James Shaw goes in to bat for a capital gains tax during parliamentary debate; Amy Adams doesn't miss the opportunity to hit back

James Shaw by Jacky Carpenter

Green Party Co-Leader and Associate Finance Minister James Shaw has used the opportunity to deliver a speech in the House, marking Parliament resuming for the year, to lay out his argument in support of a capital gains tax. 

Here is a snippet from his speech

It's been widely reported over the summer that National wants to do nothing more than talk about how we fund public services—or, as it's commonly known, "tax". Well, let's indulge them—let's just indulge them a little bit. Let's start by talking about Karen. Karen is a renter. She's got a career, and she earns roughly the median wage. Over the last 10 years, she's earned about $450,000 and she's paid, roughly, $70,000 in tax. She budgets well, she can manage the rent, and she can manage the other expenses, but she can't quite have enough left over to save. And then there's Paul. Paul also earns the median wage. He's a bit older than Karen, and Paul got lucky and managed to buy some rental property before house prices really started rocketing—about the time that Karen came into the workforce, about the time that John Key became Prime Minister. On the day that Paul sells that rental property, he makes as much as Karen has in the last 10 years, and he pays zero tax on that income—and remember that Karen has already paid $70,000 on hers. Now, what does Paul do? He uses that as a deposit to buy two more houses. That is the rational thing to do. And what does Karen do? Well, Karen keeps renting because there is no way on God's green earth that she's going to be able to scrape together a deposit on $45,000 a year. And that, in a nutshell, is why we have a large and growing wealth gap in this country, and it is undermining our ability to pay for the public services that we all rely on, including Karen—including Paul.

Now, the Green Party has long been calling for that fundamental imbalance to be addressed, and every single expert working group in living memory has agreed with us, but no Government—no Government—has been bold enough to actually do it. But if we are to be the Government of change that New Zealanders wanted and elected, we must be bold. The crises that we face on multiple fronts—the wealth gap, climate change, the housing crisis—we cannot solve without fundamental reform. These crises have been allowed to metastasise because generations of politicians have timidly tinkered rather than actually cut to the core of the problem. And the consequences of that timidity—the consequences of that timidity—are being felt by Karen and by hundreds of thousands of New Zealanders just like her, trapped in "Generation Rent". So when the commentators pontificate about whether this Government can politically afford to do what no other Government before it has done, I ask "Can we afford not to?"

Can we afford not to? We were elected on the promise of change. If we want to reduce the wealth gap, if we want to fix the housing crisis and to build a productive high-wage economy, we need to tax income from capital the same way that we tax income from work. The very last question that we should be asking ourselves is: can we be re-elected if we do this? The only question we really ought to be asking ourselves is: do we deserve to be re-elected if we don't?

I have to say, boldness is needed everywhere, everywhere. The vast majority of New Zealanders were delighted when the Prime Minister and my fellow Green Minister Eugenie Sage announced last year that we were phasing out single-use plastic bags, but New Zealanders also know that plastic bags are just a tiny part of a much larger problem. Enormous islands of plastic waste are spewing into our oceans all over the world. Plastic has been found in the fish that we eat. We need to massively cut down on what we use as well as dispose of it properly.

So this year Minister Sage will be leading the next phase of the "war on waste", and part of the solution will be to put a proper price on pollution and waste. Now, in its interim report last year the Tax Working Group pointed out that New Zealand makes less use of pollution pricing than almost any other country in the OECD—almost anyone. So it's hardly surprising that we have some of the highest waste per capita in the OECDJust as we don't have a snowball's chance in Australia of fixing inequality without taxing income from capital the same way that we tax income from work, neither can we resolve our environmental challenges without putting a proper price on pollution and waste. And Simon Bridges says he wants the National Party to have a strong environmental focus. So I look forward to seeing how he does that—how he cleans up the environment, without making polluters pay. People aren't stupid, they know when they're being lied to and they appreciate being told the truth.

Now, I believe we have nothing to lose by being honest with New Zealanders, and the truth is that we can clean up our oceans, and our rivers, and our skies. It will involve changing the way we do things now: we can make the switch from coal and oil to solar and wind, we can have fast and comfortable and convenient electric trains and buses through our cities, and congestion-free roads for our electric cars.

My other fellow Green Minister Julie Anne Genter and our colleague Phil Twyford will this year be making some of the boldest investments in New Zealand's future transport infrastructure ever. We can replace our ageing freshwater and sewerage pipes with new infrastructure that's resilient to the effects of climate change and sea-level rise. We can rebuild our hospitals and our schools to make them fit for purpose so that everyone can have a good future. In all these areas, in all of them, in transport, water, schools, and hospitals, just as with the tax system, successive Governments have simply been too timid—too timid—to actually do what needs to be done to solve the problem. They've preferred to kick the problem down the road, to lump it on future generations. Well, here we are—here we are.

National's Finance Spokesperson, Amy Adams, responded to Shaw during part of her speech:

And we heard about the capital gains tax, most recently from James Shaw. Winston Peters didn't mention it, but we heard about the capital gains tax from James Shaw, and it was a really interesting story about Karen and—I think Peter was the guy's name. Karen was going to have a better life if there was a capital gains tax—if Peter, who bought a house, had to pay a capital gains tax. Well, the sad thing for Karen is that nowhere in the world—not in London, not in Hong Kong, not in Singapore, not in LA, not in Vancouver, not in Sydney or Melbourne—has a capital gains tax prevented house prices going over 10 times income when supply and demand were mismatched. So the capital gains tax is not actually going to help Karen. But here's the thing: a capital gains tax is not about helping anybody; it's about dragging people down. It's not about helping Karen; it's about dragging down the other guy.

Here's another simple truth about a capital gains tax: James Shaw said that the Government should tax income from labour, or work, the same as it taxes capital. Well, this Government has a comprehensive tax on income, a progressive tax on income, and a capital asset is only worth the income that it produces, which is taxed. So I've got news for the Government: if they make a capital gain on an asset, well, it should be producing more income, and if it's producing more income, under the progressive income tax system that they support, it's going to pay more tax. We are already taxed on any gains made on capital in this country. Only a Government fixated on envy and dragging people down—the opposite of the values that make a country prosperous—would want to tax people again. The madness of it, in a country that has for almost two centuries been desperately short of capital and paid a premium on capital—we have a Government that now wants to put an extra tax on saving and investing. It is madness.

The Tax Working Group is due to publicly release its final report suggesting how New Zealand's tax system should be reformed on February 21. 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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75 Comments

"the opposite of the values that make a country prosperous"

Nonsense, of course, but has anybody asked Adams if she knows what really makes a country prosperous?

“the capital gains tax is not actually going to help Karen” - except she would be able to pay less tax if Peter pays more considering the working group has been instructed to be revenue neutral.

Yes, a bit intellectually lazy or dishonest to argue that the only purpose of a CGT is to bring house prices down when it's clearly been noted often - including by John Key himself - that it's perfectly fair for unearned income and earned income to be taxed equitably.

How is it fair to exclude family homes? Why should my gains of close to $2 million be tax free but an investor pay 33% on it? What impact will taxing KiwiSaver gains have on propensity to save for retirement? The logical response is to bet the house on the family house.

You're correct. It's not fair. It's pandering to try to get a start on more equitable taxation, in the face of a cohort of voters' self-interest.

Although family homes are inherently taxed differently. I can't offset income on my family home's 'losses' for example...

How taxation is not equitable at present? a considerable number of people effectively pay nil or very small amount of tax (income tax and GST paid minus benefits received) and some receive more in benefits than they every pay in tax. So the system is equitable at present as far as taxation is concerned. Equability of tax has very little to do with wealth distribution. What you are talking about is wealth distribution.

With globalisation, low level skills are now competing with slave-workers in third world countries. There is no way that they are going to win this match. Unfortunately, if this trends continues no amount of distributing wealth will remedy the root cause. Distributing wealth that is simply consumed and not invested in any significant and useful economic capabilities only destroys the wealth leave the whole country bankrupted.

The only way to change this is to run economical activities with significant added value from skilled labour that other third world countries are unable to make/provide. Much easier said than done! Both labour and national have had the vision of making NZ a high-tech economy. But having a vision and realizing it are completely different things. All of them have completely failed. This is not something that you can achieve by talking and writing policies without having the competitive advantages underlying such achievements.

Financial policy is driving a lot of that inequality through incentivising asset bubbles by taxing earned and unearned income so incredibly differently. The current system is inequitably treating these two types of income.

Having some people in society receiving a benefit doesn't change the fundamentals.

Here I thought that equity is all about the poor. So when you talk about equity, you meant equity between those wealthy who speculate in assets Vs those wealthy who do something else with their money? what else? here i thought that any wealthy person (by definition) have their wealth by owning some form of assets (a company, a real estate, a copy right, industrial equipment, farm etc). So a CGT that is inclusive of gains on all assets is unlikely to make things equitable for them (as their wealth is already taxed on the same basis).
Reducing tax for those who already pay no tax, is not equitable, is increasing their benefit by taxing others more. you can do that by increasing income tax for higher income brackets. Those higher income earners own most of the assets (or ending owning them) anyway. All you really want is to tax them more. What difference it makes if your tax their income or their wealth? sounds a lot more political than anything

We are talking about equitable treatment of different types of income - earned and unearned. It's a simple economic concept that doesn't need to be confused, conflated or confuzzled.

Rick - as MP's receive an overly generous untaxed superannuation contribution surely on leaving Parliament that pension fund gain in value from $0 to $XXXXX should be taxed at the members marginal rate of tax - jsut to ensure that all unearned gains are treated/taxed equally.
What Jimmy two mums forgot about Karen was that she spent her non working hours, reading womans day, checking out the latest fashion and sales at the Mall and drinking coffee with her mates swapping notes in Womans Day Gossip and the best deals on clothes at DECJUBA whwilst Paul had a part time job at the local service station, saved his extra income and invested it wisely. Moral is you make choices as Karen & Paul did and no criticism of either but the results follow accordingly - Karen is a happy renter with good friends and a contented life, Paul is a landlord and exchanged free time for capital/ income which he now enjoys. Both good results just different forms.

Rick - as MP's receive an overly generous untaxed superannuation contribution surely on leaving Parliament that pension fund gain in value from $0 to $XXXXX should be taxed at the members marginal rate of tax - jsut to ensure that all unearned gains are treated/taxed equally.
What Jimmy two mums forgot about Karen was that she spent her non working hours, reading womans day, checking out the latest fashion and sales at the Mall and drinking coffee with her mates swapping notes in Womans Day Gossip and the best deals on clothes at DECJUBA whwilst Paul had a part time job at the local service station, saved his extra income and invested it wisely. Moral is you make choices as Karen & Paul did and no criticism of either but the results follow accordingly - Karen is a happy renter with good friends and a contented life, Paul is a landlord and exchanged free time for capital/ income which he now enjoys. Both good results just different forms.

Wasn’t that the same John Key who for years allowed foreigners to speculate in the Auckland housing market
without requiring a NZ inland revenue number or even a NZ bank account with capital including all profits repatriated offshore no tax paid ?
Oh he was perhaps NZs smartest Prime Minister but that always irked me

Capital gains are on the family home in many jurisdictions but usually the first say 750K is not subject to tax and the rest is taxed so there’s no reason to complain.
Auckland has ridiculously low property taxes and no land transfer tax All reasons why the city is in supreme debt
Time to straighten out the inequities in investment in NZ

She's not going to pay less tax. This is a classic bait and switch; you can't keep tax revenues that rely on a CGT stable unless prices rise forever.

More likely is, like in Auckland, house prices stagnate, and the Government never quite gets around to lowering those personal tax rates. Either that or it eventually becomes a gateway to imputed rents. That's the only realistic way this is going to play out.

Either way she wins. Lower house prices mean she would pay less rent and have the possibility of buying.

She's not buying on $45K, sorry. That would require house prices to be around the $150K - $200K mark to be 'affordable' for her by most measures.

Lower quartile house prices were around that level 10 years ago in many parts of the country.

No she wont. Interest rates will go higher, there is no scenario where construction costs (labour and material) and the cost of maintain/constructing infrastructure will reduce in future, effectively putting a cap of how cheaper houses may get in event of credit crunch. Land prices can go as low as the cost of creating a new serviced land nearby. These costs are rising. Sure record gains on property will squeeze. They can even go to zero (at which point, construction of houses stops as there is no incentive to do that). But how much reduction that will be on a $600K house? $100k? will someone who is unable to afford the house at $600k and 4% annual interest rate ($2,238 weekly payment for 25 years) in a significantly better position at $500K and 8% interest rate ($2,078 weekly payment for 25 years).
No solution that reduces the construction costs of new houses is likely to make housing affordable. Any drop in values will coincide with recessions, unavailability of credit, higher interest rates, job losses, lower income for the self-employed etc making the reduction in values pointless to consumers. Only way to fundamentally reduce housing prices is to significantly reduce cost of building a similar house on a similar spot.

It isn't going to help Karen. If there is a tax on capital gains, it will be when you sell. People won't sell unless they really have to. Property investors didn't get rich by selling houses. They got rich from buying them. Investors will keep buying and holding. The reason house prices are high is due to the cost of building them. Even the Govt can't build a house in Auckland for less than $600-$650k. If Karen pays not tax then she is still going to be unable to buy one of those houses. Investors aren't going to make nothing on their investment so they will increase rents. Not going to help Karen. The solution is to enable better supply of housing which will keep capital gains in check and work on improving Karen's income.

“But if we are to be the Government of change that New Zealanders wanted and elected, we must be bold. The crises that we face on multiple fronts—the wealth gap, climate change, the housing crisis—we cannot solve without fundamental reform. These crises have been allowed to metastasise because generations of politicians have timidly tinkered rather than actually cut to the core of the problem. And the consequences of that timidity—the consequences of that timidity—are being felt by Karen and by hundreds of thousands of New Zealanders just like her, trapped in "Generation Rent". So when the commentators pontificate about whether this Government can politically afford to do what no other Government before it has done, I ask "Can we afford not to?"

Thank you Jimbo, and that is exactly why you’ll have my vote again “Can we afford not to?”

Capital Gains Tax will increase house prices without doubt.
It will ensure that rents are increased as well!
This so-called government always shoot from the hip and actually. Ever think about any consequences and that is one reason that none of them whatsoever have ever run a successful business.
Grant Robertson who is the Minister of Finance has had no experience in the finance field in his life and yet he is the best candidate to control the purse strings of NZ!
We are so poorly represented by this mish mash of politicians in the coalition it isn’t funny!
CGT has no hope in hell of being implemented and will be the death knell for this poor lot if they campaign on it, so it will be great if they do!

So a tax that is squarely aimed at taking the heat out of housing will make housing somehow more attractive and expensive ?
I own a business, if i sell it under the proposed regime I will pay CGT on any gains, so you are saying all my prices should go up ?

Try again caller.

Owned a house in Sydney for almost 15 years, property had tenants in it every single day of those 15 years except for about 2 when the property manager gave the wrong termination date to one of the tenants. We would have 40-50 people apply each time we changed tenants and would increase the rent every time. Plus we had yearly rent reviews which always resulted in an increase. Australia has a CGT, Stamp Duty AND Land tax and yet Sydney and Melbourne regularly appeared before Auckland in housing unaffordability indexes. The government have already given up trying to sell this as a way to curb the housing market. James Shaw has obviously not got the memo. Cullen himself is describing the CGT as a wealth redistribution tax and has not mentioned it as a mechanism to address house prices.
So a) it is not aimed squarely at the housing market and even if it was it would fail - see Australia and b) prices have absolutely risen despite there being a CGT (we have one here already and it has done almost nothing to address house prices)
So you may want to hang up and call back yourself

At least in NZ's case more of the value extraction from housing debt will be recycled into the local economy in that case, rather than being entirely extracted and sent to parent banks in Australia.

Imagine if their government had used all the CGT to build more houses. I doubt they would have had the same price rises!

Your numbers been disconnected - B52's

Capital Gain Tax like in many other countries can be based on certain percentage like 20% and does not have to be as per income tax 33%.

Also can have short term capital gain say within 3 years or 5 years at 20% or 30 % and long term capital gain if hold and sell after 3 or 5 years can be 10% or 20% (less) and any CG can be off set against loss in property or shares that is capital loss in same financial year against capital gain.

But yes some sort of capital gain tax is required. Percentage can be debated but not should we have it or not.

Many who have been exploiting and reaping from the system are bound to resist like national party and its supporters.

NZ need a leader who can take bold steps in the interest of the country despite vote bank politics and can see none. Will Jacinda Arden be that leader Will have to watch.

Agreed, I propose a CGT starting at 100% for the 1st year, reducing 10% for every additional year the house is owned and therefore reducing to nil after 10 years AND applying to ALL properties including the family home.

Likely outcome: much less speculation, easier to apply as less loopholes, owner-occupiers likely to pay less CGT or none since most keep their house for longer periods of time

It’s not just houses. The proposal is for a cgt on shares too and that’s where this really goes awry. If you have direst ownership of shares, these guys now want to tax the asset as well as the income. That’s what Amy Sdams is talking about - it’ll be disastrous for investment in growth.

James said "Now, I believe we have nothing to lose by being honest with New Zealanders, and the truth is that we can clean up our oceans, and our rivers, and our skies. It will involve changing the way we do things now: we can make the switch from coal and oil to solar and wind, we can have fast and comfortable and convenient electric trains and buses through our cities, and congestion-free roads for our electric cars."
Translation ... "We are going to tax you up the buggery with the environment as an excuse, so we can waits it on crap that has nothing to do with the environment ... "

What Labour does not know or care about is the fact that more Taxes will suck more life out of the economy.
In fact that goes for every government regardless of gender ...

They have instructed the working group for it to be revenue neutral. Any new tax will include a decrease in other taxes.

That would be the biggest Joke of the Century. Jimbo Jones. It would not matter what rate the CCG was set at the Politicians would soon implement an increase after they had wasted the money. Sooner we have a full review with all the Charities and people who have been evading existing tax the better. Too many avoiders, and freeloaders.

If prices continue to go up then it can result in lower other taxes. If the prices don't increase much then it is going to do very little. Even if prices go up, you are only taxing realized capital gains so even then there is no certainty around how much tax it will generate.

NZ voted in a socialist government. Did you expect your taxes to be lower? The basic premise for a socialist gov is to transfer wealth from the richer in society to the poorer. What part of this did NZers not understand when they voted? Not debating the right or wrong......
The USA has had capital gains on investments for years and they go through the same boom and bust cycles as an economy without capital gains tax, including out of control real estate prices on occasion which are affected by a myriad of other economic factors and corporate criminal activity. But then the US does not have a 15% GST, and they don't tax EVERYTHING like NZ which taxes the taxes (rates) and healthy foods (etc) at an exorbitant rate. The gov needs to take gst off healthy foods and other things that affect people Shaw refers to if they are going to be honest about helping these people.
Bottom line, if you want to introduce capital gains you'd better take taxes off somewhere else or you'll end up turning NZ into the ridiculously overtaxed quagmire in the 70's that saw hundreds of thousands of kiwis leave for Australia in order to get a better life through hard work, because they were being taxed for wanting to work hard in NZ. (Not that Australia is any better these days, just what happened then). And we all know the NZ economy went to s--t with those policies and taxes came down in order to promote growth.
I am not an anti tax person, but there ARE limits. The USA has hugely increased its national debt in just two years under trump in one example of REDUCING corporate taxes too much, because he does not understand the big picture, but that's another story.....

They have instructed the working group for it to be revenue neutral. Any new tax will include a decrease in other taxes.

But over what timeframe? It's easy to make it appear revenue neutral when the result is anything but. I agree with GV 27, this is classic bait and switch.

I thing for a CGT to be politically acceptable it will have to come with a matching income tax decrease on day 1. I'm not sure how that is achievable - I hope the TWG comes up with something a bit different to a standard CGT or perhaps backdates the start date.

They could give everyone a tax refund on day 365 based on the net surplus the Government receives on CGT? Once they have some data behind them then they can look at fine tuning income tax rates.

But CGT is unlikely to make much in the first few years so income tax cuts would be minimal. CGT could make more 10+ years down the line but what's the bet that income tax rates won't be decreased at that point in time.

GST is good because it is simple and exceptions are few and far between. Look at sales tax in the US and you will see how messed up things can get. Sales tax is an end use tax so businesses pay it also. You get tax on tax as businesses pay tax on anything they are not directly on selling. e.g. In NZ if a business buys a tin of coffee for staff to drink they don't pay GST on it. In the US they would. This means the tax on the coffee is included in the prices customers pay.

This example really falls apart if you attempt to index Paul's gain for inflation over the ten year period. By my workings, Paul is actually worse off in real terms if he's taxed at 33% and wouldn't be selling his property at all.

Agree. I can’t see how it’s possible to not exclude inflation.

Would love to see an across the board capital gains tax (including family home) and a removal of taxation for Kiwisaver accounts. If people are investing all in their house and you want to switch this, tax the house but make Kiwisaver tax free. You then switch the investment vehicle and Kiwisaver can be re-invested into productive areas.

That would be fine if most Kiwisaver funds were invested locally. They aren't.

Even if a portion of a Kiwisaver investment is invested overseas, ultimately the proceeds will, in most cases, be spent in New Zealand to the benefit of the local economy. Apart from the obvious benefit of diversification , overseas investment 'imports' wealth.

The horse has bolted. We are in asset decline. We need an asset tax.

Yes, we'll just tax our way to prosperity. Never mind the huge administration and compliance cost of making every single asset owning Kiwi a tax filing taxpayer.

PS: You might want to look at what people use to pay for assets. Usually it's income that they've already paid tax on.

"PS: You might want to look at what people use to pay for assets. Usually it's income that they've already paid tax on."

Thats the problem tho.. Lately its been untaxed and unrealised capital gains on other assets. Buy house, wait for the market to gain and leverage off that gain by getting the house revalued and take out a bigger mortgage against it. No tax paid.

Taxing any and all assets owned by every man, woman and child because *some* people manage to cash in on poor regulation of property investment seems like another boomer hoodwink to be honest; not only do they not pay their share, everyone else has to pay as well. Doesn't sound particularly equitable to me.

Be a bit realistic. For example, a tax on all that land banking would soon see it hit the markets at affordable rates. This is not about more tax, it's about spreading the burden wider.

Oh, I agree that capital gains tax on all assets is going to be a nightmare. Residential land is the issue, and thats what needs to be addressed. Forget everything else, target that and that alone. Land value tax, or TOPs plan, but limited to residential & commercial land.

That's not going to change as it will only be payable when the asset is sold.

As Milton Friedman noted, land tax would be the least bad tax. What makes zero sense at all is incentivising all money to flow into non-productive investment for tax-free gains, while heavily taxing income from productive investment.

Are you seeing productivity increases driving greater prosperity for Kiwis as a result of current policy? No.

GV lets consider another example. 20 years ago, 25yo Fred decided to become a PI. He took his meagre savings of 20k and bought an investment property. Every year he had that property revalued and used the capital gain to buy a new property. All his properties were negatively geared and he never paid a cent of tax. Now Fred decides to sell his 20 houses. After paying off his mortgages he makes $10 million - tax free. He retires and takes advantage of free public health, superannuation, etc. even though the only tax he has ever paid was on his average income for the 5 years before he became a PI.
Are you telling me this is fair? That it isn't distorting investment decisions? Or are you another Fred and quite like the status quo?

Soon-to-be First home buyer, actually, before you get too wild when you're confronted with the ins and outs of what you're proposing. Ranting about fairness does not make for good tax law.

By the way, no one is going to be doing that anymore given that rental ring-fencing is about to become a thing, so your example isn't really that relevant. Fred will likely ditch his properties before a CGT comes in and the prices won't rise after the proposed V-Day, so Fred isn't going to pay a cent either way when he sells. The only way for Fred to make his properties work for him is to make sure his rents cover his costs. Guess what that means for renters? Higher costs. Guess what Fred's net tax position is likely to be? Probably break-even. This isn't as simple as everyone thinks it is.

You see that is the point. It simply needs correct application of present tax laws. If you buy with the intention of profiting through capital gain that gain is taxable under present regime. If his rental "business" is set up with negative cash flow then surely that proves "intent" for capital gain and should be taxed? Voila!

Karens landlord will change his focus to rental yield rather than capital gains. Karen will receive a tax cut however Karens landlord will increase her rent accordingly just like landlords did when the Govt increased the student allowance by $50 per week in 2017.

Paul will do the same to his tenants and once a new Govt comes into power and reverses the capital gains tax he will sell up his rental for a healthy tax free capital gain.

It's called the law of unintended consequences.

What if Karens Landlords house is worth 20% less and his yield increases due to a loss of capital (it was just a paper gain anyway), will Karen and Paul lower the rent or bank the gain but not put the rent up.

Yes had house prices not doubled in the last 10 years, either PIs would be making 8-10% yield, or rents would be lower. There is no way that rents would be higher.

“if they make a capital gain on an asset, well, it should be producing more income, and if it's producing more income, under the progressive income tax system that they support, it's going to pay more tax.”

With our money creation system we are encouraged to aim for capital gain and not for an income generating property. Surprisingly enough... this is exactly what we have seen happen.

I wish they would be “bold” and fix the underlying issue for a change.

Agreed, there's a real agency issue in a government committed to making housing affordable, but also relying on ever-increasing price rises for capital gains revenue. Given the effect local councils have had on housing availability, this is a real concern.

I have mixed views on CGT. Having worked in the UK for a diversified conglomerate and seeing first-hand the complexities of dealing with a comprehensive CGT I think it is being overhyped here for political expediency.

My issue is that the Coalition are creating a division between the haves, and the have-nots. This is not smart. They need to focus purely and simply of property, as opposed to having an all-encompassing CGT. The costs of which will be enormous to administer.

In respect of property I believe the horse has well and truly bolted. Any capital gains are locked in now. I see very little scope for future gain, when indexed to inflation. IN fact, in real terms my personal view is that Property will be a terrible investment for the next 10 years. It will therefore be debateable whether the government coffers get any real tangible benefit from this sector.

What will occur if a comprehensive CGT scheme is implemented, will be to tax the bejesus out of Kiwisavers, and small business owners who are the life blood of the economy.

Unintended consequence?

Agree. Compliance and economic deadweight is immense. Especially if CGT is based on unrealised 'gains' and if unrealised 'losses' aren't included.....

Yup. Missed the boat in 2000 and 2007 to implement this; best to bring it in at the bottom, not a stalling peak.

Excellent point Kane

Umm you can't say the coalition are creating a division between the haves, and the have-nots! That division was created by the last government!

CGT= Labour. House prices have risen steadily for 18 years IO.

I only know of one government that thought expensive houses were worth celebrating.....and I"m pretty sure that wasn't trying to appeal to the 'have nots', but he 'haves'.......previous government could have worked on policy that was appealing/beneficial to all people - not just those who were benefiting the most durnig credit expansion, but didn't appear to want to.

I only know of one government who did nothing about house prices because it made people feel rich and distracted from the fact they were taking 39 cents in the dollar above $60K.

Those rich pricks deserved it..... many of those also got working for families to help make ends meet

Around 15 - 20 years ago i owned a few rental properties, and even then I understood that the proceeds of the sale of those properties was subject to tax. I don't think a lack of tax is the problem. i suggest it is the failure of the IRD to apply the rules.

Hear Hear,,,but they don't...Deaf as a post, IRD avoid the penalty points for rentals and leveraging up deliberately.

They also avoid knowing that the Taxpayer already subsidizes rentals to the tune of ....abide with me... ..fast falls the even tide...... and distribution of a fair societies wealth..

When a polly parrots that all is fair and they own rental properties to embellish their own ends, you know it ain;t gonna stop....People are so dumb LA.....la..land.....Bankers and shirkers ...every one....

Plus you pay twice, three times the penalties ..working....as those shirking...a real Mugs Game. Taxation.

Stop working PAYE and start ripping orf the system....they do.......What is good for the goose is good for the gander...Eh!.

I agree that in theory,we should have some form of tax on capital gains-and I say that as the owner of an investment property and a share portfolio which together give me most of my retirement income-But integrating such a tax into our current system in a way which is equitable,will be very difficult.
If for example,such a tax were to be retrospective,it would be grossly unfair to me,but more importantly,to the many small business owners who underpin our economy.Similarly,a tax with no indexation would be regressive.
In that event,however reluctant I am to vote for either Bridges or his successor,I would be forced to do so.

Jacinda campaigned on making housing affordable but for fear of upsetting all the nouveau rich homeowners qualified that by saying "but without dropping house prices". One of the most ridiculous things i ever heard of