid by existing enterprises, that might deter new investors, they said.