Capital gains tax front and centre

Capital gains tax dominates Parliamentary debate as parties move to state positions on expected Labour policy (except Labour of course)

6th Jul 11, 3:15pm by Alex Tarrant

Debate on capital gains tax was front and centre at Question Time in Parliament today as political parties moved to position themselves ahead of a major policy announcement from Labour due next Thursday which is tipped to include a form of capital gains tax.

The National Party attacked what it believed Labour’s policy would be, suggesting a 15% capital gains tax just on investment properties would raise little to nothing in revenue for a number of years, and that in 15 years time such a policy would be raising NZ$700 million a year.

The Greens, buoyed by the fact their long-standing policy was finally dominating the national policy debate, asked National why it did not agree with a plethora of advice pointing to a capital gains tax, while co-leader Russel Norman read out a long list of nations that had such a tax.

Meanwhile, Labour was busy calling across the house that no policy had been finalised, with MPs wondering aloud where Finance Minister Bill English had got his information from on the 15% figure as it certainly hadn’t come from them.

Although Labour perhaps gave the game away when much laughter and noise did arise from their side of the House, directed at National, when Norman read out the long list of countries that had implemented capital gains taxes.

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18 Comments

by Wolly | 6th Jul 11, 3:31pm 1309923089

Yes I got to see the circus. Have to say that Labour have ended up looking right dorks on this issue. As per normal they refuse to see the faults in their own promises. The CGT question has been torn apart by National and made clear to all that it is not viable. This will not stop Labour hammering away trying to smash the square peg into the round hole.

And the poll on this CGT issue in the Herald is running roughly 60% no......National win Labour lose. Back to the pork factory Phil...more promises...more freebees...fatter benefits....come on you can do it.

by Les Rudd | 6th Jul 11, 4:37pm 1309927044

I wonder how a comparison might look for the proportion of the people that might be affected by this change, nationally, compared to the proportion of people who take part in the Auckland-centric Herald polls, which I guess would be the rental market most affected, given it size, and given if rent seekers are doing a good they probably have more time and motivation for polls than most and in particular those they collect rent from and those they unfairly compete with in the FHB market.

by Ricardo | 6th Jul 11, 3:49pm 1309924146

It's good there is debate going on..but it's the LAQC rort that needs sorting out

by bob | 6th Jul 11, 5:15pm 1309929336

You people need to be more specific when you say "LAQC rort":

Do you mean the rort where tax is paid on net profit rather than gross profit OR

the rort whereby PAYE earners get the same tax treatment as companies?

by keriwin | 6th Jul 11, 3:58pm 1309924682

If you want to sell your rental move into it for a while to make it your main residence!

by meh | 6th Jul 11, 4:02pm 1309924942

Good idea. That automatically triggers a sale.

by JB | 6th Jul 11, 4:57pm 1309928226

If we are going for tax reform why not a universal land tax that is totally inelastic, ie the land cannot change it's spots, easy to levy x % of GV - at a low level with NO EXCEPTIONS and cannot be avoided.

Meets the general criteria for an optimal tax and pushes investment into productive enterprises.

We have a structural deficit according to Treasury of ~ 5 - 6 % despite what JK & BE tell us.

The surplus may be into the never never - then what ?

BH's charts from the Treasury recent love in show everything heading south with external debt increasing by ~ $ 14 B pa in 2015 from what will then be way over $ 300 B of external debt with interest of ~ $ 22 B pa at current interest rates.

God help us if they rise from their 200 year lows !

Stranger things have happened.

Friedman is on record as coming to the view a universal land tax it is the least worst tax.

Capital gains is too difficult to implement and can be easily avoided.

I am familiar with the Oz CG - hasn't done anything there to discourage property speculation and requires armies of accountants busy doing God's work on the issue.

How do we deal with farms for instance !

Is it to be inflation adjusted ? etc etc

Are company structures excluded ?

My Beach house is a business - I rent it out 3 weeks a year - ensures I can claim GST on the building and running. Typical Kiwi rort ! Obviously excluded ?

Similarly - Over 700 private charter vessels on the coast - Yeh Right !

Land tax always wins on implementation.

by Kate | 6th Jul 11, 5:47pm 1309931254

Land tax always wins on implementation.

So true - which is why we'll never see any political party getting there - however, the IMF will, so I'd see it in our future regardless.

by David B | 7th Jul 11, 12:11am 1309954264

With a comment like that it's clear to me that you know nothing about New Zealand.

by Boatman | 6th Jul 11, 5:05pm 1309928746

What about CAPITAL LOSSES? .

In order to tax the gains you must allow for a tax deduction on the losses.

The truth is we are lilely to see more capital losses in a recession than gains

My NZX share portfolio is 33% down since the 2008 GFC, and I could offset the losses against other income.

Brilliant

by Gummy Bear Hero | 6th Jul 11, 5:25pm 1309929926

Yes , during a bouyant economy the government will collect more CGT , at a time when it doesn't require the extra revenue ...... and the opposite applies during a recession , the CGT will dry up , just when the government faces falling revenue from personal & company tax , too .

....... any losses on CGT will be credited to you as an " off-set " , which you can claim against future capital gains . This will prevent people deliberately creating CGT losses as a tax minimisation policy .

From Australia's experience the CGT is messy , very complicated to administer ...... but accountants & tax-planners absolutely adore it ; they will treat any politician who introduces a CGT to free drinks & meals for life !

by Sepherial | 6th Jul 11, 5:51pm 1309931497

Imaginary tax on imaginary currency in imaginary land

by Sepherial | 7th Jul 11, 2:08am 1309961326

By using the Legal Tender in NZ you implicity subscribe to the value that it holds.

Interesting comment written by a total believer and that does hold true but only as long as the consensus reality holds that thought.

You obviously havn't checked out economic events in history then in regards fiat currency?

The link posted huh huh nice but... your point though is no point except status quo

"what you are told to believe is what you want to believe" thats your choice....you are linking to stuff I checked, researched and read about 10 years ago...

Modern New Zealand

Modern NZ is nothing more than a colonial adminstration area of the global power elite!

If you truely believe that it is all make-believe why dont you give all your money and possessions away and forage?

I have no interest in material things so theres nothing to give away. I forage all the time as a freeman, I have no debt to pay and no man owes me!

You would be best to stop worrying about what sepherial thinks and does and start thinking for yourself martyb!

Ok Im bored of this site for now later have a happy day!

by Sepherial | 6th Jul 11, 8:19pm 1309940389

Lot of confusion here couple of different things happening....

1/ every one wanting a capital gain is a speculator if ya wanna speculate go play Forex or stocks options bonds. These instruments are liquid buying and selling houses is based upon what joe and jane sixpack can earn and eventually they are priced out thats the end game!

2/ a landlord is looking for positive cash flow the capital gain is unimportant its all about the cash flow being positive ie: you can live off it! (Not be servicing some unmanagable debt pyramid of leverage! and hold down a job) The old school landlords I worked for didnt have a day job the rentals paid them!

Capital gain is an illusion as far as im concerned but then again im alergic to debt.

If you purchased a house 20 years ago for a 100,000 and sold it for 240,000 in a capital gain scenario you should now be able to purchase two free hold properties at 100,000 + have 40,000 left errr but no you can not since everything else has moved up relative to your original purchase 20 years previous - an illusion - a magicians trick?

Unfortunatly all the credit creation + interest as far as NZ is concerned has moved in to property. Its an illusion of wealth .... The excess credit has got to find a home somewhere....

Most really have gained nothing thats the magician part in thinking you have!

Just a very basic monatery hypothesis...

by rastus1 | 7th Jul 11, 8:52am 1309985559

....... sell it to your Family Trust first at a price low enough to minimise any cap gain and then have the beneficiaries use it as their family home. On sell at a profit later.

There must be a zillion avoidance techniques...the KPMG tax team will be on the phone to their Aussie branch already ....

Almost enough to make a tax accountant vote labour...a whole new income stream!

Thanks Goofy!

by Snarlypuss | 7th Jul 11, 9:11am 1309986707

Wouldn't you be seleing it the the Family Trust, now, as high as possible, not low, to set a higher benchmark price that any CGT is assessed off, as the talk is that any new rule will not be retrospective? And do you really think that Labor hasn't thought about the compliance issues? Maybe they've been on to their cousins in Aussie and have the good oil on how to plug the accounting holes that they have so far failed to.

by LAJ | 7th Jul 11, 10:32am 1309991539

Just put your money into a really expensive family home. The only reason to own a rental is it preserves the real value of your income and capital like nothing else can. As cashflow on rentals is approximately nothing you may as well have 100% of the capital gain and enjoy your big house than 85% of your capital gain and provide a home for someone who will never be able to buy it themselves (and has anyone asked them if they actually want to buy one???).

When you retire you can sell the big house, bank the money and live off the interest- so much easier than having tenants.

Labour has to tax the family home too or it just won't work.

Or here's a plan. Instead of increasing tax, stop spending so much! Instead of paying "wages" to the "customers" of the Dept welfare pay their rent directly to their landlord, their powerbill (up to a limit) directly to the power company, negotiate a great deal with local supermarkets to provide them a food parcel made up of fruit, vegetables and healthy food each week. Give them free passes for public transport (with photo id). That covers most of their needs. Then pay a small amount of cash to their bank account to cover other needs. To get this they would need to work out a budget with a budget adviser to cover eg clothes, haircuts etc. If they want to buy alcohol, drugs, cigarettes, SKY, consumer items they would have to try and find some work to get cash. That would solve many other social issues at the same time, and we'd know our money is being spent well. They then wouldn't be able to get into debt borrowing money at outrageous rates to buy consumer goods as they couldn't service the loan. We need to make sure people are sheltered, warm, educated, have medical treatment, and are not hungry, anything else should not be paid for by the taxpayer. If people then choose to trade their food for cigarettes etc and let their kids go hungry I'm afraid there is no helping them.

by Nicholas Arrand | 7th Jul 11, 10:39am 1309991963

Agreed, LAJ. Tax the Family Home, all property in other words, as well. That rules out any shifting of assets to circumvent the rules. It also put eveyone on the same playing fields, rich or poor. And only taxes the gain on sale on any profit over the CPI changes over the time of holding. It's income, after all, just like wages and interest income on saving in the bank, and they are both taxed.