It's dead.
The Government will not introduce a Capital Gains Tax having failed to reach a consensus, with coalition partner NZ First opposing the move.
Prime Minister Jacinda Ardern said on Wednesday that she still believed there were inequities in the tax system that a Capital Gains Tax could have helped to resolve but it was clear many New Zealanders did not believe in a CGT. She's now ruled out a CGT under her leadership in future.
“All parties in the Government entered into this debate with different perspectives and, after significant discussion, we have ultimately been unable to find a consensus."
This is the Government's detailed response to the recommendations of the Tax Working Group.
NZ First, long seen as the sticking point for the Government to get a CGT through, was quick with its own statement.
“There is already an effective capital gains tax through the Bright Line test brought in by the last National Government and New Zealand First’s view is that there is neither a compelling rationale nor mandate to institute a comprehensive capital gains tax regime,” NZ First leader and Deputy Prime Minister Winston Peters said.
National Leader Simon Bridges said after 18 months of waiting and a $2 million tax working group, "National’s relentless opposition" to a CGT had forced the Government to back down, but he said there were a range of taxes on the table and said Labour could not be trusted on tax.
“While the Government has backed down on a Capital Gains Tax, there are still a range of taxes on the table. They include a vacant land tax, an agricultural tax and a waste tax.
“Prime Minister Jacinda Ardern says she personally still wants a Capital Gains Tax and that our tax system is unfair. New Zealanders simply can’t trust Labour when it comes to tax," Bridges said.
This is the announcement from Prime Minister Jacinda Ardern:
The Coalition Government will not proceed with the Tax Working Group’s recommendation for a capital gains tax, Jacinda Ardern announced today.
“The Tax Working Group gave the Government, and the country, an opportunity to look at the fairness of our tax system and debate options for change,” Jacinda Ardern said.
“All parties in the Government entered into this debate with different perspectives and, after significant discussion, we have ultimately been unable to find a consensus. As a result, we will not be introducing a capital gains tax.
“I genuinely believe there are inequities in our tax system that a capital gains tax in some form could have helped to resolve. That’s an argument Labour has made as a party since 2011.
“However after almost a decade campaigning on it, and after forming a government that represented the majority of New Zealanders, we have been unable to build a mandate for a capital gains tax. While I have believed in a CGT, it’s clear many New Zealanders do not. That is why I am also ruling out a capital gains tax under my leadership in the future.
“The Tax Working Group was a valuable exercise that has delivered some useful suggestions well beyond just the debate on CGT, and I want to thank the Group for its work. In fact the majority of recommendations will either be investigated further or have formed part of our work programme.
“There are other things that can be done to improve the fairness of our tax system. As such the Coalition Government has agreed to tighten rules around land speculation and work on ways to counter land banking.
“Work will also continue to cut red tape for business and crack down on multi-nationals avoiding paying their fair share of tax in New Zealand. We have already made changes to address base erosion and profit shifting, and we will shortly release a discussion document on options for introducing a digital services tax.
“My job now is to focus on the things we can and are doing to improve the wellbeing of all New Zealanders.
“The Coalition Government is addressing the long-term challenges New Zealanders face such as mental health, climate change and child poverty and responding to the March 15 terrorist attack and keeping New Zealanders safe. Those challenges will be my priorities for the remainder of this term,” Jacinda Ardern said.
This is the statement from Finance Minister Grant Robertson and Revenue Minister Stuart Nash:
The Coalition Government today released its response to the recommendations of the independent Tax Working Group report.
The report found that on the whole New Zealand’s tax system was working well, but made a number of recommendations to improve fairness, balance and structure.
The Government is not adopting any of the recommendations on capital gains taxation and has agreed no further work is necessary on that aspect of the report.
“The final report covered all aspects of the tax system, and a number of the recommendations will now be considered for inclusion in the Government’s Tax Policy Work Programme,” Grant Robertson said.
“That includes exploring options for targeting land speculation and land banking.
“We intend to direct the Productivity Commission to include vacant land taxes within its inquiry into local government funding and financing,” Grant Robertson said.
“Officials have been directed to prioritise work on the TWG’s recommendations on ways to encourage investment in significant infrastructure projects and improve the integrity of the tax system to crack down on tax dodgers,” Stuart Nash said.
A refreshed tax policy work programme will be released mid-year.
The Coalition Government reiterated it will not introduce resource rentals for water or a fertiliser tax in this term of Parliament.
Other priorities for the Government this year include progressing legislation for research and development tax incentives; GST on low-value goods from offshore suppliers; a discussion document on a digital services tax, and further work to ensure multinationals pay their fair share of tax.
Grant Robertson and Stuart Nash thanked the Tax Working Group members for their work.
This is an announcement from NZ First:
New Zealand First Leader Winston Peters has welcomed Cabinet’s decision not to implement an extension of capital gains taxation, following the Prime Minister’s statement in response to the Tax Working Group Report.
“This decision provides certainty to taxpayers and businesses. We in New Zealand First wanted first and foremost for New Zealanders to have time to discuss and debate the contents of the report,” stated Mr Peters.
“During that time we have listened very carefully to the public.
“There is already an effective capital gains tax through the Bright Line test brought in by the last National Government and New Zealand First’s view is that there is neither a compelling rationale nor mandate to institute a comprehensive capital gains tax regime,” said Mr Peters.
“We also welcome the announcement that the coalition government will be urgently exploring options with the Inland Revenue Commissioner, in concert with central and local government, for taxing vacant land held by land bankers and reviewing the current rules for taxing land speculators. Tightening these rules was a priority for New Zealand First.
“Current tax policy, rigorously enforced by an Inland Revenue Department properly resourced will by itself 1) improve the administration of existing tax policy, and 2) target those multi-nationals not paying their fair share of tax,” Mr Peters said.
This is the statement from National Leader Simon Bridges:
After 18 months of waiting and a $2 million tax working group, National’s relentless opposition to a Capital Gains Tax has forced the Government to back down, Leader of the Opposition Simon Bridges says.
“While the Government has backed down on a Capital Gains Tax, there are still a range of taxes on the table. They include a vacant land tax, an agricultural tax and a waste tax.
“Prime Minister Jacinda Ardern says she personally still wants a Capital Gains Tax and that our tax system is unfair. New Zealanders simply can’t trust Labour when it comes to tax.
“The New Zealand economy has suffered while the Government has had a public discussion about a policy they couldn’t agree on. Put simply, this is political and economic mismanagement.
“Investment has completely slowed down while business owners worry what the future looked like. That has made New Zealanders worse off.
“Our economy was growing at four per cent two years ago – it’s rapidly heading down to two per cent. They have no economic plan to speak of at all because the Government has sapped the confidence out of small business owners and mum and dad investors.
“In the Government’s so called year of delivery, they’ve dropped their flagship tax policy.
“The big question remains, what are they doing to encourage the economy to grow?
“Unlike the Government, National has a plan when it comes to the economy. We won’t introduce any new taxes in our first term and we will index tax brackets to inflation. National believes Kiwis deserve to keep more of what they earn.”
107 Comments
So this is the “neutral expert?” Not there to talk politics? Just there to espouse on the report? The good Doctor just can’t hold back can he?When will this government begin to understand that Clark & Cullen were booted out in 2009 and were not re-elected in 2017. We thought we were getting a new fresh Labour government, not a bunch of glove puppets being fingered by a couple of old hats! May as well have voted for Punch & Judy it would seem
I’d rather not.
She is John Key’s greatest student, just with more scruples. First she dodged Nz Super for her entire career and now this.
I would have preferred a different decision from a policy perspective but this is the right call from a political perspective. They lost the argument with the public who didn’t understand most people would be better off. Once that happened it was a case of retreat or gamble on forcing it down their throats. Ardern chose discretion as the better part of valour.
The primary method that the general public would have been better off is if there were no personal home exemption for capital gains. Even before the election, Ardern stated that the primary home would be exempt from any capital gains, which eviscerates the capital gains argument in reference to property. The majority of capital gains occurring are with the family home. Why should this income be sheltered as compared to any other form of income?
Explain how the public will be better off with a Capital gains Tax.
It is what it is a tax grab, so that Politicians have the public's money to introduce and pay for the politicians ideology changes that they want to make.
No we wont lie back and accept their way of looking at the World. TIME FOR A CHANGE> we have had enough of this LOT
Clearly Winston is calling the shots. Jacinda and Labour in support but no consensus within government - guess who didn't want to upset their potential rural farming NZ constituency.
Whatever one feels about CGT, does NZF vote of 7% means that it not only gets to decide government but also important issues such as this.
Given that CGT has been long supported by Labour, are we now going to start to see cracks in the coalition.
When it became clear just before the last election that National, without Peter Dunne & The Maori Party, were most unlikely to retain power, some of us realised that WP & NZF would at least be something of a moderator and voted accordingly. And that has become so. The Three Strikes, the retention of probation employment for small businesses. And now this. Yep it is MMP at work for now. But next election? God save NZ if NZF is not returned.
rastus. On many issues yes but in respect of CGT she was on a loser from the moment she tried to con middle NZ that only the rich pricks would be paying it. Most Kiwis knew that to be simply untrue. She's burnt some of her political capital so it's a sensible survival decision to now beat a hasty retreat. Yet again she's shown that while she is competent in the hugs and kisses department, her political strategy skills are woeful.
You confuse inherent relatability, competent spin mastery and an ability to connect with people, with the much deeper and wider range of skills required to create and execute sound strategy. The longer you are in business the better you get at distinguishing the masters of BS from genuine heavy hitters. She ain't one of the latter.
Good grief. What the heck is the point of saying somebody is good because they are better than somebody else. Pointless and utterly counterproductive. On that sort of reasoning you are happy with a rotten apple simply because the other one on offer, is more rotten.
Sorry rastus - didn't respond to your last point. Bridges struggles on the relatability front but has shown promise tactically. Strategically, I haven't formed a view as he's either keeping his powder dry or ,as I sometimes wonder, could be a reactive who wings it day by day. The jury is very much out on Simon as leader, in my mind. I need to see more to decide.
Simon only has one tactic, attack. Which would be fine if this was a third term government that people we tired of but it’s not. The problem with objecting to everything the government does is it leaves you with no communication of your principles or governing philosophy. The public therefore assumes Simon has none.
... good point ... Simon was hoping they'd burnt their bridges with a CGT ... now he's go no one thing to constantly hammer them on ... lots of little things , but no big hairy scary policy to galvanise the voters against Taxcinda & her coalition ...
Sir Mickey ought to have had more sense ... the CGT as he drafted it was a shocker .. .. a horror tax for middle class Kiwis to swallow ...
... and yet he kept ruling out 100 % the one tax that would work , that would sneak a bit of extra fat from the wealthy year in and year out .... The land tax !
And I'd add to that a water tax , and a carbon tax ... set low enough to not cripple anyone ... but set to raise revenue for the crown , and to discourage bad behaviour by owners , users , and polluters ...
When you get through all the fluff it's clear that NZ First put the boot in, not to mention many people in the Labour Party who were very uncomfortable about the whole concept. It is a kick in the teeth for the Greens which they richly deserve. It is also clear that with Jacinda riding so high in the polls, she would not allow any divisive issue dent her popularity.
If Labour takes a CGT into the next election it will show Jacinda and the party really do want it. They will then leave it to the voters i.e. Labour and Green majority then CGT versus COL with NZF and CGT off the table for another term (or National win and definitely no CGT).
Labour have got the Greens in their pocket. The Greens will never go into coalition with National so no need to give them any major concessions just some crumbs and a gentle pat now and again to make them feel needed. As for NZF Labour do need to make serious concessions and share the power with Winston.
.. and that is exactly why some pragmatic Greens , such as Vernon Tarver , are promoting a " Blue-Green " party who would be open to coalition discussions with the Gnats ...
A separation of the Watermelons into two divisions ... the Red Greens ( the anti-business , anti-capitalists ) , and the Blue Greens ( the pro-business , pro-environmentalists )...
Just another case of govt assembling a select committee and then ignoring the recommendations. Just like the several select committees on alcohol that recommended increasing the drinking age, decreasing the trading hours and increasing the minimum cost of alcohol.
It seems clear something needs to be done to the mechanism of writing off costs for rentals but still not paying anything on the eventual realization of profit at sale. Observers will note the lull in the Auckland ( in particular ) market whilst this announcement was pending. This is surely evidence that investment in residential rentals is a significant driver in the market. I feel like the govt just didn't have any courage to do anything here, and this is reinforced by the PM's statement that she won't consider this (GCT ) again under her watch. Its a clear sign to voters , that is is safe to vote Labour, as they won't rock the boat - despite their "principles ".
For Housing we already have Bright Line Test = CGT
Bright Line test means anyone selling a house within 5 years (which is not a family houme) has to pay Tax, so why the fuss as long as housing is concerned.
David H, can you correct or highlight the difference between CGT and BLT as far as housing is concerned.
Its probably better that it is time bound. It provides an incentive to hold a property for at least 5 years, and penalises quick flips. If CGT is implemented on all property no matter how long its been owned, it removes the incentive to hold for 5 years. Once prices start to rise again, property flippers will re-enter the market.
I would have thought the ones who are hurting the most since 2010 are the savers, as a result of the pathetic interest rates. Not everyone is a speculator nor a borrower. Many older people also went through the Finance crash so they are the ones who do not trust the Share Market etc and stick with Bank Deposits.
Stuff all the snide political, left, right, Winnie the kingmaker bollocks.
The lack of change to a skewed tax system is a lost opertunity to place taxes on the parasitic parts of the economy that produce nothing of value but are there to simply suck money out of the economy by clipping the ticket.
A lose for those who actually work and pay income tax.
I believe this to be the best outcome. Taxing a paper change in value was always going to be fraught, and when I read the papers produced by the TWG, I had considerable unease as to the efficacy of such a tax. I think the TWG dodged the hard areas and largely focussed on what was essentially a jealousy tax. As some say here, what now?
And this is why National won't win the next election. If Labour + Greens are polling near 50%, enough National voters will peel off to vote for NZFirst to ensure they get across the line and into the coalition to act as a hand-brake.
A Labour + Greens government would have gone ahead with CGT.
Labour are masquerading as quasi National at any rate. They are occupying the middle ground. Labour won the election off a series bribes, however those policies are now mostly dead or buried, or going nowhere fast. Ardern hasn’t got the intestinal fortitude to ram through divisive policies. She might be an idealist, but has sold her sole to populism.
A few are on record as stating the TWG CGT proposals have created considerable uncertainty and have been a major contributor to current real estate price weakness. Now that the "so called" CGT cloud has been lifted, lets see if this is actually true. I don't think it is and personally doubt anything's going to change. Barring a Global meltdown I think prices will continue drifting down and % losses will continue accumulating for years to come. With current lofty valuations, other issues such as local affordability and tighter lending standards matter most now. No gains made = no CGT to pay anyway.
I just won 20 bucks, knew they would not go ahead with it. There is no need for a CGT, the 5 year bright line test and IRD doing their job will get the same results. Seems the govt is not confident in the tools they have given their own agencies so this was the cover up. Would like to see how much money IRD recovered over the last 5 years from speculators who flicked houses in weeks/months for a huge profit. Reality is Tax department and both National and Labour Govt were caught napping so we the taxpayer paid 2 million bucks to hide the mess.
Hi Chairman Moa,
Agree with the thrust of your comments.
For sure, uncertainty doesn't help the buoyancy of the housing market - or any other market.
Indeed, house buyer confidence might well be boosted by today's announcement.....
And house owners are likely to feel less at risk of capital erosion with the prospect of CGT eliminated - and, thus, be more reluctant to sell.
Whatever, housing has become increasingly viable as a longer-term investment.
TTP
I'm pretty ambivalent about this decision, even though I think 'in principle' a CGT is justified.
The time for a CGT was 15 years ago.
Given property is unlikely to appreciate much, at least in the next 5-10 years, it wouldn't have realised that much revenue.
And I think it would have generated unintended consequences, especially around supply of private market rental housing.
Capital gains are no guarantee of wealth, because there's no guarantee of the underwrite.
So it would have been a tax on nothing in particular - a slice of ponzi, in effect.
Better we stick to real-value stuff and have a look at whether the future can supply the underwrite.
But we won't. This decision tells us we are too selfish and short-term for our own good - ultimately for our own survival.
The timing is wrong for a capital gains tax.
The main issue in NZ is the property market.
There are simply too few properties, tight land use regulations and a high immigration rate.
The tax advantages of renting properties and low interest rates means a relatively higher number of rental properties available and moderate rents, but high house ownership costs.
A CGT would further reduce the number of property investors & rental properties available.
Given a net shortage of houses and in general higher occupancy rates (people per dwelling) in rental accommodation, there would likely be an increase in rental costs (even given the net zero sum, i.e you have to rent or buy). This would affect the poor even further.
No doubt Peters will be repeatedly cited by die hard lefties as sabotaging CGT but this outcome was always obvious. Any PM with a modicum of smarts would have anticipated the Peters effect and established his bottom line in advance, instead of plunging ahead regardless knowing there was a very good chance it'd crash and burn. Naive ideology in the face of previous public opposition they somehow believed had gone away, appeasing the hard left Labour Party faction, hubristic belief in the bankability of jacindamania or a pre-deal with the greens are all possible explanations for them persisting with this doomed campaign. Central to all of these are MMP constraints on policy making; the inevitable outcome of a coalition between minority parties. Thank goodness there are no critical existential threats facing NZ inc right now.
I have decided to put all my eggs in one basket, cracked though they maybe and stick it to the Taxpayers and support the avoiders. A Capital Idea, perpetuated in perpetuity. May the IRD rest on its laurels, hedge my bets, they will turn a blind eye, yet again... what about the Workers....Stuff em.
When Members of Parliar-ment mostly own rental houses, there is no sh-t show in hell, that they will do the honorable thing and make a fair tax take for All........not the already marginalized voters.
Labour is not working, Labour is just as bad as the rest of em...And I will now put my best foot forwards to make a bigger Capital Gain, than anyone can imagine.....plus pay no further Taxes in the process....
My accountant may be thrilled.....my Trust will be delighted, my Laundering Tactics will be as pure as the driven snow, just like all those Gold Diggers in Polily-ticks and Bwanking.
I will never vote for people who collude....steal and Benefit and leverage to their hearts content.
And that includes All those of the same ilk, with no real....Agenda, other than the Status Quo.
Screw the system, not work the System is a National Treasure...I thought, I have been proved wrong.
Winnie the Poo, this stinks of one man, one vote... Voting people down, will never lift up the Working Class, who can never own a house of their own....from now on, until Hell freezes over.
Kiwibuild....ha ha ...what a joke....they cannot afford to fix the system....it is already................Fixed.
Yvil, today a Spruikers expectations got raised. Tomorrow they will freefall.
Have you already read the John Mauldin's series of articles? If you have, you'd already know for some years to come its entirely plausible there was unlikely to be much CGT collected if there's no gains made - lol!
Watch the MSM quickly usher from front page news this crashing failure of yet another coalition flagship policy. Recall the media hounding (deservedly so in my view ) that housing minister Smith received for responding inadequately to the AKL housing crisis and compare that with the comparatively subdued media response to Twyford's inept failure to deliver on his bombast. So it will be with todays debacle. Already the media are spinning this as a courageous Jacinda decision justified by the need to ensure the coalition survives to deliver its other 'flagship' policies, rather than the always ill-fated, poorly managed process it in reality was.
What a bizarre little sideshow this TWG has all been. If the coalition parties couldn't work out what they wanted before they started then what the hell was the point? Realities of Yes-Minister style political process is working groups are just rubber stamps for pre-agreed outcomes. All they succeeded in was making themselves look dishevelled. Labour lose popularity for proposing a widely unpopular tax that was never going to fly and Winston gains nothing as he was the one who enabled this circus in the first place.
Non-universal CGT without inflation indexing was always an unfair/crap idea. I like land taxes myself.
Let's not forget the plethora of non-CGT proposals for Modest Fees and charges in the Cullen report....don't pop the cork on that 2019 Schadenfreude just yet.
CGT was the third rail, and despite the Greens going 'Ooooh - Shiny!', no pollie with any survival instinct was ever gonna touch it.
But, bathed in the afterglow of 'No CGT Evah' plus a long weekend to luxuriate in that, we should remember that 'Tax Rich Pricks' Cullen and the TWG had other Means to the End......of Mo' Munny to Extract.....
It might be a "fairer" society, but only because everyone that will be left in NZ is poor. Anyone with a profession will simply up sticks and move to Australia - cheaper housing, higher incomes, lower tax, and better weather. Just like what happened under the last Labour government. On your way to the airport, don't forget to toss your spare change at the homeless beggers.
Yeah I agree. They are hopeless. Very disappointing.
Mind you, should we expect much better from any politician or political party? They consistently let us down.
I had some faith in this new government, but it’s pretty much evaporated.
Not necessarily because of the CGT decision. As I have said elsewhere I am ambivalent on it.
It’s more their pathetic display on housing and immigration that gets me.
Two million wasted talking around this subject.would have allowed half a dozen or more State Houses for rent....with no debt.....
If they used it for rental Houses, subsidized by Taxpayer...who knows how many....especially if boosted by partial rent...
If they bought caravans and put em on sections.....of houses state owned....could have Housed people to infinitude......rent-to-buy. (They used to call em Caravan sites....
People sleeping in cars.....Garages...a thing of the past. A long drop and a big saving in all this Waste...........of Taxpayers....................Money.
Ms Ardern was very careful with her words, 'no CGT whilst I'm PM'.
Fuels my expectation that she will not run for a second term, and will instead focus on spending time with her daughter.
This was purely about pulling the wind out of National's sails, and setting clear water for someone to step up and run for a Labour/Greens coalition next term minus NZ First.
Wonder if I could interest the TAB in some odds on that...
Ms Ardoon is just a smiling face,she won on the Christchurch Mosk attacks , have no problems with that as it shouldn't not of happened .
But there is a country to run as well where Ardoon cannot do this as there have been many filp flop jacks with this government.One day in China?
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