Finance Minister Bill English is continuing to rule out a Capital Gains Tax, saying it would be too complex and take too long to generate significant revenue.
English also said the government did not introduce the tax this year because it would have caused too much disruption at the time.
Green Party co-leader Metiria Turei asked English in Question Time on Wednesday why he had ignored Treasury advice and not brought in a capital gains tax on property, excluding the family home, to reduce housing speculation? The Greens have called for a capital gains tax.
The government decided not to proceed with a capital gains tax for a couple of reasons, English said.
"One was complexity of such a tax, second was it took quite a long time to generate significant revenue compared to the other measures that were available from the Tax Working Group," he said.
"Neither did we want to cause too much disruption at a time when many New Zealanders were concerned about their house values and their job security," he said.
Turei then asked why the government did not do something about the medium and long term effects of unsustainable borrowing to fund housing speculation, and take Treasury and the Green Party’s advice that a capital gains tax, excluding the family home, was a critical step towards tilting the economy in the direction the government wanted?
English said he could only really give the same answer as before.
"The government has looked at the option seriously, because it is a serious proposition. A number of countries have capital gains taxes of some sort, and we decided with the circumstances earlier this year not to take that option," English said.
"However we did increase the effective tax rate on investment housing by abolishing allowances for depreciation," he said.
18 Comments
Wonder if Labour and Greens decide to campaign on this next year? Probably any Labour-Greens coaltion will have a capital gains, prices will then come down appreciateably and those investors struggling will sell to take a capital loss write-off. Meanwhile every homeowner sees their home value go down
Just as it was the party which you did not expect to introduce the taxation reforms in the 1980's who did so,it will be the party you do not expect,who will introduce a Capital Gains Tax.
We now have a North American head of Inland Revenue,and an increasingly closer relationship with Australian IRD.
Our Tax system will evolve closer to theirs.
As for house prices,haven't you noticed the correction from the ridicuolus highs.
Haven't you noticed that they are already out of pace with wages and need to cottect further.
What does it matter if your house goes down in value.
It is only somewhere to live.
Im not so worried about asset values falling, i'll leave that to the bank. However I am worried about the implications of future asset rises being taxed and how.
What will the tax be,a land tax or a capital gains, what will the threshold be? who would buy property with this big unknown hanging over them especially if it looks like interest will be adjusted for inflation, better to keep saving than take a risk. How will it effect high asset low return businesses like farming, will it be on transfers within trusts?
Cannot the guys in Wellington get together and sort this out so its a bi-partisan solution that gives us certainty?
They've already taxed property, and very few investors are still buying.
The reasons house prices are still high is because of lack of supply etc, these measures to tax property if anything will probably make that worse.
The main problem at the moment is the government borrowing so much anyway, but the government have pretty much guaranteed that will continue, by boxing themselves in and cutting the tax take, at a time when it was naturally dropping anyway.
if they really want to get prices down ramp up supply! Housing NZ is sitting on prime property throughout Auckland that is just crying out to be flogged off for development. For every house sold in Kohi they could build 4 cheap properties out in the back of beyond. This would help fill the government coffers, stimulate the construction sector, whilst ramping up demand, thereby lowerig prices. Christ do a Public Private partnership and float the vehicle. Kiwis are crying out for investment now. Apart from 2% with the bonk what else is there. Kiwisaver? Without the taxpayers $1k contribution each year the returns are non existent once management fees are taken out. Investing o'seas now is a waste of time since Cullen F^&*d it up. Even the sale of the Hyatt to foreign investors (the jewel in SCF book) was touted as brilliant by the media. How many farms could that buy? More profits flowing offshore. This was picked up well by the Herald business staff eh? not.
I just find capital gains tax unspeakably destructive.
It was used by California, the US, Britain and not only does it not prevent bubbles it encourages them. The government comes to enjoy the increased revenue and everyone thinks they are very clever. Policy is shifted to generate greater gains. When the results of the stupidity finally hit home the government revenue disapears completely. It is called symbiosis, the parasite depends on the host.
Let's not go there.
We don't need more taxes, we need greater production. Just a general flat tax is best to encourage those that have the gift of making money to get on with the job, and then get Government to reduce its own costs and clean up all the handouts! To few are paying costs for to many, it simply cant go on forever!
And where is all this 'production' going to come from, Gavin? Here's just an example. If little Johnny Key left school today to take up his first job ~ he wouldn't be able to, because it doesn't exist any longer!. Key's first job was at LaneWalkerRudkin in Christchurch. LWR went bust last year, after years of trying to compete against the cheaper clothing producers in Asia. We have out-sourced our productive jobs, Gavin, and they aren't coming back until we have a lower wages structure. All our development capital, for new industry, is tied up, where? One guess! All we are left with is a tax on that capital. That's a property tax of some magnitude.
Enough NA, you're frightening Gavin with the truth.
I see we have a visitor from Beijing in town sprooking the production of wool....fabulous market in China and all ours if only we can increase production.....!
A classic example isn't it....to expand wool output would mean more sheep...which means more farmland...either the marginal rubbish that is as dry as buggery one year and sliding into the river the next and when it does produce grass you have to topdress with very expensive fert that's imported and after all that the council ups your rates and oh bugger what was the point of it all because the shearers realise they are in short supply and want the cream off the cake before taking the fleeces off the sheep.......the resulting rise in wool production runs smack into Chinese buyers saying "too much wool...we pay less".
Best decision would be reduce wool production even more. Burn the bales of low grade wool.
Hi Gavin,,,,Totally agree "too few paying the costs for too many"
Capital Gains Tax is destructive.... the Government would find themselves with a rapidly growing demand to provide rentals because Landlords have pulled out of the Market over time. This means the PAYE tax payer (some of which were Landlords - yes we pay taxes) will be footing a bigger bill from their PAYE.
Capital Gain opportunity entices growth now matter what form (housing, shares) it comes in.
You cant just work an hour and be paid for it day in day out and expect to come out to retirement better off because any savings you can afford to make from other forms cant keep up with inflation and taxes.
This economy needs to maintain opportunity for capital gains in whatever form.
And when the 'landlords pull out' of the market, what do they do with their property? Set fire to it, or sell it? Because, as I see it, the property is still there. It's either sold to another landlord at a more effecient net yield; bought at a cheaper price point by an owner occupier, ( making less renters in that pool) or left empty - which is highly unlikely.
Good points,,,Mostly to owner occupiers maybe,,,,there will always be a gap between those that can afford to buy one becuase they have savings (equity according to banks new requirements fopr lower risk) and those that cant..... thats why it will be gradual. Hopefully the outcome will be less new houses built for immediate profit that are not needed. (Especially if the numbers are right about people going to OZ)..
"a general flat tax is best to encourage those that have the gift of making money"
That may well be true Gavin but we do already have quite a low top tax rate and the genuinely productive end up effectively subsidising (via taxes, exchange and/or interest rates) the speculators and bullshit artists.
CGT is intended to shift the tax burden to those that are essentially non productive and away from wages and profits. I think we should do it and cut the size of Government in half at the same time.
An effective flat tax has done well for the US eh? what has it actually created? all are better off? no...maybe the top 10% but probably only the top 2 to 5%
You are thinking like 1) a libertarian...........nations need to be wealthy not individuals 2) a dodo............greater production means a) more consumption....to do that all (or most ppl) have to have enough money to buy....this isnt the case right now due to the GFC, poor wealth distribution (not re-distribution) and debt overhang. b) Use of more materials and in it has to be cheap materials and especially, cheap fossil fuels these are not happening things ever again....
regards
"If the horse were put before the cart just for once, it would be obvious that reforms that aligned tax and credit policies with income generation have to come first, and then surprise, surprise, the savings for investment would automatically be more than adequate."
http://www.interest.co.nz/opinion/opinion-gareth-morgan-argues-baptists-and-bootleggers-favour-compulsory-savings-are-just-plain-wrongBut as we know, the 'status quo'ists' like that cart just where it is, thank you very much, and SWG were told not to mention it! What a surprise.
If the taxation burden was more evenly distributed over wealth generating mechanisms we'd be a lot better off.
As you can see, South Africa managed it, why can't we?
What was apartheid really about for SA?
What is 'economic apartheid' really about in NZ?
Cheers, Les.
NZ has no death duties,inheritance taxes,land taxes,stamp duty,capital gains taxes,and soon no gift duties.
And an Inland Revenue Department decimated by the National Government of the early 1990's under which you would be desperately unlucky to actually receive an audit,and under which the massive profits made in the post 2000 property boom have been largely free of tax.
Study the tax systems of the rest of the Western world.
For example have a read of the Dutch Tax system.
All of you who think this utopia will last are misguided.
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