Green Party co-leader James Shaw says having a capital gains tax makes even more sense now than it did before COVID-19.
He told interest.co.nz he worried the money being printed by the Reserve Bank (RBNZ) to buy New Zealand Government Bonds as a part of its quantitative easing (QE) programme was flowing through into asset prices, rather than the “real economy”.
He noted how QE done in other countries in response to the 2008 Global Financial Crisis created asset bubbles and had “huge secondary impacts” on house price affordability.
In this crisis, Shaw said we’re already seeing cash flow into stock markets, with markets in the US performing relatively well for example, all the while unemployment is high and rising.
Shaw, who is also an associate finance minister, said it was “worth investigating” whether the RBNZ’s mandate should be changed to enable it to do QE in a different way to avoid creating this disconnect between financial markets and the economic reality experienced by most people.
The RBNZ is currently buying New Zealand Government Bonds from bondholders in view of lowering interest rates to boost inflation and employment in line with its monetary policy objectives.
Shaw said he didn’t have the expertise to say whether or not the Government should direct the RBNZ to buy bonds direct from Treasury with the purpose of funding specific government policies, and in doing so, putting the cash directly in the hands of households/businesses that need it.
However, he was cautious: “With an idea like that, which is largely untested, at a time like this, which is a moment of enormous crisis - it’s not necessarily the best time to go experimenting at scale.
“Maybe if you were to do it, you might want to bite off a very small chunk and see what effect it has, but treat it very cautiously.”
Both Finance Minister Grant Robertson and RBNZ Governor Adrian Orr have said this move, perceived to be taboo, is unnecessary, as the market is functioning smoothly. However, Orr hasn’t completely ruled it out, saying it would be “achievable” if done transparently and with the appropriate checks.
Greens looking at all tax options
Shaw believed that with QE keeping interest rates low, largely to the benefit of asset owners, a capital gains tax made even more sense.
“It was our policy when we entered parliament in 1999; it remains our policy today. The extent to which we’ll lead with that or with something else [at the election] is yet to be revealed,” he said.
Shaw wouldn’t say whether the Green Party would advocate for a different type of tax, like a wealth tax for example, going into the election, in light of the Prime Minister sticking to the position she formed after the Tax Working Group recommended a capital gains tax, that such a tax wouldn’t be introduced under her leadership.
Shaw said the Green Party was “actively looking at all of the options”.
Neither Labour, New Zealand First nor National have unveiled the tax policies they’ll take to the election either. All the political focus is on spending, not repaying.
‘Significant’ progress could be made on welfare reform without NZ First
In the more immediate term, Shaw saw welfare reform as a way of providing a demand-side boost to the economy.
He made the argument that lower income earners are more likely to spend any additional funds they receive, than higher income earners.
“Focussing on income support for people worst off is a really good way to get money moving through the economy… They’re spending it at dairies and supermarkets and electricity companies and using it to pay rent.”
Shaw maintained without New Zealand First, a Labour/Greens government could make “significant” progress in this area off the back of the government-commissioned Welfare Advisory Group’s recommendations.
How a crisis can be a catalyst for change
Shaw believed it was possible to make structural changes to the economy during a time of crisis, without crashing the entire system.
He explained: “You can understand that when there’s a downturn people want to cut cost… but often… they will simply cut too close to the bone. And it means that as the economy recovers, they don’t have enough of an operation to rise along with the rising tide.
“Whereas those companies that go, ‘Ok, prices are lower now than they were a few months ago, let’s cut some deals - borrow, invest and actually build the operation…’ - those companies historically have done very well on the other side as things have recovered.
“Obviously a national economy doesn’t work the same way as a company, but often if you try to do major reforms when things are really humming along and prices are actually inflated, that’s a really tough time to change things because people’s vested interests are in the status quo - ‘I’m making money, don’t mess with it’…
“But if you do see a significant market correction and prices, including house prices and other asset prices, are down anyway, in some ways that’s the ideal time to do structural reform because you’re messing with a system that’s already messed with. And then you retool and as the economy recovers, it actually just grows into the new shape.”
Shaw used his recently-announced Emissions Trading Scheme reforms as an example, saying it was harder and more expensive three months ago to add 3 cents to the price of petrol, than it is now as prices are lower.
We can’t do this all again in 10 years’ time
Looking at the big picture, Shaw said the Government had a “responsibility” to borrow and invest well for future generations, who will have to help repay this debt.
“Every dollar that we borrow and spend today to get us through another crisis, is a dollar that they cannot spend on getting them through another crisis that they will also be faced with.”
Shaw said these were “big ticket” crisis around housing, climate and biodiversity.
“It’s an economic duty, but also a moral duty, to use the stimulus money that we’re currently spending on those things, so that they don’t then have the double whammy of paying for our crisis on top of their crisis.”
229 Comments
A CGT is a waste of time, to many ins and outs and could be avoided. A straight land tax, and x5 the rate for people paying their global earnings outside the NZ tax jurisdiction. Points for trying to differentiate to further left than Labour, but wish him well as this policy is generally the kiss of death politically in NZ.
This (Shaw bringing up a CGT) is exactly what the country needs. Since Labour have essentially become the Green lite when it comes to the environment, we don't need the Greens for the environment any more. The Marxist part of the party can feel free to box on, for what it gets them.
Shaw is spot on. However the mentality of the institutions is far too entitled and patriarchal to allow money printing directly into the hands of the great unwashed who're only really allowed the crumbs. The bandits in the finance sector; CEOs; shareholders (to some extent) are the real winners of money printing. Ticket clipping is the name of the game.
I looked at actual data. Their average income has declined faster than their CPI. So in my mind they have had inflation (i.e. prices have increases relative to the family income). Why do you think their consumption is shrinking? people have less and less money to spend. It is not other way around (i.e. people rather save than to spend, so consumption shrinks so prices fall). Japan QE just props on Zombie financial institution and the costs of that is shouldered by the Japanese families who earn less and less
I agree with you but you're also talking about a fairly recent phenomenon (incomes declining faster than the CPI). Remember that this started 30 years ago. Japanese h'holds have held cash savings (relative to say NZ) that has cushioned the blow to some extent (their money hasn't deflated in the same way it has in NZ where the cost of living is far higher).
NZ GDP per capita has not dropped in that fashion though. NZ per capita GDP has constantly increased from 2006 to 2014 (except for 2008 GFC and all). It dropped from its pick of 2014 at $44500 to $38500 in 2015 and despite small increases since, it has not gone back to the pick (might be due to weaker NZD).
I think his idea to test putting money directly from government deficit spending to citizens' pockets on a small project as a research initiative is a good idea. Specially if they ensure that enough thought and attention is spent on what data is needed and how to appropriately collect and organised it (maybe they could ask NZ universities to be involved and let them know what information they would need and how best to organise it).
Labour will need to retire Jacinda from Leader/Prime Minister if it now wants to introduce a CGT.......
Let's see if it has the intestinal fortitude to do that. Can you see a headline, "Jacinda to step down before September election"?
Does anyone here see smiling James Shaw as the new Labour leader in the near-future? (Other than Shaw, himself?)
TTP
I think his idea to test putting money directly from government deficit spending to citizens' pockets on a small project as a research initiative is a good idea.
Currently savers swap their bank loan derived deposits for government bonds (IOUs), thereafter the government spends those same deposits into the economy via the bankng system. The QE wrinkle swaps those bonds into interest bearing central bank reserves for the same savers in an attempt to wrestle term interest rates down. The RBNZ mistakenly supposes lower interest rates stimulate bank lending to the not so creditworthy masses. In reality lowering the term discount rate just raises the present values of assets which are then capitalised by the minority investor./speculator cohort. Pricing the future today. Inequitably, liabilities for all rise in cost by the same amount.
CGT will take far too long to get any meaningful momentum. Labour needs much more revenue and far sooner. Watch for a property tax based on valuations and mechanisms currently used by local councils. Universal super will not be means tested, instead pensioners will receive a “new” specific tax brackets that claws it back each post 31March.
Foxglove
There is never going to be an ideal time to introduce a CGT and yes, it will not provide immediate tax income.
It’s like putting off going to the doctor - the illness is there, it is not going to go away, so deal with it now rather than letting it festering away.
Property investors consider CG as return on investment and that is income by any comparison or measure - and I am pro property investment.
In the States CGT is high, it stops people selling they just become renters. CGT is impossible the gov't never knows what its earning year to year a simple asset tax based on GV is easy to administer and fair as long as it's tax neutral. The reduction in income tax incentivises people to earn and not speculate.
What would be good, for us the ordinary people on the street, is for both Labour and National to provide in their pre election manifestos, exactly what their tax policy will be for the next three years. Given the great uncertainty abounding at present, the people have every right to know what lies in store in this area, and how it will affect them.
And that is why you're not a politician. Lesson learned from the last few elections is that you cannot propose any tax changes before the election without having the media misinform the public about it to the detriment of the party that proposes it. How did National get the GST increase through? They lied about it pre election. This is the only way to get tax changes through in NZ.
They won’t be bringing in a CGT!
They won’t have a clue how they are going to repay the borrowings apart from just hoping business picks up and more tax is collected!
None of them have had to run a business, always been laid for doing diddly squat and just hoping!
Watch this space as you will see just as “the man” has stated from the time they got in the back door, how nil they really are!!
I will not apologise for working my up to financial success off my own back!
You don't need to. Receiving access to affordable housing off the back of preceding generations and governments'efforts then enjoying massive gains on that thanks to poor governance and central banking absolves you of any such need to apologise for such off your own back. Now if only we get taxpayers free of subsidising investment property that'd be dandy.
That's not how the economy works. A burden shift from the working classes to the wealthy would mean a larger consumer base for businesses to sell to. The business environment in NZ would increase. A matching decrease in income tax would incentivise labour more, or a decrease in GST would incentivise trade more. CGT doesn't disincentives trade or labour.
https://www.marketwatch.com/story/why-raising-taxes-on-the-rich-isnt-so…
The economy would benefit directly from a more equal distribution of income because middle- and low-income families spend a greater portion of their incomes than the very rich do, so more money would recycle through the economy. The economy would also benefit if everyone could take advantage of the opportunities that are presently hoarded by the rich. How many great leaders, thinkers and inventors never got the chance?
Social class, wealth and political power are inherited from our parents and grandparents to a shocking degree.
Inequality of wealth creates other problems. The top 1% are socking away a greater share of the nation’s wealth; so much so that regular Americans are starved for the capital they need to buy homes, invest in schooling and start new businesses. The poorest half of Americans have only 2% of all wealth, half as much as their parents had 25 years ago. Meanwhile, the share owned by the top 1% of families has soared to 32%.
Thanks, it puts Democrat proposals against Republican proposals. Not offering empirical evidence.
Observations are that all incomes have gone up.
The writing mentions
Extreme wealth seems to flourish when competition breaks down. Rent-seeking behavior leads to an inefficient economy.
- that's a markets thing not a tax thing.
Real life examples, high rates produce tax exiles, remember the Beatles in the UK.
The tax minimization industry here in 70s and 80s.
I.e. the burden is shifted to empty space....
I read over the weekend how the US has created $35k to $48k of ‘stimulus’ per person ...... but the people only got a $1,200 cheque! The rest has gone straight to the 1% ers.This sort of c##p is going on all around the globe.....leading to the mass social discontent now erupting ( it’s not about blm at all).
So not really interested in creating jobs or opportunity, just redistributing wealth to people who don't work (for what ever reason, and I don't want to be beneficiary bashing). He disappoints me by not picking up on the opportunities, not discussing how a 'reset' could work, or even regulating areas like property to stop the speculators and parasites (sorry, landlords) fleecing everyone. Just take money of the rich pricks to give to the rest! Did he go to school with Michael Cullen?
I think he is stating what many of us already know. But doesn't the reserve Bank want house prices to continue to rise?
In terms of spending in a crisis, Why are we going to spend half a billion building another tiny indoor stadium which won't even be large enough for major world cup rugby games if we were to revert hold another tournament. Why not build an 80000 stadium if we need one and invest in the future needs
The Dunners stadium brings in millions to the economy. Best idea ever.
Great that the council could see the bigger idea and act pushing away the nay sayers. It has transformed Dunedin and will continue to do so.
The income generated can be used to repair infrastructure.
The worst thing about being moving to Dunedin is the nagging of the Council. If people want something done about it, they sould run for Council and make a difference... other than that they should just continue with their own lives.
But that stadium is going to be a very bad thing for Central Otago & Wanaka residents if Aurora (DCC owned) gets its way. DCC forced Aurora to borrow to pay it dividends up to $144m so it could build the stadium. It left Aurora with no funds for maintenance of its infrastructure to the point that in C Otago powerpoles have literally been falling over. Many more are unsafe, but rather than replace them - because they say they can't afford to - they just attached nail plates at $2500 each, with some poles having 2. These can be seen clearly on CO/Wanaka roads. The road between Cromwell and Wanaka has several of these. Now Aurora has applied to the Commerce Commission to charge CO/Wanaka residents an additional 23% ($504) for line charges per year, phased in over 3 years. Meanwhile Dunedin and Queenstown's increase is pegged at 16%.
The stadium more than pays for itself with the money that it brings into the city. 10's of thousands enter the city and spend up with the events. I moved to Dunners two or so years ago and it adds another level to the city. We meet people that recently moved here often and the population has increased rapidly. The stadium adds a buzz to the city in also plays a part in people relocating. The locals are always moaning about the stadium but are the first to buy tickets and host their friends and family on their visits to the concerts and sporting events.
Land tax has a lot of other benefits too. Chances are it would have the effect of reducing rents too.
https://np.reddit.com/r/newzealand/comments/6b6qy5/landlords_threaten_r…
Taxing land not buildings would help rebuild Christchurch's CBD. It would do more for the city than a $500m stadium and wouldn't cost anything...
https://medium.com/@brendon_harre/transforming-unattractive-car-parks-t…
iconolast
That was John Key's argument about CGT and cycles - and towards the top of the next cycle (whenever that will be) the same argument will be trotted out again and investors will disappear into the sunset with their tax free income.
The introduction of a CGT is not about judging when in relation to short term economic and property cycles - it is about long term.
The Bright Line Test (a CGT in disguise) is working fine; "If you sell a residential property subject to the bright-line rule at a loss, the loss will be ring-fenced against other property income" (IRD). So it can not be offset against other income, and so what if the loss is carried forward against future capital gains - this is no loss to the IRD/government/tax income.
You think,
https://youtu.be/uuKGxBS1obc
Here are Niall Ferguson, H.R McMaster and John Cochrane doing just that.
After years in governance and administration, Shaw & Co lack of empirical evidence, lack of small scale testing of elements of new policy are disappointing.
For a glimpse of the future
https://youtu.be/Nim4MBZ-mw4
A Near Horizon.
Niall Ferguson, H.R. McMaster and John Cochrane are all supporters of neoliberalism reinforcing the last 40 years of economic policy imposed on us. And that has been spectacularly successful for the very wealthy, not so much for the rest of us.
I'm pretty certain that if you actually look at the Greens policies they have all been sized and costed accordingly. Could you point to anything in particular?
You refer to costings of policy.
I refer to the evidence that the policy proposed do & have achieved the objectives specified.
For example, historical data shows as taxes & tax rates go down, tax revenue collected goes up.
Have you got any examples where greater taxes on people have increased all tax revenues and increased community well being?.
Do you have any idea how the costs of zero carbon, 5 trillion, to defer global warming by approx 25 days in the year 2100, how is that money well spent compared to the other spending options not progressed?
Do you accept that the climate of the Earth is under threat? And that it will affect us all? And that human beings, in the last 200 years have accelerated climate change to the point of collapsing the Earth's ecology?
Even the neoliberals won't be able to theorise their way out of that.
Things have to change. The warnings are there and the Earth won't care if we're around or not.
Thomas Piketty and Kate Raworth have some great ideas - me? I just know right from wrong.
Not an expert in any field by any means. And while you didn't address either of those previous replies except with further questions I'll give this one a go.
Companies investing in research in health, medicine, ecology, i.t., food supply, sustainable farming, sustainable manufacturing, renewing local paths to vital supply chains, investing in the creative industries, sustainable building.
Many large infrastructure projects could be implemented with government support such as natural forestation, reinstating apprenticeships, public transport initiatives, water infrastructure, environmentally integrated housing, rebuilding communities......many many more.
We have limited resources. We need to maintain our ecology and environment. We need regenerative non damaging food supplies. etc etc.
Look up. The theme is global warming, how can it be addressed without looking, by overlooking energy (this was an example of full costing, the first example was empirical evidence of policy success).
Somehow the thread has driven away for critical full review of policy and green policy.
Michael Moore has cast a shadow over renewables (in they are not), the work of current gen3 and coming gen4 nuclear provides an achievable answer.
Example France compared to Germany. Energy. France wins.
In context it was a revealing answer.
Sure there are threats.
Where have you been for the past 4 months?.
Now you appear to be making a mistake in that you recognize one threat. One risk.
If that's you, you are wrong. Covid tells you.
Accepting there is more than one risk, next thing one does is rank them order them. Then action accordingly.
What M Shaw & Co seem fail to accept, is their swamping of resources, and full application to climate change thereby starving our pandemic response and other responses.
The poly filler solution of grab another tax to fix the revenue line is shameful.
Let him get a European ngo job, sounds like the rest of the Greens are actively actually levering him out too.
Sorry? What swamping of resources are you talking about?
How was the pandemic response starved? Unprepared maybe. Health services utterly starved by the previous 9 years of National definitely.
As for a wealth or CG tax, this is an equitable response - capital gains should not be tax free when everyone else has to pay in spades for everything. Your crypticism makes it difficult to reply with a straight face.
Thank you. I will take the win.
Unprepared = starved.
The govt $ allocation between Health & Climate Change (health unprepared) shows health should have had more $ in comparison to CC. CC has had too much of funding envelope.
Note, admin of Flu vacc, mgt of PPE purchasing & stores need not cost more than existing health budgets.
Note, measles and pandemic simulation 2019 & earlier was govt wake up call, alarm they slept thru.
Your CGT comments, if that envy is your reason, it's a rubbish policy grows the economy zero.
Whatever win you're taking exists only in your world Henry.
If you believe CC (I assume you mean climate change, and by that man made accelerated climate change) has had too much of the funding envelope then you clearly don't see it as a threat, let alone a threat to mankind. Only maybe a threat to the continued neoliberal policies that have led us to the current troubles. And ensured the wealthy have accumulated wealth upwards, pulling the ladder up behind them.
So in that context funding to combat climate change, adjustment of economic policy to be less resource grabbing and more renewable, putting in regulation to prevent rapacious destructive corporates may well be a threat.
And yes, health has been run down completely in this country in the last 10 years. The coalition are finally starting to rebuild the ruins left by the last government.
I agree that the response could have been better. But at least we can attempt to fix the weaknesses in our supply chain, at the same time strengthening local manufacturing, if there is a will.
No envy sorry, only a sense of fairness.
A less rapacious capitalism that wasn't parasitic. A capitalism that was distributive and equitable
A democratic government that ensures fair distribution of wealth and protects the climate and the planet. A community approach.
Property rights? People should only be allowed to own one home - that's all we need, and maybe a holiday home somewhere. No one should get rich off the backs of the poor.
Rule of law - again, fair and equitable law, not law that guarantees an uneven playing field. Not law that is racist and protects and entrenches the entitled class that we have in this country
The Greens really don't seem to offer much outside of the ecologicial policies. A CGT is a very off the shelf option. "Other countries do it, so we should too". But it's a pain to administer and we wouldn't see any government fiscal benefit for years. I thought an outright capital tax would be the way to go, maybe exclude owner-occupied houses as a concession. Oh, and once we make a dent in our ballooning public debt then reduce income tax rates starting with the bottom tier.....reward working people first, especially the working poor.
No, if you're going to do it don't exclude owner occupied.
Owner occupied is a loophole which has been flogged for years, more now that we have the BLT. And I don't mean bacon lettuce tomato sandwich.
Otherwise we'll just get the mansion effect like they do in Aussie. Pretty easy workaround.
Does that assume the Inheritance is here (in NZ) to be Looked Back on?
I could sell-up and shift cash to, say, Botswana today and into the account of any number of worthy beneficiaries. How is the IRD (or whoever) going to tax that?
Unless there is a reintroduction of Capital Controls, (approval needed to ship funds out of the country), that probably involves a Fixed Exchange Rate to go with it, I fail to see how Inheritance Tax is going to work?
Because tepid colloquialisms are not a sound basis for tax policy? Also, what is the government going to use that money for? Is it going to be spend on something that enriches the lives of the people who otherwise would have been able to retain their departed love one's property without being slugged by a giant tax bill, or is it going to be squandered on government largesse and nest-feathering?
"Sorry your nan died, instead of using your inheritance to pay down your mortgage, here's a bill so Shane Jones can try buying another electorate seat until he wins one!"
If we're dishing out the 'why nots' based on nothing whatsoever, I propose we shoot everyone on their 65th birthday. It would stimulate the funeral industry and save us a lot of money on super.
I'm curious kotare - are you arguing that money taken for the politicians through tax is better off there than in the hands of the people? Consider what controls there are on how the pollies spend it - essentially GVs comments above. Or are you a pollie in stealth on this forum?
Capital Gains Tax BS once again!
The “have nots” once again just wanting to have a crack at the “haves” just because they don’t believe it is fair!
Well I have news for you, they will not be introducing a CGT in with Labour as they know that they would be gone because of their lack of business
Acumen and Ardern has said that it won’t happen under her watch!
What is wrong with the “have nots” doing things for themselves, so that they can get closer to being a “have”?
We have developed into such a Jealous and green with envy society and this is not very becoming!
I thought the Greenies used to be worried about the planet and that money was not important to them, however now they have just become a total left Socialist Party, take from the rich and give to the poor!!!
Shaw and Davidson what have they really done of any economical benefit to NZ?
Sounds about right.
They'll just enforce it better as Income Tax, and if they have any sense, broaden it out to include all business transaction in the process. (ie; those that have claimed business expenses/GST rebates etc from the IRD or earned business income over the tenure of the asset)
Easy!
You mean the haves, having taken from others and pulled the ladder up behind them, not to mention torn up the level playing field crying foul at any kind of policy that tries to restore some form of equality in our society.
Lack of business acumen - another tired old right wing trope. National ran this country down to the bones for some mythical surplus and tax cut that benefited the rich.
As for the "doing things for themselves" - of course we do, you just have no idea. And not everyone covets riches, but it would be nice to have enough to live on. Have you not seen the working poor, that got far worse under National?
Breaking news - the Greens have always been left. And if you look at the policies that have been implemented you'll see that they've helped a large amount of new zealanders, maybe not the ones in your circle though.
But you wouldn't be interested in finding that out would you?
Dcnbwz, which of the coalition then, has business success?
National ran the country extremely well, Oz couldn’t believe that they were voted out by a system of 3 loser parties amalgamating their votes to get in!
Which policies in your opinion, has the Greens implemented that has helped the average New Zealander?
They are not a Green Party any longer, they are more about taking money of the average Kiwi and giving it to the beneficiaries!!
National ran all essential services down to disrepair. Police, health, education, defense all on the bones of their proverbial. Hospitals needing to be rebuilt.
They ran the economy on mass immigration and a housing ponzi scheme.
They gave tax cuts to the rich
They abandoned the people of Christchurch, and the market certainly did not provide
The Greens? Minimum living wage, Insulation in every house, zero carbon act, funding of the city rail loop, buy kiwi made, energy efficiency act and there will be heaps more
Reality is that the coalition took over the country in great financial condition, but is destroyed now due to the over reaction of the virus.
You have to admit that we have not had any deaths due to Covid19 to any people that weren’t in a rest home or elderly and vulnerable.
Don’t feel abandoned at all in Christchurch from National!
Minimum wage risen, when most business can’t afford it but this will show up soon enough!
Insulation in every house? Not correct only enforced onto landlords and not owner occupied houses!
Zero carbon, don’t really care !
City rail? Who needs it?
Kiwi Made? Yeah right people buy the cheapest!
Energy efficiency Act! That’s why power has never been more expensive than it is now!
They are are very weak performing party and not like they used to be in that they Are more for supporting the have nots
Great financial condition with every bit of infrastructures requiring major upgrades. Transport, road, school, hospital, water facilities...You name it... Of course they will get very good financial condition with letting more people in.Most of us can do that as well. But have they done anything to improve infrastructures? Zero... Which costs more? Labour is elected because people are sick of last government which was doing nothing to solve these issues. Now Labour / next government got this huge mess to clean up..
They should probably actually upgrade those things. So far their record on key policies is nil, and all they've done is sit around and trot out 'nine years of neglect' when one of our compliant media has a brief seizure and dares to question the head prefect about where the stuff they campaigned on is. So far we're up to 'three years of neglect' - how many more is acceptable, do you think, until you might start holding them to their own repeatedly reset and missed promises?
The Man 2, are you really that dim that you are taking what happened as a result of the lockdown (few deaths, comparatively) to be evidence that we did not need the lockdown? If you take action to prevent a bad thing happening, and the bad thing doesn't happen, that's not reason to believe you didn't need to take any action in the first place. Perhaps you have not read anything about what has been happening in the rest of the world (though you'd have to have been living under a rock).
When have I never said that I didn’t think lockdown was necessary???
Ardern closed the borders as she had to, a bit slow though!
What she didn’t do was govern the country as it needed to be!
We needed to have been open earlier as the no.s dropped to zero, as the hospitals were not required for the virus.
The excuse is to look at what has happened overseas, which is irrelevant as it never happened here!!!
Yeah nah. We are in unprecedented times. Every country and their response, circumstances are immensely relevant. And of course, if we had opened earlier it greatly increased the risk of a new wave. Was it perfect? No. But we have set the example for the world. Oh and BTW, every country in the world is facing a recession.
Yeah, the rich should be tax free and get to enjoy all their free capital gains given to them by years of central banks idiocy (who incidentally happen to be run by the same people benefiting, but that's just luck right?). They have "worked" by sitting back and doing nothing (???), so should be able to enjoy it because they had wealth invested in assets in... well any asset... because they were born at the right time. Dumb working poor should have just been born at a better time, idiots.
Sure those assets are completely unaffordable now but but but smashed avocado and smart phones and sky tv and and and other distractions... (god please don't tell me to look up actual statistics of when I was a kid compared to now...)
@blobbles .............if the assets are as you say " completely unaffordable " , why then are there buyers clearly willing and able to buy them ?
It makes no sense whatsoever...........unaffordable for whom ?
Buying something may be unaffordable for me , but may be affordable for my neighbour ........... thats life ........... get over it .
If you want it , you need to be disciplined with money and save , save, save and save some more , and then sign up for 30 years to pay for it just like the rest of us did
BS.. I have known so many property traders (incl. some close friends) who bought and sold so many without paying a cent in their tax returns. All you need is follow your account recommendations for the "right intention" before signing the Sales and Purchase Agreement.
Bring in the hard line they have is Aust.. No blimming loopholes to escape.
The Man
A CGT is not about a means of controlling house prices.
It is about fairness when it comes to contributing tax.
I find it hard to understand why a factory worker who works overtime to get ahead pays tax at his/her high marginal tax rate, while a mum and dad property investor who look to property to get ahead and walk away with their capital gain income tax free.
That is unjust.
HERE WE GO AGAIN !!!!!!!!!!!!!!
These people are just delusional , and what problems does he think it will solve ?
1) It will generate very little revenue
2) Its easy to circumvent and to plan to legally avoid it
3) It never brought house prices down , just look at Sydney
4) Its a resentment tax ........ aimed at people who have saved some money and have invested it .
"people who have saved some money and have invested it"
Most people haven't of course. They've borrowed it; leveraged their savings bit up and realised income, not from their own effort, but from a financial transaction that should be taxed in some way. Other sources of income are, after all - say a non-leveraged Term Deposits, Wages etc - taxed, so why not that part of a leveraged transaction as well as the 'cash' part?
I have no problem with anyone who wants to plonk down $X of their own money, using it to invest in any way that they want. ( 0% LVR if you like). But once it's used as the basis for a financial transaction ( leveraged up, in other words) my view changes. Income Tax needs to be paid.
Most people have earned their savings in a PAYE environment and paid tax, and so have paid tax on any retained surplus ( savings) that they might want to invest, so it could be said that those should be free of double taxation in any investment they make with them. But any income, new income no matter how it is derived, should be taxed just as their day-job wages would. The same should apply to any financialisation of those savings - ie: the borrowed bit, and they too should be Incoem taxed at a persons marginal tax rate.
BW, so a business borrows money to run a business, and you want them taxed even more.
If you are talking about property investment then you are totally way off the market!
Are you saying that people shouldn’t be borrowing money to buy homes for their own occupation, and should have only bought their home with cash.
We buy our property by total leveraging, however we pay tax on each and every one of our properties, each and every year.
We employ many people who pay tax From money that we pay them!
We Will pay tax on any property that we sell within the The Brightline time!
Reality is BW, that NZ should be encouraging property investment as without it, there would be so many living on the streets or garages.
And when renters pay money to a landlord that is from income that has been taxed!!! But the money a landlord makes when the asset appreciates is not! So why should a renter pay money on all their income when the landlord does not! If I pay tax on every cent that I earn so should you! You need to learn that you are not special!!!!! All of this has been stated many times. Reality is there would be fewer on the streets if property investment was not unfairly undertaxed!!!!!!!
The tax working group rejected the idea that the wealth of high net worth individuals in NZ is simply 'a store of tax paid income'. A good chunk of the wealth is derived from untaxed income. The 2016 IRD report into HNW wealth accumulations shows HNW entities in NZ on average pay an effective tax rate of ~1% pa..... Many of these HNW entities pay no tax. So the people who can afford the most tax, pay the least. Go figure.
A very small number in 2014 (a few hundred). But they sat on over $50 billion in wealth. The point is the current system of taxation is highly unfair - favoring those who have accumulated capital (in many cases via very low or no tax accumulation methods). Hence, low and middle income NZ bear a disproportionate share of the tax burden (as a % of wealth and income). For fairness reasons alone this needs to be redressed. Any combination of a CGT/wealth tax/land tax/inheritance tax would help fix the imbalance.
It will generate more tax for the government to pay off its debts so we dont have to increase income tax. It's good to solve overpriced house price and slowly get rid of the housing bubble. It's also helpful to bring economy back on track, our financial system will also become more stable.
@Company of heroes .............our overpriced houses cannot be blamed on property investors or lack of a CGT , investors are merely doing what any market participant does when prices are perceived to be rising .
The causes of overpriced houses are many-fold totally unrelated to investors , such as :-
The arrival of 1,000 to 2,000 new faces in NZ every week over the past 10 years , they all need to live somewhere .
Restraints on development by Auckland Council
A single water connection which costs half-an -annual minimum wage for a minimum wage worker
DC levies which make a single subdivision cost up to $250,000 to get through council
Boatman, you are correct it is not investors that force up prices, as I have constantly stated!
In Christchurch, the most liveable city in NZ our prices are extremely affordable.
I have been buying extremely affordable homes in Christchurch for many years and achieve very good returns, by providing affordable accommodation to those that require it!
Our standard of accommodation we provide to our lucky tenants, is light years ahead of anything that the government state houses provide!
The reason this BS in regards to Capital Gains Tax keeps coming up is due to the welfare system that we have, that makes the so-called have nots envious of the haves!
Without the wage subsidy , they would simply have made the staff redundant , thus making it the Government's problem .
Thats what happens in competitive labour market .............just like in America .
Many businesses are going to fail anyway , its just a matter of time
TM2, that statement "In Christchurch, the most liveable city in NZ our prices are extremely affordable" is a bit stale right now, it's like old mouldy bread.
I can say Tokoroa or Balcultha is also is most liveable towns in NZ, its prices are extremely affordable, but we both know it's shxt place to live!
Al of our tenants are working people!
If any get accommodation supplements I don’t care as long as they qualify!
Change the ru.es if the y want but there will be a huge number of people that will require state housing that can not be supplied!
We have no problem whatsoever in finding good tenants that wish to rent from us
@dcnbwc ............what utter rubbish .
There is no evidence that some secret "minority " own the housing stock .
Quite the opposite , there are stats to show most rentals are owned by ordinary Kiwis trying to get ahead
Secondly , investors dont fix the selling prices of houses , most houses are sold by auction or negotiation .
They are not to blame for house prices at current levels
Incorrect. Emotional home buyers outbid others. I know, I've done it as an emotional home buyer.
Rentals on the other hand... when I bought there was NO ONE ELSE buying. No competition from either other investors or home buyers. Mine was the only offer, the vendor chose to sell, no one made them as it wasn't a mortgagee sale.
Even if that's right, it doesn't follow that 'emotional home buyers' set prices. As you point out, they are paying those prices to 'outbid' others. If there weren't so many people trying to buy houses, then there would be fewer situations in which you'd need to outbid someone.
lol, calling someone fool is not a valid arguement. It just shows how desperate you are, Boatman. Did I blamed on property investors? No. Did I say that we are lacking of a CGT? No. I just simply listed some positive aspects CGT can bring to solve our current issues. If you dont agree, then make some valid arguement. I am open to your ideas.
@Company ......how on earth will an additional TAX on housing ever solve or bring down the rampant cost of housing? ..............we all know if you want less of something then TAX it !!!
Do we want fewer houses ?
CGT will never make its way to the poor or homeless , or unemployed , it will simply be consumed by Government .
With the current economic climate it's high time for property investors to cough up in regards to tax. They've had a free ride via the ponzi scheme for way too long. So yes, I'd certainly implement a CGT tax aimed only at landlords and property developers.
I'd also add a in main cites (Example Auckland) "Empty Homes Tax" at 1% tax, charged annual based on the properties RV. This has proved to be very successful in other countries in recouping tax revenue especially for Overseas Speculative Investors, who can't vote by the way. :)
i'm with you, they really don't know what they are doing. I have friends who have invested or speculated in housing and made money they never could have earnt in the productive economy. The gov't encourages this behaviour though an unequal tax system that benefits speculators.
The other side of this is crazy high rents that look young people starting out in life in poverty. Why can these guys not see?
They can't see it because all of their mates are in the same echo chamber. I was at a restaurant in Auckland about 6 months ago and overheard a group of specu-vesters comparing their property portfolios and laughing at all the idiot renters who were paying their mortgages. One guy (who seemed to be the leader) boasted about his 37 properties and how half of his tenants were young families who were beneficiaries of either WFF or WINZ. He delighted in being the receiver of all the tax dollars which he reckons is "payback" for some misplaced harm done to him by the government. They were all sharing the stories of their rentals like they were monopoly cards. It was hard to believe at the time, but my friends I was with told me it's pretty normal to hear.
@ Blobbles , anyone with so much in residential property is just plain stupid , but that aside, there is nothing to stop anyone buying a home for his family , there are ZERO barriers to entry , other that the cost .
And if they cant afford to buy , then they will always be renters , like it or not . Dont blame buyers for that .
And that cost of an Auckland house is not fixed by investors, they are merely participants in the market , investors dont set prices , they take risks at these silly prices , and the yields are tiny , so I dont get why anyone would do it .
The banks are in part to blame , they should have lending ceilings.......... they have lent far too much money to borrowers , and its contributed to the bubble
Oh please. The old "investors don't set prices" chestnut.
If you are the bank and you see someone with 30 properties behind them as collateral plus all the rental income vs someone who is new and doesn't even have secure jobs or anywhere near the deposit... who are you going to choose? Having worked with the lenders in banks, those actually making the decisions about who to lend to, I can tell you they favour investors heavily. Why else would the RB have had different limits for FHB's vs investors?
Pretending bidding for a house isn't a competition between FHB and investors is delusional at best.
Fritz, what part of there not going to be a CGT introduced do people not understand?
It was ruled out by Ardern last year wasn’t it?
What we need to do is encourage productivity rather than reliance on a welfare system that is antiquated and does absolutely nothing for the well-being of families
@Fritz why is it unfair to not have a CGT ?
Investors in any market take risks , for which they expect a yield and a return after factoring the risk .
They should pay tax on the net rent or dividend , which they do , and anything else is reward for the risks taken
We already do have, for some things .... The issue seems to be just with regard to property. If one buys and sells shares (more often than some undefined criteria) it is taxed, corporate bonds are always taxed on capital returns etc. Broadening and simplifying the tax seems an inevitability - since business owners / lenders (share/ bond holders) are taxed on capital returns it seems only reasonable that property investors be likewise taxed. Actually those owning shares in listed property already are.
The Australian system of discounting gains on assets held for a couple years and allowing losses to be used to offset future gains is such that it could be introduced at any point in market cycles. It would not make sense to allow losses to be deducted from other ( eg PAYE) income.
The dissent seems to be predominantly because rental property should be exempt.
We already have CGT. It's just called different for obvious (marketing / denial) reasons - such as the Bright Line test for property, Fair Dividend Rate or the worse for anyone who has repatriated superannuation funds saved oversees a tax on capital (yes a tax on capital NOT a CGT).
These aren't often mentioned by the press or politicians for obvious reasons.
Where the tax working group went completely wrong was their insistence that CGT should be charged at the same rate as income. This clearly would never work, however if kept low and fiscally neutral or perhaps as a tax on capital would help to transform NZ in a very positive way.
CGT does make better sense but will JA does U Turn again. First by arguing for it to win election and than changing tune, once in power.
CGT is good and just but with some changes. Instead of it linking to income tax slab ( which normall will be 33% plus) can have fixed slab like long term capital gain tax (Holding for more than 5 years) than 15% or 20% CGT and if short term before 5 years than 20% or 30% with exception of one family home and could be linke to inflation.
As JA cannot do U turn Again and introduced CGT can make BLT more rigid, can add like Overseas Investment declaration which a buyer has to sign while buying a house can have a compulsary declaration for sellers, if they hold any other house be it individually, jointly, in trusr or in company and if Yes details (for BLT).
Sigh.
Shaw doesn't understand that it is not the QE that matters. It is the deficit spending. If it's financed via borrowing and then QE or directly by RBNZ buying the bonds or just keystroking in the cash to the government's account is macroeconomically the same. It's the spending that matters. The advantage of dispensing with the bonds is that the bond dealers don't get to clip the ticket and the nation gets to stop neurotically worrying about the illusory prospect of the NZ government who issues the currency ever defaulting on its debt.
Right now we don't need any new taxes that stifle demand. We need G to be bigger than T. We don't need rich people's money for the government to deficit spend. Lower income taxes for the low and middle income earners and GST I say. Don't get dragged into a more tax debate. When inflation bites one day worry about it.
Finally
“Every dollar that we borrow and spend today to get us through another crisis, is a dollar that they cannot spend on getting them through another crisis that they will also be faced with.”
This is plain wrong and is the old fashioned pre MMT thinking that leads to austerity bias. Shaw needs to move on and get better advisors who understand modern sovereign currencies.
I'm broadly in favour of CGT but under no circumstances as Greens and Labour see it as a revenue gathering exercise rather than equalising the investment playing field. The devil is in the detail. I think the tax working group labelled it balancing rather than levelling and did not achieve much balancing if any.
The TWG was a vital part of badly needed tax reform left to the most partisan of interests. Those with practical knowledge of dealing with the tax system felt strongly enough to issue a minority report, which was far more sane than the ideological dirge the main TWG report pushed. No government was ever going to accept the main TWG report, it was a total waste of time and a missed opportunity.
Greens need a point of difference. JA is assured of the young urban vote, so this is Shaw’s pitch to them. Has he told them that they can expect to pay a grand or two each year on their KiwiSaver balance? NZF need a point of difference, too, though they are better placed. Big no to CGT, perhaps? As I’ve said many times, the tax system is unfair, not so much through a lack of CGT, but the situation where low earners spend mostly everything they earn, thus paying an extra 15% (GST) on a huge chunk of their wages, while high earners save a considerable proportion of their salary, which of course doesn’t incur GST. The Greens are a concern re tax. More on fuel, CGT, wealth taxes, carbon, farming, you name it. They could well become a millstone around Labour’s neck.
Guy has no understanding of NZ economics
Two points, they’re printing money to get real estate liquid and transacting at the heart of it all, end of story. If you’re going to the introduce policy to cool the market you introduce backward action
Secondly, the bulk majority of capital gain is simply inflation, or toward inflation. A govt can’t tax its own inflation
Shaw has been harping on about house prices crashing by 50% and is beyond irrelevant when he talks about things now.
Trying to stay relevant
Secondly, the bulk majority of capital gain is simply inflation, or toward inflation.
Asset price inflation!!!!
Cutting official interest rates in half five times from 8.0% back in July 2008 dramatically increased the discounted present value of cash flows associated with assets. Investors/speculators flocked to monetise these higher valuations with residential property loans from banks taking advantage of low RWA capital requirements attached to this category of lending to boost shareholder profits.
No. It's an obscene implementation of central bank inspired trickle down economics to benefit the minority rentier class and the masses be damned.
Wealth effect or wealth illusion? The other therapeutic effect of lower-for-longer interest rates is the wealth effect. By driving up the value of future cash flows with lower rates of interest, all manner of assets – stock, bonds, and houses – increase in value and, thereby, can stimulate our marginal propensity to consume. More simply put, the imperative was to make rich people richer so as to encourage their consumption. It is not so hard to imagine negative side effects.
There are the obvious distributional effects between those who have assets and those who do not. Returning house prices in California to their 2005 levels may be good for those who own them, but what of those who don’t?
There are also harder-to-observe distributional consequences that flow from the impact of lower-for-longer interest rates on the value of our liabilities. This is most easily observed in pension funds.
Consider two pension funds, one with a positive funding ratio and one with a negative funding ratio. When we create a wealth effect on the asset side of their balance sheets we also drive up the value of their liabilities. Lower long-term interest rates increase the value of all future cash flows – both positive and negative. Other things being equal, each pension fund will end up approximately where they started, only more so.
The same is true for households but is much more ominous, given the inequality of wealth with which we began the experiment. Consider two households: one with savings and one without savings. Consider also not just their legally-defined liabilities, like mortgages and auto-loans, but also their future consumption expenditures, their liability to feed and clothe themselves in the future.
When the Fed engineered its experiment to promote the wealth effect, the family with savings experienced an increase in the present value of their assets and also an increase in the present value of their liabilities. Because our financial assets are traded in markets and because we receive mutual fund and retirement account statements, we promptly saw the change in the value of our assets. We are much slower to appreciate the change in the present value of our liabilities, particularly the value of our future consumption expenditures.
But just because we don’t trade our future consumption expenditures on the stock exchange does not mean that the conventions of finance do not apply. The family with savings likely ends up where they started, once we consider the necessity of revaluing their liabilities. They may more readily perceive a wealth effect but, ultimately, there is only a wealth illusion.
But what happened to the family without savings? There were no assets to go up in the value, so there is no wealth effect – real or perceived. But the value of their future consumption expenditures did go up in value. The present value of their current and expected standard of living went up but without a corresponding and offsetting increase in assets, because they don’t have any. There was no wealth effect, not even a wealth illusion, just a cruel hoax. Link
What inflation? US 5-Year, 5-Year Forward Inflation Expectation Rate. New Zealand around 1.43% based upon most recently funded yield trades.
Be nice if someone somewhere would put some figures to this CGT proposal.
Like if revenue to be raised was for example $5billion per annum, then at a 10% CGT rate, for example again, there would have to be a capital gain in sold assets of $50Billion.
Where is this variation between asset purchase and sales price of $50Billion coming from? What transactions gardener this volume of capital gain?
Or are we talking about the TOP proposal to tax asset's on their potential (even if unrealised) income gain? Rather than when sold?
Some clarity on what volume of revenue is desired and an explanation where this is to be gained from would be helpful.
Many commentators in this chat seem to miss the point of a CGT. As ugly as it may look to you fellow successful real estate investor, the high returns of unproductive economy need to be highly taxed to encourage capital to shift to the productive sectors. To those that are talking about taking risks, of course you may get profit by taking risks, but that doesn't mean that your risk will go towards the common wealth and this behaviour must be taxed accordingly.
"...the high returns of unproductive economy need to be highly taxed to encourage capital to shift to the productive sectors." totally, which is why every state and council public sector servant needs to be made redundant (or the sector trimmed by 90%) so that their current unproductive endeavours (tax wise at least) can be better utilised into the tax paying productive sector.
Ne need for extra taxes, cut expenditure on the pencil pushing cardigan wearers. Dont know how many are suitable for the real world but at least they could give it a try. Swap the cardigan for a hiviz vest.
Really?
So you are advocating for private only health system, a private only education system, private security in place of police, armed vigilantes in place of the armed forces and what about border security, biosecurity .... the list goes on.
What utter nonsense.
As Laws and Taxes are framed by people in power with vested biased interest, it will be hard to get CGT in NZ (No political will as all politicans and so called experts/media are allergic with the very word CGT as for ages have been exploiting to get tax free income and that is one reason easy/fast tax free money will never be taxed and will remain defination of rock star economy for obvious tax free status in NZ).
Other argument is that we already have BLT but how many people have been taxed under it or is IRD vigilant.
Why not have a form which every seller has to fill and declare if they own any house/property in their name either independently or jointly or even in a company or in trust just like buyers have to sign a form for money laundering.
SO LIKE BUYERS HAVE TO FILL A DECLARATION FOR MONEY LAUNDERING WHEN BUYING WHY CAN'T SELLERS TOO FILL A FORM DECLARING ANY OWNERSHIP BESIDES THE ONE THAT THEY ARE SELLING.
A CGT would be useless if it did not pick up all assets, hence ordinary home owners (coincidentally also middle voters) would get caught up.
Not doing this for homeowners would negate any benefit, as I could (as a silly example) have 4 houses under the names of my wife, children plus a couple more for the dogs.
Smart people will avoid the CGT if not on all assets, or the government will annoy voters who will quickly exercise their freedom of electoral choice. Having the government picking the CGT winners is as useful as asking Jacinda for ideas on running a business during a crisis.
That's easily policed - you can only have a 'main residence' exemption for one house at any given time - the house you actually lived in. Plus you're effectively arguing "any tax can be avoided if you revert to outright tax evasion", in which case, why have any laws at all?
I would agree, however, what people think they actually want a CGT to do would be far better covered by a stamp duty with multipliers where needed (e.g. 0x for FHBs/Family Homes but 5x for investment properties) etc.
Dopey bugger. These anti-wealth policies are anti-job policies in disguise. They seek to destroy the private sector, so we can all be obedient clones. The stupid house prices and homelessness and poor productivity and low wages are entirely the result of decades of stupid politicians and stupid bureaucrats with zero business sense carefully crafting stupid policies that favour themselves and large overseas owned corporates such as the Aussie banks.
By all means print up some funny munny and spend it where it is needed on strengthening the safety net, but spend twice as much strengthening the SME business sector, where jobs are actually created. Refund all taxes paid in the last 2 years, in a cash lump sum, to individuals and businesses with fewer than 250 employees and just see what happens.
If the premise that central banks can just print money to fund any manner of things is true , then there is no reason to tax anything at all. Think of all the advantages of completely eliminating taxation. The government can get all its funding by simply destroying the value of its own currency. Hurray!
Wrong. Tax drives the value of the currency. The fact that each year you have to stump up a certain amount of taxes in NZ dollars fundamentally means there is always demand for NZ dollars. It is the value of the dollar - that you can use it to extinguish your liability to the NZ government. Central banks can fund government deficits to support spending to bring the economy to full employment and capacity utilisation. Beyond that inflation will take off. Then you need to tax more to open up non inflationary space for public spending if that is what the political choice is. Governments cannot use overt monetary finance without limit. And taxation is fundamental to currency demand.
This acknowledges the failure of the governments approach to solving the COVID crisis. Free money, print more of it, and keep giving it away to everybody seems to be the COL only idea.
Shaw is part of the government (ish), so rather than proposing taxes that would stifle the recovery, he should be proposing a way of working that does not inflate asset prices with the governments free money.
Seems he has been captured by the hard left in his party - perhaps he had to sell his soul to hold his place on the Greens list
A capital gains tax would work if a) it is taxed per imputation at a flat rate b) is used to direct investment to productive assets rather than gaining government revenues. Revenues for the Govt are important for expanding the tax base, but the true goal should be it's benefit to the overall economy. That growth itself will produce needed ratio balance that will allow our public debt to remain low and sustainable.
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