The Labour Party will be announcing tax policies in the next "couple of weeks" to indicate how it will find revenue to pay for spending plans, leader Phil Goff says. But Goff this morning would not go further into any details, refusing to rule any tax changes, or new taxes, in or out.
Speculation has centred around Labour announcing a form of capital gains tax or a land tax, while a comprehensive financial transactions tax is much less likely. What is known is that Labour is looking to reintroduce a higher top personal income tax rate for incomes "well into six figures". It has also signalled it would introduce a tax-free threshold for the first NZ$5,000 of a person's income, which is expected to cost NZ$1.3 billion a year.
Labour is also looking at 'ring fencing' - not allowing rental property investors to claim losses against other forms of income in order to reduce their tax bills.
The government-appointed tax working group in 2009 signalled a comprehensive capital gains tax could raise up to NZ$9 billion a year, while one excluding the family home - a policy endorsed by likely Labour coalition partner the Greens - could raise NZ$4.5 billion a year.
“You can’t ask me anything at all about the policy until I’m ready to announce it," Goff told journalists in Parliament this morning.
Policies would be in the area of taxation.
“We’ll be looking at, as we’ve foreshadowed, indicating how we will be paying for the policies that we’re introducing, and any changes in the broad taxation area," Goff said.
“I’m going to leave all comment about the announcement until I make the announcement," he said.
Asked whether he would rule out a financial transactions tax, Goff replied:
“I’m not ruling anything in or out at this stage, you’ll just have to wait for the announcement when we’ve completed the policy process."
He said the same when asked about a capital gains tax.
The retirement age would not be addressed at all in the package. The current Labour policy was to keep the Super age at 65.
'Bold change in NZ tax scene'
In further comments to media this afternoon, Goff said the tax plan would be a “bold” change to what was taxed in New Zealand. The changes Labour was considering would look toward the long-term. Goff confirmed an announcement would be made next Thursday (July 14).
“It won’t just be looking at November 26,” he said in reference to the upcoming election.
The changes would focus on reorienting the economy to benefit the productive sector more, although Goff would not say whether that meant providing incentives to try and get capital to flow from ‘unproductive’ parts of the economy to the manufacturing sector.
'Too complicated and values will fall'
Prime Minister John Key tried to pour cold water on speculation of Labour announcing a form of capital gains tax, saying that form of taxation was "hideously complicated". Key also attacked the idea of a land tax.
"The advice we had was it would make land prices substantially reduce," he said.
Pros and cons
In 2009, Economist and Tax Working Group member Arthur Grimes outlined the pros and cons of a land tax (see here), saying a simple 0.5% tax on the unimproved value of land (valued at NZ$460 billion in 2006) could raise NZ$2 billion a year after adjusting for value falls. A simple 0.5% land tax could lead to up to 15% falls in land values, with house prices perhaps falling by 4-8%.
Those most affected by a land tax would be retirees, young homeowners with little equity and low incomes, and owners of large land holdings if a simple land tax were applied.
However thresholds could be introduced to ensure farmers and owners of large tracts of land were not caught by the tax.
In a presentation to media at the Tax Working Group conference in 2009, Grimes said research showed families with a number of children tended not to own high value homes, with Maori and Pacific Island families generally not likely to be hit much either.
See his 2009 presentation slides here
Your view? What should Labour announce?
(Updades with further comments from Goff, background on land tax)
54 Comments
John Key says in regard to land tax, "The advice we had was it would make land prices substantially reduce." I may have got this wrong, but hasn't he claimed in the past that such taxation would have no effect on property bubbles?
In any case, what's wrong with the longer term improvement in affordability if land values were to reduce relatively and gradually over time? Why wouldn't John Key support this?
Hi Alex, sure, but what of the evident incongruent thinking? On one hand JK is saying it would reduce land values, and earlier I believe he has argued to what amounts to the opposite logic with no effect on arresting property bubbles. Can't have it both ways. When you get to him or Bill E perhaps you could ask for claification and explore their thinking a little further. Plus ask them why they wouldn't support a land tax given the evident positive effect on affordability? (What's their problem?) Cheers, Les.
Don't see myself voting Labour...but there is a need for further property taxes, the LAQC rort definitely needs to be sorted...so if Labour propose those types of changes, good on them...could definitely be some swing votes in it for them.
Also, if Labour get property taxes back into the policy debate, it could force National to slam property investors with another tax to counteract Labour's traction. So all in all, both National and Labour could address the issue.
if you are a conspiracy theorist..maybe this is what John Key has been waiting for all along...he had the Tax Working Group come up with ideas..and he decided to only implement depreciation reform, but to keep other property taxes for a rainy day...and once Labour use them in their policy toolbox, then JK pulls out his property tax as a counter-attack...politics - dirty game.
Is that the LAQC rort that allows business expenses to be deducted so tax is payed on net profit not gross profit (the same rort that all businesses like F&P use). Or are you referring to the rort that allows PAYE earners to deduct tax from their PAYE income in the same way that companies can transfer losses from one company to another?
I don't think it is a good think for the renters.
The depreciation change last have pushed up rent for $40.00 on average in Auckland. Another $50.00 will be increased if landlords need to pay CTG.
We may need a policy which can kill the landlord instently before they try to increase the rent.
Dr Roof Ron
1. Either a Land tax or a Capital gains tax.
2. GST exemptions on fruit,veg and milk
3. First $100 of income every week to be tax free
4. A new top tax rate for income over $100,000
5. Putting the squeeze on tax dodgers, such as those who structure their affairs to avoid
paying their fair share
6. Incentives to grow savings
7. Monetary reform to build a stronger export economy
The FAIR SHARE statement I keep hearing really insults me. Higher income earners ARE paying their fare share. By earning more we are paying more. The problem is that what goofy thinks is rich is actually only middle income. Why dont people get that. A flat tax rate IS a fair share option. This sums it up really.......
Suppose that every day, ten men go out for beer and the bill for all ten
comes to $100.
If they paid their bill the way we pay our taxes, it would go something
like this:
The first four men (the poorest) would pay nothing. (NZ Beneficiaries)
The fifth would pay $1. (Anyone who gets any kind of relief from Gov (WFF)
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
total equals $100.00
So, that's what they decided to do. The ten men drank in the bar every day
and seemed quite happy with the arrangement, until one day, the owner threw
them a curve.
'Since you are all such good customers, he said, I'm going to reduce the
cost of your daily beer by $20.
Drinks for the ten now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the
first four men were unaffected. They would still drink for free. But what
about the other six men - the paying customers? How could they divide the
$20 windfall so that everyone would get his 'fair share?'
They realized that $20 divided by six is $3.33. But if they subtracted that
from everybody's share, then the fifth man and the sixth man would each end
up being paid to drink his beer. So, the bar owner suggested that it would
be fair to reduce each man's bill by roughly the same amount, and he
proceeded to work out the amounts each should pay.!
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
'I only got a dollar out of the $20, 'declared the sixth man. He pointed to
the tenth man, 'but he got $10!'
'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too.
It's unfair that he got ten times more than I!'
'That's true!!' shouted the seventh man. 'Why should he get $10 back when I
got only two? The wealthy get all the breaks!'*
'Wait a minute,' yelled the first four men in unison. 'We didn't get
anything at all. The system exploits the poor!'
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat
down and had beers without him. But when it came time to pay the bill,
they discovered something important. They didn't have enough money between
all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our
tax system works. The people who pay the highest taxes get the most benefit
from a tax reduction. Tax them too much , attack them for being wealthy, and
they just may not show up anymore. In fact, they might start drinking
overseas where the atmosphere is somewhat friendlier.
David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible
I think a CGT, a land Tax, and most importantly an assset tax are need to be implyed. Why some people owen a family house worth few millions and most of people only owen a house worth $300K. It is not the future, the socialism is the future and labour is working on it.
Sr roof Ron
FYI
http://online.wsj.com/article/BT-CO-20110704-703627.html
The European Commission expects a Europe-wide tax on bond, share and derivative transactions to raise EUR31.5 billion annually, German newspaper Frankfurter Allgemeine Zeitung reports Monday, citing internal commission calculations.
That estimate is based on a 0.1% tax on all share and bond trades, and a 0.01% tax on derivative trades, the newspaper reports.
OK, Goff's just been around the gallery giving a bit more on this - comments in above. The annoncement should be made next week FYI.
Basically from his comments I'm getting the feeling think are pointing to some sort of capital gains tax rather than a land tax.
They surely aren't going to impose a tax on the family home - that would be too far politically.
Basically Labour aren't going to win this year's election in the current environment (if they do I'll eat a hat or something).
So they can afford to announce some 'big bold plan' for the economy that they can carry through and refine if need be over the next 3 yrs. Whether Goff's there or not doesn't really matter. That gives them a bit of time to say 'hey National's plan hasn't worked, look at us'.
However whether they stick with the 'bold' plan after the election is anybody's guess.
The test now will be to see whether next week's announcement is in fact as bold as Goff is making it out to be.
Alex: If you want to do a Bernard Hickey and "make a difference" here is what you "should" do :-
Victoria with a population the same as NZ has all 3 property taxes.
(a) Stamp duty going in (on purchase) (State Tax)
(b) Land Taxes on aggregated land holdings - including land in trusts - first $500k exempt
(c) Capital Gains Tax on exit (on sale) (Federal Tax)
Ring the State Revenue office and find out how much they collect on Stamp Duty and Land Taxes
Google search the Federal budgets for how much they get in CGT (and it's not that much)
Ring one of the larger Real Estate agencies and enquire which of the 3 taxes influences buyers behaviour.
You might be surprised.
It surprises me that there are people who - voluntarily - are voting for getting slapped with more taxes. How hard is it to understand that the more tax you pay - capital gains tax, land tax, income tax, any tax - the more money will be wasted and less left for you to spend?
Government spending should be cut down to what's absolutely necessary and taxes reduced accordingly - THEN there will be incentives to earn more, THEN productivity will increase, THEN incomes will improve and THEN housing will become more "affordable".
"THEN housing will become more "affordable"."?
I agree with most of what you said except this statement. The ONLY way housing will become affordable in NZ is if it is tax properly so as not too incentivize property hoarding whether it be residential or commercial. The biggest negative for peoples spending power & incomes is their living costs, be it a mortgage, rent or business rent. This could be going to more productive things IF NZ had a government willing to really do something about it
The 'cycle' of NZ politics works like this:
First, create a problem via sloppy legislation and weak kneed policy, then lose an election because your too arrogant to admit your previous mistakes and also the consequences of your crap legislation and weak polices. Continue being arrogant and ignorant of your previous errors/ or should that be "era's" while you write up new sloppy legislation & weak kneed policy hoping to correct some of your previous mistakes and find favour with a new generation of 'mugs' who have short memories also.
Problem - Reaction - Solution same old tactics same old gang of vested interests.
What the majority havn't worked out yet is that there is only ONE party and the Party takes its orders from other places over in The City of London or over at Goldman Sacks...
Depends on the deals on the table or I should say which bits to be sold off at cents on the dollar to who...
Mr Aguirre
I recently finished your book using your Christmas discount. Great read by the way! I've been following your blog since the beginning and so far you are spot on regarding the changes a society faces during an economic collapse. My country (Greece) is in slow mode collapse and funny thing is most people don't understand what's going on and where things are really going (debt restructuring/default). I guess ignorance is bliss right?
Anyway, one of the positive aspects of this economic annihilation for the middle class is a growing wave of civil disobedience taking place in the mindset of the common folk and also on the streets. The most successful act of this type is the ''I will not pay'' movement for the toll highway fees which have increased at least 300% in the last few years. According to estimates published by the movement and the government, at least 20% of the drivers refuse to pay the toll, simply remove the barricades by hand and drive on. This of course has panicked the companies operating and profiting from this but also the government which fears a coming wave of general refusal to pay for anything deemed too expensive (which is practically everything in Greece - food, power, taxes, more taxes etc.)
My question to you is: Has a similar movement manifested in Argentina after the collapse? If so, what have been the results?
Thanks in advance for your time,
K.C. from Athens, Greece
http://ferfal.blogspot.com/2008/10/thoughts-on-urban-survival-2005.html
cshawcuk Today 05:54 AM Recommended by
2 people when the brazillian and argentian governments repaid their debts to the IMf the resulting loss of income through interest payments to the IMF...caused panic in their finances..they are infact like every other bank on the precipice of insolvency and can only exist because they rape countries -they have no assets of their own-only the ones they take from the countries they "invade" ReportRecommend panos 6 seconds ago Add also that the loans to Greece (because there isn't charity help but loans from eurozone & IMF) are almost at twice the rate they gave to Argentina!!
Greece from 90b euro debt in 1994, by 2009 had paid 600b INTEREST and their debt was 300b http://www.telegraph.co.uk/finance/comment/jeremy-warner/8616747/Lesson…
Well I'll confess I haven't voted for National since many elections ago, but a vote for Act is a vote for nutcases, and a vote for Labour with prospect of a Labour-led coaltion means Greens would be in the driver's seat, and thus effectively a vote for nutcases on the other extreme. So, nowhere else to go this year, and guess I'm representative of many Kiwis on that one.
Muzza.
Well I'll confess I haven't voted for National since many elections ago, but a vote for Act is a vote for nutcases,
Really,can you tell me the policies that you think are ,<nutcase>.
Personly I will vote for the party that wants to pinch less of my money.
As a poster said on here earlier,no one votes to have their tax increased,they will only vote for an increase if its someone else whos being taxed.
Poor old Goofy and the Labour Party wowsers. New Zealand has numerous pressing economic matters to attend to such as our debt/appalling rates of savings, low productivity and a lack of innovation. And their solution to those pressing economic needs? NOTHING! From them it’s the same old same old that the bankrupt Left always has. TAX AND SPEND, TAX AND SPEND. Pathetic! Labour party flunkies and associated hangers on, give yourselves an upper cut!
http://earlywarn.blogspot.com/2011/07/update-on-north-sea-oil-productio…
fantasy?
No matter how hard they cut and/or tax, the Brits never catch that graph up.
I'll stick with physics.
2TB - (you'll be into macro economics, then?)
Can ye no' see? Have a look at that graph - it's global too, except that the exporting countries retain more in proportion to production, so the importing ones (like us) cop it faster.
Economic landscape? An unfortunate - and doomed - misconception, I'm afraid.
You could offer it to Hughy, though. He could build on it..
Interesting to see an article in the 11 June Economist discussing the candidates for the Republican nomination, who are having to pander to the loony Tea Party fringe.
Tim Pawlenty is described as "setting out his economic stall firmly on the right, promising to slash the size of government and boost growth by simplifying income taxes, cutting corporate taxes and eliminating taxes on capital gains, dividends and inheritence. Critics dismissed his plans as fantasy."
So removing capital gains taxes in the ultra-right-wing US is seen politically right-wing extremism. But even suggesting such a thing as a CGT in NZ is to be laughed out of court.
One does note that virtually all OECD countries have a CGT, & somehow manage to survive.
Our failure to have a broad taxation base including some form of wealth tax will inevitably lead to extreme polarisation of wealth, in a country already with a more extreme Geni coefficient than most OECD countries.
There might be howls of rage & name-calling ("Goofy") among the land-holding Interest.co.nz posters, but the argument for a CGT is undeniable.
Cheers to all
Yeah extra taxes are really good at bringing the price of things down - look at how price of things dropped when GST was increased.
Supply and demand has nothing to do with it - look at the exhorbitant price of tomatoes this winter. Nothing to do with weather related supply problems, it's because the Asians are buying them putting them out of the price of proper kiwi's and also those *&^%%$ tomatoe investors speculating on them. Tomatoes should be taxed more then they will get cheaper!!!
A land tax should form the base of tax for New Zealand.
A Land tax is a tax on not doing anything. That is why the rich don't like it.
At the same time as a land tax we should
Lower GST
Lower PAYE
Lower Company Tax
Because these are all taxes on people that do things, like work, consume and invent stuff.
Say no to a CGT - becasue that simply taxes doing things.
The idea of moving much of the tax base from taxing activity to taxing non activity - across the board no exceptions is very compelling.But to do it we have to tackle it the way we started with GST. There can be no exceptions for first homes or farms or anything.
The idea that it will supress land price inflation is actually one of the most comelling reasons in favour of it. Others are that it is impossible to avoid. And it provides a base for a tax system that is currently on shaky ground.
CGT can be avoided
PAYE can be avoided
Company Tax can be avoided
GST can be avoided.
CGT should be simply rejected. It is unworkable. The others should be brought down to the level that a reasonable man would not attempt to pay too much to avoid. There will never be a reasonable level for corporates as they are essentially psychotic in nature.
In the end we will get a land tax because it cannot be avoided. And it is immune to the ups and downs of the business cycle so when one of the major parties breaks ranks and does it, the other party will not get rid of it.
With a Land Tax the government does not car who owns the land, only that the tax is paid, by whom does not matter. It will stop people land banking through their parenets and inheritance. It will help move us from a nation that wants someone else to do the work to a nation that wants to do the work.
If Labour had the never to bring it in it could help to reposition the party to chnage the meaning f Labour. To make Labour stand for the party of people that do stuff, that labour and toil, either as owners and workers and to stand against those who simply want to rent seek and operate toll booths. These could the be exposed as the core of the corrupted National Party. Rob Muldoon would be appalled at what has become of a once great party , a party that stood for New Zealand and New zealanders, A farmers party maybe but it was a party for doers not for those who sat back with their hand out.
Re
waymad
Heh. The poor ol' Labourites are still trying to 'soak the rich'.
Hate to break it to you but probably have not noticed that it is the rich soaking the poor. The rich avoid, the middle get squeezed the the poor get less and less. Have you not been keeping up. As New Zealand has very few very rich people it seems pointless to fucus too much attention on what they want.
I want the poor to front up more to this country and start contributing to it instead of always having their hand out and taking, taking, taking. They pay no tax or very little, most are on welfare, they don't contribute wealth, opportunity or productivity to the country. They are the major users of our health system.
I want to see the poor start to pull their weight in this country, and to give the rest of taxpaying New Zealand a fair go. I want to see them take responsibility for getting themselves out of low paying jobs or welfare dependency.
In the interest of fairness, all people on benefits (excluding Invalids, sickness and National Super) and low tax payers should have to give 10 hours of their time free each month to high tax paying New Zealanders as their way of giving something back to those that give to them so generously.
Make the Poor Pricks pay their fair share.
All for that paying, "their fair share":
This is an advertisment for a Capital Gains (and land) Tax:
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Bayleys can guide you smoothly through that process. Bayleys is New Zealand's largest privately owned full-service real estate agency. With more than 57 offices throughout New Zealand, Bayleys can help you find the home of your dreams or a commercial investment property in New Zealand.
The benefits of buying property in New Zealand are that there is no capital gains tax, no stamp duty, no gazumping, no chains of contract and no inheritance tax.
http://www.globalfootprints.co.uk/new-zealand-property-information
I only own one rental property on 2 1/2 acres, 1 3/4 of the property is a avocado orchard that I work, I have 60 avocado trees that produce $11K a year. The trees are worth $60K. My question is do I pay CGT on the whole property or the bit with the house on? Who decides? Seems like an army of beauracrats will be needed, I guess Goofy can rehire all those sacked by Key....
A land tax on wastefully used land, such as McMansions, would be a goer.
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