Capital gains tax polling is pointless when you set leading questions

Tuesday, 9 April 2019

Revenue Minister Stuart Nash and Finance Minister Grant Robertson speak to reporters shortly after the release of the Tax Working Group's final report. The Government will provide its response before the end of April.

OPINION: At a time when the Government might hope that support for major tax reform is building, there are signs the public is less on board than even critics expected.

On Monday a supposedly 'grassroots' campaign to demonstrate support for capital gains tax attracted about as many supporters to the steps of Parliament as it did bodies from the media there to cover the event.

Given that the campaign supposedly has the backing of some unions, which should have been able to muster bodies, the launch of the Tax Justice Aotearoa NZ campaign appears to have been an own goal for those who back reform.

Later the same day BusinessNZ, a lobby group for big business and the peak body for the chambers of commerce network, released polling which showed a majority of voters are against adding a capital gains tax on virtually any kind of assets.

At first blush it may seem like the polling will add severe pressure to the Government to abandon whatever plans it has.

The taxing of things like KiwiSaver is opposed by more or less all voters, according to Reid Research, the polling company used by Newshub.

Even when respondents to the survey were asked whether 'there should be a Capital Gains Tax on the profit made from the sale of a property which is NOT the family home', the question barely gained a majority of support from even Labour and Green voters. National and NZ First voters, meanwhile, were strongly opposed.

Given that a tax specifically on residential investment property has been touted as the fallback position to which the coalition might agree, if even that area was unpopular it would be unwelcome news.

On the back of the poll, BusinessNZ chief executive Kirk Hope declared that a capital gains tax should not be a priority for the Government.

But anyone who has ever read polls on tax issues needs to consider the starting point.

If you ask people about tax increases of more or less any type, they are usually opposed to almost anything, especially if you design the question the right way.

In some ways, the fact that close to 40 per cent of voters back a tax on residential property beyond the family home could be seen as encouraging.

Even, that is, if support is based on the mistaken belief that taxing investment property will improve housing affordability, when it may in fact do the opposite.

Elsewhere, the level of opposition to the tax may be misleading due to the way the questions were designed.

The poll contain clear elements of advocacy for a position which is likely to be backed by BusinessNZ's members.

When asking if a capital gains tax should apply to businesses and farms, those who took part in the survey were encouraged to see these entities as 'things that contribute to the economy of the country'.

When it came to whether the tax should be applied to KiwiSaver, respondents were informed that the savings scheme was already taxed and a capital gains tax would be an 'additional' tax.

While this is true, the question is leading.

But it was not as leading as what appears to be both a sermon on the importance of the economy and a plea by BusinessNZ for some sort of assistance from the Government for its members.

The poll saw 1000 Kiwis told that New Zealand's 'productive sector includes manufacturing businesses, tech firms, start-ups, service companies and farms' which not only employed 80 per cent of New Zealanders, it generated two thirds of New Zealand's revenue.

Only then were respondents asked whether 'our government should do more to support and encourage our productive sector'?

In terms of establishing what the public believes about tax reform, it was about as illuminating as asking whether or not you support motherhood.

This is especially the case given that there was no survey question about income tax cuts – something the Government has virtually promised were it to bring in a CGT.

There are very valid reasons why organisations such as BusinessNZ should oppose the introduction of a capital gains tax in New Zealand which are not simply wealthy Kiwis worried that they may pay a greater share.

The economy has a recognised shortage of capital, in part because New Zealanders are so fanatical about residential property, and a capital gains tax is likely to make the situation worse.

It will also distort the economy in unusual ways, meaning people will hold on to assets which they no longer want to avoid triggering the tax, the so-called 'lock-in effect'.

There are issues which the business community should be trying to make front and centre of a debate which has at times bordered on hysterical.

With a coalition Government that has a new level of political capital at its disposal, and has clearly signalled tax reform, providing skewed polls on public opinion will add nothing to the argument.

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