The Labour Party caucus has agreed to campaign on a 28% capital gains tax on residential and commercial property, which will be used to fund three visits to a general practitioner doctor for each New Zealander each year.
Opposition leader Chris Hipkins said the policy, which was announced abruptly on Tuesday morning, would help to grow the economy and provide better healthcare.
“Right now our tax system rewards property speculation instead of the people creating jobs and growing the economy. We will change that,” he said.
The National Party's finance spokesperson Nicola Willis was quick to slam the policy, saying that "Labour’s tax grab" would put New Zealand's economic recovery at risk. "It's a tax on savings, investment and growth. The complete opposite of what our economy needs right now."
But Hipkins said the “simple, targeted tax changes will make sure those profiting from property pay their fair share, levelling the playing field for Kiwi businesses and innovation”.
Every dollar raised by the new tax would be redirected into the healthcare system, Hipkins said, including funding free GP visits through “Medicard” — a physical card and digital system which would be used to track entitlements to subsidised care.
The capital gains tax excludes family homes, farms, KiwiSaver, business assets, inheritance, and other valuables. The capital gains tax is only on investment or second properties.
It would appear to capture a holiday or second home, even if that property was not held specifically for investment purposes. While the tax excludes “business assets” it appears to include any commercial property they may own.
Labour said the tax rate would be 28% to align with the corporate rate, so that property transactions are taxed like other business activities. It would apply at the sale of an asset and be charged on any gains after July 2027.
This is the statement issued by National:
Labour’s new tax is an attack on investment and savings
Just as New Zealand’s economy gets back on its feet, Labour’s new capital gains tax would hit businesses and Kiwis’ savings, says National’s Finance Spokesperson Nicola Willis.
“Labour’s tax grab would put New Zealand's economic recovery at risk. It's a tax on savings, investment and growth. The complete opposite of what our economy needs right now,” says Nicola Willis.
“Labour’s proposed capital gains tax would load more costs on businesses, investors and savers and act as a handbrake on our economy.
“Every business needs somewhere to work from and many businesses depend on some form of commercial property - be it the shop building they own or the premise they work from. By levelling a new tax on land and buildings, Labour has effectively committed to a tax on businesses small and large - from the corner dairy to the local factory.
"This is nothing but a tax on the savings and investment our economy desperately needs.
“Many Kiwis’ retirements savings are tied to their small business, rental property or KiwiSaver investments in New Zealand businesses. Taxes on all those things would go up under Labour.
"Kiwis need confidence to invest, hire and plan for the future. This policy would do the opposite. It's a recipe for fewer jobs, lower incomes and less savings.
“The GP policy is poorly thought out and will simply clog the system as Labour prioritises free GP visits for millionaires, paid for by a tax on people’s savings. It would result in longer doctor wait times for every single Kiwi.
“After a week of shambolic policy announcements, this policy appears to have been rushed out with no detail after someone within Labour leaked it to the media.
“National will not introduce a capital gains tax. We are working hard to rebuild New Zealand’s economy with less red tape for businesses and more investment.”
Additional reporting by David Hargreaves
32 Comments
My GP has a long wait list. Like, months.
How are they going to go when everyone has free visits to use up?
Dont folks who need support get a community services card?
The reasoning is less credible than drugs trade retaliation for trade tariffs.
Nimbys will be happy. A lot less building in Auckland now.
Agree, the last thing the health system needs is more demand. At least they limited to three.
Seems like they are moving more towards the working class voters. As you say the poor already get it free don’t they.
Healthcare is a tricky one. We are getting all the issues that you’d normally see with a subsidised system. People don’t give a crap about their health as Nanny will fix them up for free. That’s leading to excess demand. Whenever I go to my local medical centre I’m often the only person there that’s not obese. But no worries, Nanny will give you a free insulin shot.
But on the flip side, the American system is definitely no better.
I personally think somewhere in between might be better. A subsidised system that isn’t completely free so the user has a reason to keep themselves healthy. Obviously this policy is going the opposite way.
Taxing the stable door
After the horse has long bolted
and the barn just blew down.
The distance between Overton Window and reality is widening by the day.
I get the feeling the horse will make another run. Maybe Labour will be too late though.
You don't have to look too far to the west to see how that can be
Self sabotage?
One would almost think that Labours ineptitude around designing /promoting a CGT is deliberate.
They are very clunky aren’t they. Arrived in 2017 with very little planning of substance and futile policy such as Kiwibuild. Then it became a staggering of announcements about announcements and on the hoof such as the cycle bridge gushed out, that even the cyclists could see was not viable. Here there it seems to be that the exemptions outweigh the inclusions. Would think just taking the bright line back out to 10.years would be a simpler effort for much the same result.
The only region where there have been capital gains in NZ over the past 5 years has been Queenstown. We have the ludicrous situation where the many Australian investors there do not pay capital gains tax here on those gains but are obliged to do so in Australia. So, while it will negatively impact me, I'm happy to pay it if it stops the ridiculous situation where foreign governments are raising tax on our property capital gains.
"The capital gains tax is only on investment or second properties.".
So, baches, holiday. 2nd + homes etc captured whether or not rented out.
Labours virtue signalling the thin end of their wealth envy wedge to their congregation. There's a more reasonable question whether the existing Brightline cgt speculator test should be 2, 5 or 10 years however for property owners its still the same asset with the same relative market value. The $ price +/- simply reflects money as the medium of exchange, re/devalued by monetary and fiscal policies outside the control of the asset owners. Looking forward to seeing their tax treatment of capital losses.
So when those property speculators were making millions in tax free gains each year, it wasn’t actually a gain it was just the NZD devaluing? How come my income didn’t go up by the same amount?
The flaw with your argument is that land has a fixed supply, but the demand (population) keeps increasing. Land will increase in value in that scenario. And why shouldn’t you be taxed on your gain, when almost all other gains are taxed.
But I agree a CGT probably won’t just tax the value increase, it will also tax inflation, and that will result in people with baches etc paying much more CGT than any PI will. They really should fix that, the same problem exists for savers where inflation is taxed. They should assume inflation of 2% per year and deduct that, it’s not perfect but better than assuming 0%. And it can be paid for by doing the same with interest deductions for borrowers, the first 2% shouldn’t be deductible.
Land supply is a political decision: we've seen many decades of central & local govt lock it up to maintain value / price increases. Population is also a political decision: NZs rate of natural increase is now a net decline so this millennium Govts L&R have imported more immigrants to increase gross GDP.
The most egregious increase in property prices in the last 50 years was the direct result of 2020/21 political, monetary and fiscal policies. As was the subsequent devaluation.
It's absolutely a tax on inflation (= devaluation of monetary value)
The population increase is not the key driver rather it is the expansion of credit that has driven the gains....population support of this credit (new bodies to borrow) is however is one means of sustaining demand.
The removal of credit (capital) controls towards the end of last century set us on this path, but the problems have accelerated as output has stalled creating a disconnect between credit supply and output....the resulting 'money' has to go somewhere.....unless destroyed by taxation or debt reduction, and we are unable/unwilling to tax those with the bulk of it.
I reckon if the NZ population was still the 3 million it was when I grew up houses would still be affordable. Or if they’d allowed people to build houses while increasing the population that would have helped too, instead of forcing single house zones right near NZs biggest city centre for example.
Either way, the people that gained should have paid tax. Might be too late now though.
If the population was still 3 million and the credit supply was the same as it is then the price per property would be higher (assuming the same property/pop ratio, or we could be like China and build twice as many houses as needed)
Unless we were using that credit to invest in something else....like maybe infrastructure or production, but we dont do that here for various reasons.
It’s not just the credit supply, it’s the income supply, households went from one income to two. Houses are probably as affordable to a household now as back then, but you need two incomes instead of one. One to pay for general living, and one to pay for the house.
"It’s not just the credit supply, it’s the income supply,"
Ultimately it will be income that is the undoing of the bubble, but the driver is credit supply....we are witnessing the struggle maintaining credit servicing and so interest rates are falling (plus the proportion who are credit worthy is declining) but the bubble can be sustained by increasing credit to the reducing pool of credit worthy until it reaches a point when the debtors can no longer service that debt and then the whole house of cards collapses and the debts are defaulted....i.e. the 'money' is destroyed.
Better all round to destroy that excess money with taxation rather than collapsing a functioning system, but greed gets in the way.
Why not sell it as a way to cool a still-too-costly housing market rather than tying it to medical visits?
As others have noted: the problem in that latter is system capacity, not demand, and this doesn't detail anything to fix that.
It feels like a really ill-conceived policy, with the shackling of two unrelated problems, with one of them feeling like a fundamental misdiagnosis (sorry).
I disagree. When you introduce a new tax you want to add a sweetener. People want to think that money is going to get used for something that makes their lives better, not just disappear. For many people this will make a difference, and there are also a lot of voters are themselves well off but sympathetic to those that aren’t that will also like it. Most people don’t understand demand and supply (including many politicians!)
Lower house prices for the poor and the squeezed middle - prime Labour electorates - isn't a sweetener?
And the less dramatic you can make it, the less available traction for the opposers.
Not if you already own one!
So where does that money go? Lower government debt? They need to tell us the other side of the ledger too.
Care to explain HOW you would lower house prices ?
Oh the humanity....speculators would have to actually pay some tax. Hosk all red faced this morning on the wireless.
End of the day NZ is in a Tax loss window as stupid policy drives our future workforce offshore. More tax has to come from somewhere and this is the last untaxed lolly pop in the store. Something will happen. When and what is in debate...
Or someone who buys a family home, moves to another city to work, rents there because they can't afford to buy, and rents out the family home to cover the mortgage.
Under the Labour brightline test that got captured as speculative activity.
I have no problem with this.
One gets to keep 72% of a capital gain windfall that hasn't involved any effort. Sounds OK to me. :)
P8, very good post!
Winston Peters has been vocal about the fact he blocked it in coalition with Labour as they refused to allow capital losses. I guess it's to early to tell whether this remains the case, however, as they are likely to be needing NZ First after the election they may need to accept this to get the policy over the line (and live with whatever direction the implementation of this policy sends house prices).
From the guy who restructured healthcare bureaucracy during a pandemic. Switch to the Singapore healthcare system already and reward people for being healthy and being good doctors. Don't muddy the waters with housing.
I don't have a problem with a CGT as described, but I would have preferred to offset the extra income against lowering income tax for the working class.
Fair enough but don’t forget how GST played out. On introduction and each increase income tax was compensated to some degree. However succeeding governments then ratcheted up the income tax. Trouble is that income tax , PAYE in particular, is just too much of an easy target.
Not to forget over a decade now of bracket creep with both Labour and National clipping the extra "unearned" stealth tax in excess of currently $1Billion pa
Wouldn't this be an incentive for the Govt to have house prices increase in order to fund these costs...
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.