Prime Minister Jacinda Ardern won’t commit to ensuring any tax hikes introduced will be offset by tax cuts.
She acknowledged to media at a post-Cabinet press conference on Monday afternoon that the Government had instructed the Tax Working Group (TWG) to recommend packages that were revenue-neutral.
"So obviously we were interested in those ideas," she said.
"But we’ve made no commitments on any elements of the TWG report."
Pressed on whether her preference was for tax reform to be revenue neutral, Ardern said: “I’m not giving my preference here at this point in time. My job is to bring a consensus together...
“I have never stated a preference on a particular outcome of the TWG.”
Ardern’s comments could reflect her unwavering commitment to not tainting discussions between coalition parties, or pre-empting how the Government will respond to the TWG’s recommendations come April.
Alternatively, they could reflect the Government pulling back from its intention to ensure whatever tax changes it implements are revenue-neutral.
The TWG estimated that taxing capital gains earned on investment property, land and improvements, shares, intangible property and business assets would raise about $8.3 billion of tax revenue over five years.
It put four packages on the table suggesting ways to offset this through things like income tax cuts and changes to the way KiwiSaver is taxed. See this story for more on what those packages look like.
89 Comments
This issue is simply going round and round the mulberrybush.This is becoming a circus, and a penny dreadful one at that. Does this government actually know that they are meant to govern. They are sowing so many seeds of doubt and uncertainty, that if this was during the cold war, you would think the Russians were behind it. The world is not exactly an easy place at present and we are but a small player. For heavens sake get what we can do done and do it with some confidence not this endless pussyfooting with committees and Clark and Cullen playing Waldorf and Statler from the gods.
... yeah , I don't get it ... I'd have thought that as the real estate market has peaked and is now trending down that property speculators / investors would be dead keen on a CGT ...
They've have a CGT free run to the top of the market ... Taxcinda introduces a CGT ... and they can lock in losses as the market falls , to offset against future profits ....
... why can't they see the logic of that ?
Does it look like they're keen on a CGT?
This is not about how much a CGT will make, whether workers will pay less tax on their income or whether it's a bad time to introduce a CGT as house prices are dropping. It's about treating income the same, whether it comes from a person's labour or from a gain in value of an asset.
It's a fairness issue and nothing you have said responds to that.
Haha, until they've decided on what their proposal is, they're not going to include or exclude anything. Jenee is simply making up something to write about. I've got your next headline. Labour didn't denounce North Korea at the last press conference... Labour supports North Korea! Don't turn interest.co.nz in the the Herald please.
GV, no they haven’t figured out a response because they have realised they have not worked out how they can camouflage what is being constructed as a blatant tax grab. Read Chris Trotter today about all the other tax hikes being proposed, read out in parliament, as well as CGT. This is what Labour governments do because that’s all they have always done. Except for that of Roger Douglas though. I will keep on banging the drum. They introduce & increase GST as the great panacea, and next time round bang up income tax again, so eventually you end up with the same old tax plus GST. so twelve years later let’s do a replay with CGT. Here is Ardern, admitting as much as far as keeping all the “options” open.
Labour are about as indecisive as a kid picking out chocolate flavours. I can imagine Jacinda at the supermarket: Peanut or almond? What about hazelnut. The greens really like dark Ghana but little Winston doesn't like the dark ones and Shane is more into lolly scrambles. The greens are fruity and NZF are nuts. Maybe fruit and nut then. Oh damn it's not vegan. Might have to get a working group to report back on the options then.
The Greens co-leader has stuck her stake in the ground and just kaiboshed the whole debate .
I have been saying it for months ............ this Coalition Government is an utter shambolic disaster, bumbling and at times lurching from one self created crisis to the next .
What have we New Zealanders done to deserve this ?
Yup.. she has said CGT doesn't go far enough and should be the first step to wider tax reform.
Looks like McFrowny Face has got a lot of work to do to reach a consensus... that said given her vast and worldly experience of chairing the International Union of Social Youth this should be a breeze.
Exactly, considering exemptions, deducting the bright line test revenue and a flat to falling asset market - there could be close to nil revenue from CGT for the first five years. It would be foolish to reduce income tax in the expectation that CGT will replace it. It is an unpredictable tax unlike income or GST, and people change their behaviour to avoid it. Investors will simply hold off selling for the first few years, if National maintain their policy of removing a CGT. This could seize up the economy. Ardern and Robertson need to read the dissenting members' report to the TWG, but I doubt they will bother. Their view is that a CGT loads dead weight cost onto the economy for very little tax revenue and little effect on house prices. And that an extension to the bright line test would be preferable.
Simon Bridges would be best just to sit back right now.
The Greens have said CGT doesn't go far enough but if we cant get CGT in we shouldn't be re-elected.
Winston knows if CGT goes thru then he wont be re-elected as he will burn his supporters (as well as contradict his previous stance on CGT).
Bridges doesn't need to stir the pot. Sit back and keep his powder dry as the Coalition of the Lost tear themselves apart.
For the life of me I fail to understand how or why the Labour -leg of the coalition Government needs so many months to make its position clear on this tax ( which it has wanted for over a decade ) .
They (Labour ) have had the TWG report since before we, the people, saw it ........ and we were mightily horrified by the contents of the report when we finally did get sight of it .
Its a shakedown of the assets and small ( and often modest) capital reserves of ordinary hard-working individual New Zealanders, who , at the Governments' instigation have saved some capital and risked it in providing rental stock and building a nest egg for their retirement , and old -age .
Its wrong on every level and driven by resentment of success.
I believe a case can be made for a more equitable redistribution of the tax however I am vehemently against CGT, or any other change for that matter. This is how low tax regimes become high tax regimes - with no discernible benefit to the nations citizens. Any new revenue will instantly destroyed by bureaucracy, consultants and progressive agendas like climate change. The playing field is level, you know there is no tax on investment property so make rational decisions accordingly.
You're assuming that a meaningful portion of this extra revenue will make it back to a) people who need it and b) that they'll use it to improve their lot in life. As a rule, if that was the case it would be fine by me. The problem is when you have endless contractors, inflating public sector salaries in Wellington (but front line Govt workers like teachers etc striking) and one group of taxpayers paying through the note (e.g. student loan repayments) but other people universally get free tertiary education.
Fairness.
Will not commit but will do as politics will force them.
All surveys done by Labour party and Winston Peter and all discussions are just playing with time as what has to be done is already decided as below :
Understand that will bring CGT to housing market (For farmers and small business may exempt or give concession or go soft on them) and will give some concession on income tax.
Watching this Govt self destruct is a wonderful thing - if it wasn't for the havoc they are creating in doing so. I am saddened that a Labour Government is so willing make it much harder for today's young to build an asset base for retirement. Stealing their future is not producing incentives to save and become self reliant through one's retirement years. As one who is old enough to remember the response to Nordmeyer's black budget of 1956 I can easily see the same thing happening to this coalition as happened to Walter Nash's government then.
You are a couple of years out but I too remember it well. Suddenly, no instant coffee! For years after “The Black Budget” was a lucrative rallying cry for the Nationals especially Muldoon who eventually morphed the theme into the dancing cossacks. Strangely enough, Muldoon later recounted that Nordmeyer was about the only Labour identity that he had ever admired.
As I was saying, the PM is just waiting for Winston Peters to clarify what he wants: https://www.stuff.co.nz/national/politics/111207342/capital-gains-tax-c…
talk about a slow moving train wreck. This is laughable. Although its not as it is messing with peoples livelihoods, and NZs future. I speak to businesses, bankers, entrepreneurs on a daily basis. These people are investing in NZ. The feedback is very negative. I have not seen this in over a decade. Transactions in many sectors are slowing. Pressure is building There can be only one outcome. And it isn't good.
Transactions in many sectors are slowing because we've been relying on debt-blown bubble driven consumption. Now we're seeing the long-term effects of this showing up around the world: https://www.interest.co.nz/news/98570/us-retail-sales-weak-us-inflation…
Blowing asset bubbles and taking ever more of working folks' pay packets in subsistence and housing costs (especially those extracted as finance costs) leaves little to circulate in the local consumption-driven economy.
We are seeing the results of the last decade's reliance on blowing bubbles and living off cheap debt, while penalising labour and exempting unearned income.
If we'd tax land value instead of labour bearing the bulk of the burden people who work would have more to spend in the local economy, and less would be extracted oversees.
tell that to the chippies, the cabinet makers, and the tradies out there that are watching forward orders dwindle. The reality is we, whether you like it or not live in a capitalist society, and it is transactions that make the economy function. Some rely on debt, others don't. It is the sum of the moving parts that counts
Indeed, we could tax lower income taxes on labour and raise taxes on land or capital gains, thus letting more New Zealanders keep more of their own money (re tax) whilst also letting NZers keep more of their money via paying less to foreign banks as interest.
Good idea.
Of course JA won't commit. the fundamental untrustworthyness of politicians around tax. there is huge history - GST is a case in point. At 15% I seem to remember that we wouldn't be paying PAYE at all. It is after all their trough and they want to keep it full to over flowing. Time to rip off the masses again!
National Party - Lolly scrambles for boomers, land bankers and China. Perhaps the least nationalist of all parties.
Labour Party - Represents idiocracy baby factories via welfare such as working for families. "Labour" doesn't care about hard workers at all.
Greens - The watermelon party. Red on the inside and actually not overly interested in the environment. These loons have two leaders how on earth does that work? Do they paper siscors rock on every decision?
NZF - Pork barrel politics and a whole bunch of do nothing on immigration reform.
None of them will tackle the living expenses problem because they don't care as long as the banks, boomers and baby farmers get their loot.
Can the hard worker catch a break from these traitors?
Where are the Western economies that don't have a consumption tax or council rates and what has immigration got to do with income tax? Perhaps Denmark have no consumption tax, but the average personal income tax is 45%. NZ's income tax rates are the envy of most Western tax payers.
I agree and disagree. No it doesn't tell the whole story, but that is a deeply complex discussion. Ceteris Paribus, lower taxes mean greater take home pay and NZ has some of the lowest PAYE on the planet. However non-tradeable goods adjust to disposable income. So basically higher take home pay = higher rents. Rent is high in Manhattan and HK as disposable income is high, it's a finite resource. As soon as students were able to borrow our rents jumped in Wellington. Basically, if income tax was cut to zero, rents would sky-rocket.
The tax mix is important too. Having no-to-low tax on land and capital gains results in more money being taken out of NZ in the form of rent extraction (rent on money) rather than circulating through the local economy. And people having less effective take home pay to spend in the economy after housing costs. So it's going at the moment.
I don't follow your logic "Having no-to-low tax on land and capital gains results in more money being taken out of NZ in the form of rent extraction (rent on money) rather than circulating through the local economy" You are conflating different principles. Untaxed capital gains will actually stimulate the domestic economy - the wealth effect. If I make $100k tax-free flipping a house I may buy the Stabi-craft or do the renovation. You can argue it's unfair, but it increases GDP. As for money being taken out of NZ - there is a difference between interest on funding and profits being repatriated to Australia. It's no bad thing a foreign investor lends NZ money, I tend to agree on the profits though but that is only because the Australian Banks have gotten themselves organised in a free market.
Zero land tax and high taxes on labour ---> higher land prices and more Kiwis taking on larger and larger mortgages to buy it off each other ----> as in the current situation, more and more interest being collected and expatriated overseas to foreign parent banks, out of banks' record profits.
It would be better to have land tax (unlike income tax, it also cannot be avoided structurally) and lower levels of mortgage debt as a result. Less money to interest and expatriation, more recycling through the local economy as taxes spent on necessary infrastructure.
(As an aside, of course as John Key notes, it would be much more fair for all income to be treated equitably - income from capital and income from labour.)
We also have pretty low wages and costs of living that are rapidly outstripping them. Yes, you can take more tax from people, but that 39% rate in the 2000s to 2008 didn't do much for house price rises; in fact, they rose faster then than at any other time in history. The Australians earn more, pay less in living costs but spread their tax brackets far wider than we do.
I wouldn't mind so much if I got something back out of it. The core services (health care, education , police and transport infrastructure) are a bit of a joke really. The largest single chunk of tax payer money goes towards already rich boomers who never paid in enough and use that money to ruin the housing market for young people. Accommodation supplement (landlord welfare) and working for (dysfunctional) families is probably not far behind.
The tax is not spent on core services building the nation it's pissed away on boomers, landlords, and dead beat families which is all funneled into offshore bank profits.
Bilbo, there is no point having a chip on your shoulder about baby boomers,
It is in recent years that house prices have taken off in NZ and that is not the fault of the baby boomers at all,it is the competition amaongsts the 25 to 40 year olds buying for owner occupation!
Investors have not forced prices up, as look to buy at unders!
If you couldn’t beat them, then why didn’t you join them and make plenty?
If there is any good in the TWG proposal it's putting CGT on lifestyle blocks over 4500sqm. Good farms are being broken up into these often non-productive one horse ragwort and gorse plantation blocks so perhaps the CGT will discourage people from lifestyle blocks.
Good farms?
Farming today is monocultural (non bio-diverse) and totally a case of applying finite fossil fuels to food.
https://www.resilience.org/stories/2003-10-02/eating-fossil-fuels/
Not only is agribusiness farming unsustainable, so too are the crammed cities it feeds. I suggest that those lifestyle blocks have more potential for biodiversity, require less fossil-fuel support, and can be morphed into the food-supply of the future (which will involve more people per acre).
The Wealthy Are Victims of Their Own Propaganda - Stephanie Kelton
To escape higher taxes, they must embrace deficits.
https://www.bloomberg.com/opinion/articles/2019-02-01/rich-must-embrace…
You reap what you sow. You've made progressive NZ parties obsessively pay-go.
Witness Justin Trudeau : 4 years ago at the tender age of 43 he was elected Prime Minister of Canada ... the people loved and adored him , he was young and handsome , glamourous , females swooned over the guy like no one had in Canada since the Beatles toured in '64 ...
... now , he's dog tucker .... toast in the polls ... tracking to being unceremoniously dumped out at the forthcoming elections ...
Jacinda ! ... wakey wakey ... the sands of time are running out for you ... being young and smiley smiley doesn't work forever , the natives are getting restless .... get your act together , or wither Trudeau goes , you will as well ... and aboot time , too...
Whats the hurry ?. Biggest tax reform for a long time , and everybody expects them to pop a policy out months after the reports are released. they will be aiming to think this through and get this right. And , yes , getting it right includes making it palatable to their coalition partners and the voters.
It is all about property investors and how much they will pay.
People forget that over 30% of my rents already get paid to the government as normal income tax. My commercial tenants already pay 15% GST to me so with low interest payments most income is taxable.
Now the greedy boys and girls in Wellington want even more.
No , because that will all be taken into account. The capital gains less the tax you have already paid. You pay tax every year , basically on the incease in value of your property. ( not market value increase). Income less expenses, the difference is your profit if you take it , or the added value of your business(property)if you leave it in the property.. Tax is the same wether you take it or leave it in the property. So the tax is on the increase , not your income. When you sell , the capital tax payable is the tax on the amunt you sold it for , less the tax you have already paid. Same with a business, they are paying tax every year .
Capital Gain in property is not unearned income at all, and should not be subject to any Capital Gains Tax!
Landlords do p,entry of things with their properties that we do not claim time for, including property checks quarterly, doing repairs ourselves or arranging for repairs to be done, finding new tenants etc,etc.
Landlords who do well are deserving of capital gain on their properties or why would negatively geared landlords bother??
Ïf you earn NZ$100,000 from going out there and having a job, and you pay tax on it, well fair enough. If you earn NZ$100,000 from buying a property, well you probably should pay tax on that – fair enough," Key said.
Capital gains are generally regarded as one of a number of forms of unearned income. And as Saint John, says, it's fair to tax income equitably.
Not landlording efficiently or effectively doesn't make one more deserving of tax-free income. But yes, negative gearing should probably go away eh.
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