By Bernard Hickey
Prime Minister John Key has denied accusations that the Government's new two year 'bright line' test to force property traders to pay tax was a Capital Gains Tax in disguise.
He also denied the surprise announcement on Sunday of new measures to crack down on local and foreign property investors were poll-driven changes and an indication the Government was panicking over a housing crisis in Auckland. He did however acknowledge, for the first time, that foreign investors were 'rorting' the tax system by not declaring purchases.
The move to assume rental property investors who sell a home within two years are doing it to make an untaxed capital gain was announced on Sunday as part of Budget 2015, despite not being considered just six weeks ago.
Key told a stand-up news conference after the speech on Sunday that the tax measures did not amount to a capital gains tax and were simply a tougher enforcement of the existing rules applying to income from property trading.
"A capital gains tax is something that you pay no matter when you buy and sell the property. It doesn't matter whether you do that in three months, five years or 15 years," he said.
Key said on Morning Report that his comments in mid-April that there would not be any new tax measures for property investors in Budget 2015 were made before IRD advice came in on the 'bright line' test.
He told Paul Henry the changes were not a capital gains tax and that Auckland's property market was not a bubble.
"This is just part of the tightening up of the tax loop," Key said.
"We started really working on it six weeks ago, but we've looked at these things over the course of the last five years," he said.
'Undeclared foreign buyers a problem'
"We know there are people that come into New Zealand - IRD's advice to us is that number is increasing of people who are deliberately rorting the system," Key told Morning Report.
"Now I don't know know how big that is today - no-one's quite sure - but IRD says there's more activity happening there, and my main point is why should a non-resident be in a better position than a resident."
He later told Paul Henry the measures aimed at foreign investors was a major part of the announcement.
'PM forced to eat his words'
Labour Leader Andrew Little said the Government had finally reacted to the Auckland housing crisis after months of denial, but only after polling and focus groups had indicated voters also thought it was a problem.
"The stunning thing about this is that for months, if not a year, the government has refused to accept that there is a housing problem or housing crisis, especially in Auckland," Little said to reporters after the Sunday announcement.
"Now they've finally decided that the thing the Reserve Bank has said is a problem, the thing that every Aucklander has said is a problem, the thing that just about every bank has said is a problem, the government has now grudgingly, finally accepted is a problem," he said.
"Today, John Key has been forced to eat his words."
Little said the moves were tentative and incremental.
"It will take two-and-a-half years for this tax to fully come into effect. That is a long time to wait when Auckland house prices rose over $100,000 last year," he said.
"For years the Prime Minister has denied there is a crisis, refused to admit foreign investors are pushing up house prices and said there is no need to dampen down housing demand."
Key says rocketing house prices 'isn't new'
Asked on TVNZ's Breakfast if the policy was a 'U-turn', Key said supply was the best way to resolve the issue. He did not address the question.
"This isn't new, as I have said to you guys on many occasions. House prices doubled under Helen Clark's watch, they went up faster than us," Key said.
The REINZ-RBNZ Stratified measure of house price inflation in Auckland shows prices rose 77% between the November 1999 election of Helen Clark's Government and the November 2008 election of John Key's Government. Since November 2008, Auckland house prices have risen 87%. See the interactive chart below. Click on the Auckland tab for Auckland house price data.
'Crisis? What crisis?'
Key also denied there was a crisis in Auckland housing.
"House prices are rising faster than we would like but if you go to Sydney or Melbourne, or go anywhere in a major capital in the world and pick up the paper, I am telling you now, house prices are rising either faster or as fast and it is the main topic of debate," Key said.
"It's not new in a big metropolitan area. But what we announced yesterday does help, because we know people are rorting the system," he said.
Key pointed to NZ$33 million spent on IRD beefing up compliance with property trading rules, which had raised around NZ$250 million from people 'rorting the system.'
"So all we are saying is if you buy or sell an investment property within two years, you can kind of claim you were renting it out, but in reality you were there to make money," he said.
'Withholding tax for foreigners'
"And for foreigners, or non-residents (because it could actually be New Zealanders living in London on the big OE) but basically for non-residents we are going to get good information about you and you will have to pay your tax because we are going to withhold the tax if you sell the property and you're going to have to come and get it off us, as opposed to what we do at the moment, which is try and get it off them and we never can."
Key referred to a recent TVNZ news item profiling a property investor buying and selling properties quickly.
"If you were just a speculator and you thought you were going to rort the system - and you guys on your TV One news a couple of Sunday nights ago had a company on and the guy said 'We buy and sell properties within six weeks' and I was sitting there going 'these people don't even realise, because they are probably badly informed by it, by that information, that they don't have to pay tax'," he said.
"They do already have to pay tax and somebody's going to knock on their door. So what you are going to do is, genuine investors will still buy an investment property without doubt, but if your intention was to buy and sell quickly and actually rort the system and not pay tax you now know you'll be caught. I think that will free up some supply for more genuine other buyers."
'Big revenue earner?
Meanwhile, Key said the NZ$420 million expected to be collected from an extra NZ$29 million in tax compliance spending was before the impact of the new 'bright line' test.
"Our expectation is we will get $420 million - not even with the announcements made yesterday, just giving IRD more inspectors," he said.
Key also told Paul Henry the measures were also designed to better track foreign investors buying property here.
"What happens at the moment if a foreigner comes to New Zealand, a non-resident, and buys a property in New Zealand, sells it, makes a profit," he said.
"Even if they owe money we can't track them down easily. We don't have any information on them. So this will force them to give us an IRD number, a bank number and they will be withheld their tax. So I'm a non-resident, I live in Hong Kong or whatever, I come to New Zealand and I buy a house for half a million dollars and I sell it for $600,000, we will withhold probably 25% of that profit."
"So why change now?"
Asked why the Government had changed its position, Key said the IRD had changed its view on the 'bright line' test.
"They have changed their position. But I think these things actually help make the system a bit fairer," he said.
Asked why the Government had changed its mind in such a short period of time, he said: "In fairness we started really working on it six weeks ago - five, six weeks ago. But we'd looked at these things over the course of the last five years and IRD four or five years ago came back to me and said 'we don't like bright line tests for these reasons'," he said.
"When we recently pushed them on it, and a series of other things we looked at, some of them they said 'no'. This one they said 'yeah, we've changed our view'."
'PM panicking'
Little later said in a statement John Key needed to tell voters why he had had a sudden change of heart.
“The Prime Minister’s sudden rush of blood to his head followed his adamant denials last month that he would be making tax changes for property investors in this week’s Budget," Little said.
“And just two weeks ago he told journalists introducing a withholding tax for non-residents selling houses didn’t work in Australia; now the Government’s looking at it," Little said.
“It is panic stations at the Beehive. These are rushed and ill-conceived measures that experts have said will have negligible impact. Even the Government’s former tax advisor John Shewan says it won’t curb skyrocketing house prices or deter speculators," he said.
“These are the actions of a bystander Government that has watched the Auckland housing crisis unfold and then done too little too late."
'Proper Capital Gains Tax better'
Green Co Leader Russel Norman said Key was "fudging the record to try and justify his Government’s about-face on taxing capital gains.” Green Party Co-leader Dr Russel Norman said, pointing to Treasury advice from 2011 and IRD advice from February last year.
“Treasury has consistently supported a tax on capital gains, believing it to be a beneficial reform, and suggested a ‘bright line’ set at 10 years, meaning sales made within ten years of acquisition would be liable to a capital gains tax," Norman said.
“Treasury also highlight the difficulties a bright line test would create with people incentivised to sell assets just outside the timeframe the capital gains tax applies. A capital gains tax without a time constraint has benefits, as we have proposed," he said.
“National’s proposed two-year bright line test will create more distortions than a longer timeframe like ten years.”
'You could drive a motor home through it'
New Zealand First Leader Winston Peters said the Government's measures did not address foreign investment or migration as drivers of Auckland house price inflation.
His statement “we don’t always have good information about them” just about sums up his approach, Peters said, pointing to NZ FIrst's foreign buyers' register proposal in a private member's bill before Parliament.
“Mr Key scoffed at the idea, which is common sense in other countries but apparently not to him. Accordingly, his recent Damascus experience should be seen for what it is – a weak attempt to deal with a major problem," Peters said.
He said the 'bright line' rule was a joke.
"Expect the Companies Office to receive a torrent of applications for new property companies all in the name of virtually anonymous offshore property investors," Peters said.
“Mr Key and foreign-owned banks are on the horns of their own dilemma. The bubble can’t last. They can’t avoid the dire results of house price deflation and hundreds of thousands losing most, if not all of their equity, in over-priced homes," he said.
“Mr Key’s residential property gains net is so full of holes one could drive a motor home through it."
(Updated with Key comments on size of tax take and timing of change of view, Little saying Key must explain change of view, Norman pointing to distortions of bright line test, Peters saying the 'bright line' test was a joke)
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90 Comments
About time John Key Man up and sorted out the Auckland property market. Only two more things for JK to do now.
1. Only allow the international investors to invest in new builds. They should not be allow to purchase New Zealanders family homes in all the good school zones. This is what Australia do and it works very well. We need the investment channeled into new builds and development.
2. Only allow the internationals to purchase leasehold farmland similar the westcoast lease around the Taranaki area. We have a reputation to look after in our biggest backbone farming.
Come on John Key lets see you really man up and sort this two issues out. He has half my vote back sort these two things out he can have it all back with a pat on the back as well.
Looks like Key is following Fiji's example, at least in part.
Fiji in the last two years had similar issues with the property market; such as quick large capital gains were tax free, property prices in the main centres were going up in leaps and bounds particularly with Asian overseas influx, locals forced out of the market, foreigners sitting on undeveloped land.
So they introduced the following;
1) CGT at 10% on all property sold except for family residences
2) Only Fiji citizens can buy freehold properties in city and municipal boundaries
3) Foreigners owning freehold land have to develop within 2 years or pay 10% every 6 months on the value of the land.
As a result;
1) Speculators are paying some tax and not complaining
2) Sanity back in the housing market. Prices have stabilised to some degree (not fallen)
3) Land banking not such an attractive proposition and more developments in the pipeline.
The Fiji Government didn't wait too long to move to try and sort out the problems. Time will tell if they have succeeded but no procrastination.
FYI I've updated with more detail from Key on the change of view and also his argument that prices went up more under Labour than National. That's wrong. Auckland house prices have risen 87% since November 2008, but rose 'only' 77% from November 1999 to November 2008, using the REINZ-RBNZ stratified measure.
As always people will pick their dates but policy makers should focus on the most relevant and visceral dates: from the pre GFC peak to now.
John Key will know this but Auckland house prices have risen more from its pre GFC peak than any other major city in the OECD. While obvious, that includes Sydney, Melbourne, cities in the USA, Vancouver and the rest of Canada, etc. That is hugely horrifying - end of debate. Hell - at today's exchange rate you could even sell your Auckland home and buy an equivalent median home in any city in Australia bar Sydney, and probably in a few months even Sydney itself (notwithstanding Sydney siders make ~30% more than us and have houses that are well built in a truly world class city which Auckland is far away from becoming).
John Key / National / the Treasury et al - I challenge and implore you to comment on these facts as it relates to policy settings. Here and now directly or on any forum.
And looking at the most recent year on year growth as well, Auckland at 18% growing more than any of those cities.
So John Key is at best utterly naive or picking his dates to suit his cause and is wilfully disengenious.
Brian Gaynor interestingly said over the weekend that at no point did Dublin house prices rise as fast as they are now in Auckland prior to their devastating and spectacular crash that put Ireland into a depression and tore at the social fabric of their country.
The fact that we have gone so long without a crash, and have prices rising this much as well, is even more cause for concern. But this Government has as a matter of policy decided to ignore that.
This is the greatest economic, social, and moral issue facing New Zealand. It presents a clear and present danger to our economy and way of life. And under this Government we are all apparently on our own.
Without tremendous action, John Key personally and National by association, will not be remembered for their "threepeat" electoral success. Instead - John Key and National will be remembered as the culprits who ignored history and repeated the events leading to New Zealand's own full financial crisis.
Well how dumb are NZ reporters??? The fact that PM Key has had to explain what a CGT is to them is highly alarming!!! If NZ media do not know the difference between income tax and CGT then I'd suggest they change jobs!!
And what a shame some decent questions weren't asked!!
Why the IRD has had no system in place to collect the tax from these players?
Why the IRD has let this fiasco go on for so long?
Has the IRD deliberately allowed this fiasco to take place so they can increase their size? They now have increased staff numbers and millions to spend.......this is a classic example of how to make your bureaucratic empire grow enormously!!
How many non-registered business people on a annual basis have been investigated by the IRD for any house sales activity they have undertaken where it was found tax was found that tax was owing???
Why has the media been so quiet on these dodgers? After all $250 million has so far come in from those who have been rorting the system.....what is the breakdown of unpaid tax and interest charged?
What is the number of people in the public services who have been trading houses and not paying their share of taxes on that income?
Come on BH if you asked a few proper questions rather than your normal socialist politicking we might all be better informed!!
Bernard would seem to be one of the few journalists who have asked some difficult questions. I do though agree that there is a suggestion in this saga that the IRD are a very slow moving not all that capable bureaucracy. To have suddenly decided six weeks ago that there was a problem that most of us have seen for years, does seem barely competent on their part, and on Bill English's part, where I note that Key has tried to distance the National government from the previous non decision, or the latest move, as though such decisions are or should entirely be those of the civil service bureaucracy.
Bernard does seem to have ferreted all this out.
... tell those journos to re-read their political history , this Claytons CGT is merely a resurrection of an old NZ Labour plan from 1974 , during the days of Norman Kirk and Wallace Rowling ...
Nothing new to see here ...
... nothing that will actually work .... but it gives the great unwashed Kiwi public the warm fuzzies that we're on the ball , kicking the rich Chinese and Singaporean investors squarely in their warm fuzzies ...
Go to Wikipedia : Third Labour Government in New Zealand .... and scroll down to " Major Housing Initiatives " ...
... not surprising that Piggy Muldoon kicked this lot to the kerb ....
Who's stepping up to the plate to do the same to little Johnny & the Gnats .... only the Greens seem to be showing some initiative !
Howzat - Well done GBH
How quickly New Zealand's history is forgotten
A Property Speculation Tax was introduced in 1973 in an attempt to control speculative dealing in property, and in 1974 building restrictions were imposed on commercial building and the construction of larger houses. A land tax was also introduced to control profit-making on rezoned land
Muldoon "returned to capitalist principles" and wiped most of it out
Hasn't worked out too well for New Zealand has it?
Muldoon's ghost haunts us still
And all those introduced measures that you are talking about Iconoclast had a rather large affect on the CPI......inflation was high, Government kept coming up with new ways to tax and then new ways to spend......all those subsidies further distorted the market......
If we are to learn anything from history it should be to keep Politicians and bureaucrats out of the way, keep their numbers low.
Maybe, notaneconomist, but the main lesson here is that if you left our property and farm markets totally to the free market, they would all pretty soon be owned by the Chinese, Japanese and Germans- they being the countries with the biggest current account surpluses in the world.
That's on top of assets like our hydro dams that we handed to them for free.
The US prints money faster than anyone.
But that's why we _had_ (past tense) the OIO. to make sure that only true strategic developments could buy into NZ from Overseas, for the main reason that just a bigger bank account to offer more shinys to the locals wasn't enough to justify sales. It _was_ a rather clear and strong signal about what was and wasn't acceptable, one that has been totally disregarded, yet where are the watchers??
NOE:- For future reference, you should read my posts within a context that I'm also in favour of all things that encourage society, and those within it, to realise their fullest potential without unreasonable restraints that dis-incentivise and dis-courage those wishing to have a go
However, I believe there has to be a governing body, a rule-setter, and a set of rules, that all abide by
Anyone who doesn't want to play by our rules should leave
To use an analogy:-
There is World Rugby, also known as the International Rugby Board, or IRB who set the rules on how the game is played, then there is The World Rugby International Referees Panel which is a panel of elite rugby union referees appointed by the sports governing body, who enforce the rules
Then there are the playa's
I think we all realise there has to be some rules.....they are Rights...constitutional ones and often these rules are completely disregarded.......there is no referee between the individual and Government.....so we are exposed to their whims and the whims of bureaucrats administering policies.......
I wasn't intending to offend in my post but rather warn of the resulting inflation that interfering policy brings. That 1970's crap took a long time to blow through and in the 1980's NZ finally suffered the full consequences of all those actions.......and I never ever want other people to have to suffer that climate!!! Many of us lost what should have been the best working years of our lives struggling to pay the extortionate rates of interest.....It would be wrong of me and others to sit back and allow the same scenarios to play out for future generations!!
If all the bureaucrats and politicians would play by the rules that have been handed down to people over time then we wouldn't have 3/4 of the problems.
Many of us lost what should have been the best working years of our lives struggling to pay the extortionate rates of interest.....It would be wrong of me and others to sit back and allow the same scenarios to play out for future generations!!
The capital values were so low the per capita interest bills were not as great as they are today. Today's total usury bill has to cover the cost of servicing forty years plus of indiscriminate spending on imports not paid for by exports, hence a crippling sore of an accumulating current account deficit requiring foreign money to fund it. The only collateral left is residential and farm property since all the big ticket family silver has been sold. And the only way to pay the mortgage interest bill in a banana republic is to capitalise it in the form of higher debt levels chasing diminishing property stock.
True. And the interesting metric to ponder in terms of how society might have gone instead ... what would New Zealand Inc. look like if it had been average salaries/wages that had grown by 87% since 2008, rather than house values - and what if we had spent that 87% increase in our wages on growing productive industries instead of additional debt servicing? And just think of the additional tax collected had wages grown at that pace - surplus what surplus - no one would be focusing on that at all it would be free education for all instead, I imagine.
The property would have grown about 50% of what it has, and we'd have a strong industrial sector instead of the left over pieces we've got now. Having strong wages (a term included salaried workers) results in high velocity of money (the same dollar goes around the loop several times). The result is always high inflation as the demand means people are buying, and the business revenue makes it easy to hire and train people. the high wages mean that people ARE spending AND saving - saving because businesses can afford to pay high interest rates.
There is also a big push to reuse and shortcuts, as mentioned previously, at 17% interest, it is worth drinking water not bought drinks, and staying in for the night. The savings made are significant.
there would be less credit card use, as the margin on CC would make them ridiculously expensive (50% interest anyone?)
The real difficulty comes from the number of people saving too much !!
The Freemasonry lodge I belonged to had a system where you pay 5 years dues all at once and that was lifetime membership - because the compound interest at 17% automatically paid dues and kept pace with CPI !! but it was challenging for banks to find low risk investments that return 17+%, because the rates offered by other retail lenders were also favourable (and less risky) than private people or businesses.
the danger is that prices of services would shoot up, I think it wouldn't be as fast as under the current "interest creep and certify" that is currently happening (ie that our buying power is actually lower than it would have been)
Happy times are going, going, gone..
The rort was actually practised by those in power and the media which ignored all the legitimate questions, but wrote gloriously about the price rise and stoked the fire daily..
But now that the Aussies are tightening, we can't be far behind, so the change of heart now. But once again, implementation and follow through will be were the success will be tested.
"If you were just a speculator and you thought you were going to rort the system - and you guys on your TV One news a couple of Sunday nights ago had a company on and the guy said 'We buy and sell properties within six weeks' and I was sitting there going 'these people don't even realise, because they are probably badly informed by it, by that information, that they don't have to pay tax'," he said.
Sean woods of property tutors... and they do pay tax they actually recommend it as evidence of income so banks can lend them more $. Although it would surprise me if a % of their properties did not get through without disclosing profit on sale... id imagine they'd have a separate company for 'hold' properties which they intend to rent but may end up selling. Guess they'll just hold them for 2 years + each now which might be painful if they're poor performers (i.e auck yields)..
I'm pretty sure property traders/speculators are liable for both income tax (on the profit) and also GST (on the full sale price - regardless of whether they claimed GST on the purchase).
Wonder if they have thought that through and whether GST would also apply in this type of scenario.
e.g. buy a cr$p auckland house for $1M.
Sell in a years time for $1.1M
Income tax on $10k profit = $33k.
GST on $1.1M = $96K.
Total tax to pay = $129k
If so = OUCH!!!!
The standard S&P agreement for real estate has a bit stating:
[purchase price] Plus GST (if any) OR Inclusive of GST (if any).
One or other must be struck out if neither are then the purchase price includes GST (if any).
So GST can be claimed on any property purchase but if it is, then it must also be paid on sale. If the sale price goes up and/or if GST goes up (as a percentage of sale) - then the GST paid on sale will be higher than the GST claimed on purchase.
At least that is my understanding.
GST can be claimed on purchase and sale and expenses involved in renovation, so effectively pay GST on the profit so at top marginal tax rate pay 33% income tax and 15% GST=48% total tax. So if paying full statutary requirement of tax only get to keep 52% of actual gains after expenses.
There definitely is:
https://www.ird.govt.nz/property/property-rental/what-tax-shld-you-pay/…
"Rental dealers and speculators must pay income tax on any gain they make from reselling their property. They must also pay tax on rental income they may earn from the properties. GST does not apply to residential rental income but does apply on the dealer or speculator income. "
My understanding is that the dealer/speculator income is the FULL sale price (assumption being that you claimed GST on purchase - regardless of whether you actually did. Pretty sure a lot of speculators have been burned by that in the past).
So concievably you have:
1. Buy a rubbish house in Auckland for $1M with 30% deposit.
2. Auckland property market takes a dive and/or you lose your job etc and the bank wants their money
3. Sell for $700k
4. Bank get's their money
5. IRD comes looking for the GST on $700k.
Ouch again...
"Key is delaying the inevitable until he's safe in Hawaii. After that he doesn't care what happens to NZ and NZers. Why would he?"
He's made it plain, he's leaving NZ after leaving the PM slot. The shambles he leaves behind is of no concern to him. I seriously wonder if he's in payback mode for slights in his childhood and school years. We never hear from his contemporaries from that period.
JK has a huge ego. You are talking about someone who wanted to be PM and will possibly go for a third term to get into the record books. He does not need the money it pays or the aging process that is occurring while he is PM. He will want to leave a legacy of success. If he does not get on top of the Auckland bubble he will have failed. Not only is the bubble unfair for those who are not even old enough to consider buying but it also creates possible problems for the economy in the future. He might not be saying he is worried about Auckland prices but he will be. He wants to go out as one of NZ's most successful PMs ever. Anything less and the last four and a half years are a waste of his best years.( I voted for him in the last two elections.)
Let's not forget how JK got the top job, with a little help from his friend Billy.
Don Brash is still fuming about it.
The moral of the story is, "Never leave anything even remotely incriminating or compromising on any computer accessible by your colleagues, because they will use it against you."
In reply I posted the text of a 2008 article from The Press ("Stuff") but the interest.co.nz goon squad deleted it, as usual.
Anyway, the article quotes the police who investigated the leaking of Brash's email and they all but came out and stated they know who did it but lack necessary evidence (in another article, one of the policemen involved actually did say that...), and they flatly stated that they do not believe the leak was the result of external hackers or any internal email system failure.
As a result, John Key mumbled something about how they are obviously wrong and it was definitely some dirty hacker who leaked the email, thus toppling Brash and allowing John Key to grab the hot seat for himself.
Some evil computer genius in China or Russia or Wherethefarkistan was responsible, and it had absolutely nothing to do with trusted colleagues slipping into the boss's office after hours to rifle through his documents and trawl his email to find anything to use against the man because one of them wanted Brash's job and another wanted revenge for previously losing that job to Brash.
Because, haha, no other explanation makes sense, right?
Haha.
After all, it's entirely coincidental that, as a result of those mysterious leaks, the two people many believe had motive to do the leaking -- who some say had the only motive -- became the party's leader and deputy leader the moment Brash was ousted.
Haha.
Right?
HAHA!
RIGHT?
Here's your best answer!!!
http://media.nzherald.co.nz/webcontent/image/gif/201519/050515NZHtoon1g…
Let's try and keep the consipracy theory rants off of interest.co.nz. There are plenty of other political blogs that are open to any sort of accusation and cheap name-calling. Willful blindness is free there.
But comments here need to meet minimal standards. Wild accusations don't count as sensible 'comment'. Last warning.
You mean wild-eyed conspiracy rants such as published by, say, TVNZ, TV3, The NZ Herald, the NBR, and the Dominion... All of whom printed these same articles, quoting these same policemen and these same denial of the facts by National party leader and Prime Minister of New Zealand John Key?
OK, sure.
Here are the facts:
* Somebody gained access to the Beehive office and computer(s) of then Nat party leader Don Brash and leaked his emails;
* Police investigated his complaint and concluded the leak was not the work of an external hacker, or a failure of the local email systems, and exonerated the various parliamentary cleaners and security staff randomly accused by certain of Dr. Brash's party colleagues;
* John Key asserts the police are wrong;
* Don Brash was forced to resign and John Key took his job, with former party leader (previously ousted by Brash) becoming Key's deputy;
These are the incontestable, undisputed facts of the matter, as per public record and police file, and have been reported at length and in depth by the nation's media.
It has nothing to do with demonized "conspiracy theory."
By the way, David, just because a theory happens to pertain to a conspiracy doesn't automatically make it wrong or untrue.
If he can prevent a bubble from taking down the economy, I think he's done extremely well. No idea how he's going to achieve that. The only people that are not that concerned are the banks. Ideally for them, property bubbles will last forever. But they know the taxpayer has their ass covered should anything get too bad.
Well done Labour...or should I say National... sorry, I'm puzzled by the origins of this policy announcement.
One comment further up was spot on as to why it has taken this long for any government to tax speculators and foreign investors on residential property.
Perhaps Billy Bob English finally asked John - "Mate, I can't keep fronting the media promising the government returning to surplus when our tax intake continues to diminish and our spending sky rockets, could you please allow me to tax some of your mates speculating in property in Auckland.?...pleeeease!!"
Or perhaps Puller asked Billy Bob "Mate what can we bring in that looks like we are doing something and will get those pesky posters on Interest. Co off my back but wont upset Beijing and also my heavily invested National Colleagues ? Oh Yeah - also something that I can make out is not a GST tax so Labour and ol Winnie don't start taking the piss?
I can feel a NZ Hitler parody getting made here - see a recent example on property - possibly coming soon to a Beehive office near you https://www.youtube.com/watch?v=bNmcf4Y3lGM
Wouldnt that come under tax evasion? ie undertaking a deal with the sole purpose to avoid paying tax. ie there was a case that PWC? advised some medical surgeons to do a deal where their true wages of $500k+ shrunk to $120k (which they paid tax on) and the rest came by a different "path". IRD won that one.
You'd be brave to rely on that outside of a s And p agreement... I'd sign of the house at 1 mill then when they ask 4 the $ for the bike tell them they're dreaming. Or include the bike in s and p or other contact and have paper trail as well as bank statements just waiting for you to get caught to pay tax plus penalty for tax evasion
Ya kin bet the farm that there will be a leetle clause in the Act that runs something along these lines:
'The Gubmint of the day may, on the advice of the appropriate Minister and officials, adjust this figure up, down or sideways, via a Regulation duly notified by Order in Council, which Order can be done by lunchtime tomorrow if our polling indicates such expeditiousness is required.'
He (Winston) said the 'bright line' rule was a joke.
"Expect the Companies Office to receive a torrent of applications for new property companies all in the name of virtually anonymous offshore property investors," Peters said.
On the 74th floor of the Time Warner Center, Condominium 74B was purchased in 2010 for $15.65 million by a secretive entity called 25CC ST74B L.L.C. It traces to the family of Vitaly Malkin, a former Russian senator and banker who was barred from entering Canada because of suspected connections to organized crime.
Last fall, another shell company bought a condo down the hall for $21.4 million from a Greek businessman named Dimitrios Contominas, who was arrested a year ago as part of a corruption sweep in Greece.
A few floors down are three condos owned by another shell company, Columbus Skyline L.L.C., which belongs to the family of a Chinese businessman and contractor named Wang Wenliang. His construction company was found housing workers in New Jersey in hazardous, unsanitary conditions. Read more
A crisis for me is something where someone is in or going to be in deep doo doo. Ppl can still rent, so they have a home to live in, they are not left on the street, ergo not a crisis. Oh wait some ppl are living on the street but the Govn doesnt seem to care very much about real crisis. So I guess the "crisis" is one of "oh my god we are losing votes" and nothing more.
im sure this is but step one, and slowly we will get to a CGT,
i also hope they follow up like many other countries with a non resisdent or citzen policy except for new builds. Buying and selling of existing NZ houses by foreigners brings no long turn benefits to NZ just increases the debt mountain of the locals
So, we the taxpayers of NZ, have been dicked out of capital gains tax that should have been paid by non-resident foreign investors in our residential housing market since FOREVER. And all the while the IRD stood by silent on the matter (chasing locals instead!!!) - and governments stood by silent on the matter .... why??? What, pray tell, was in it for NZers?? A false sense of wealth creation - accompanied by a tendency to borrow more on their newly inflated farm and residential asset prices.
Am I mad?? You bet.
Now we really understand the clear intent of our present and recent past governments has been one of accumulation by dispossession on behalf of the banking/finance sector. They have deliberately engineered the dispossession of their citizens landholdings and property assets. And its worked a treat. All that is left now is the years of reckoning.
I can't give you a New Zealand example of what you refer to but
Here is straight forward example of how the ATO got caught out
A USA private equity outfit TPG bought the Myer Department Store chain for $1 billion, took it private, stripped fixed assets out, 2 years later went back on the market in a $2.4 billion IPO. The float happened on the Friday, the proceeds were gone the following Monday. One week later, the ATO held its hand out for $738 million in tax on the profit, which was pretty fast going for the ATO
The ATO never did get the money. It was long gone
http://www.theaustralian.com.au/business/companies/uphill-struggle-for-…
And here is past defensive spin protesting Winston's exhortations to stop such nonsense.
Sales of farmland to foreigners has become a heated issue just before the election.
Rather than getting steamed up, we should think about what results from such sales, and also about what would happen if we banned them.
What happens when anyone buys an asset such as a farm? Basically, capital gets recycled. Capital comes in, courtesy of the new owners, and capital gets taken out by the vendors.
This recycling process also produces something new. The new thing, a benefit over and above what the buyer and seller get, is a net gain to the economy, usually in the form of more spinoff enterprises and jobs. Read more
Are the thin capitalisation rules policed as hard as they could be prior to capital export?
Of course not - given NZ is not run for the benefit of NZers. The government can't manage a surplus because it has chosen not to collect tax that was legitimately owed by non-resident foreign ownership interests. Plain and simple, really. Not only do we have a government happy to sell out to offshore interests - but all the while, we locals pay tax on our local earnings and they don't.
How BIG is what we have failed to collect over the years? Much bigger than our entire government deficit, I reckon.
It's the silence - can't you hear it?
There's not even a gentle little zephyr eddying through the trees in New Zealand
Meanwhile, my favourite scribe Michael West keeps the fires burning on big multi-nationals ripping the heart out of the tax system
trawl through the headlines of his last half dozen articles - you'll get the drift
then come back and tell me this is not happening in nz
NO and NO
The ATO has a history of not going up against big-money that can fight back
You should go through Michael West's articles linked above - he's scathing of the ATO
Michael West is Fairfax's foremost financial investigative journalist
I read every article he writes.
He is meticulous in his investigations
He consults heavily with Forensic Financial gurus from University of NSW
Everything is vetted by a dozen legal eagles before publication
I have never seen anything come close to it in the New Zealand media
His archives are worth sifting through
Kate I have been saying for some years now that charging rent and obtaining capital gains is criminal like behaviour. What stop at taxing capital gains when the whole gain is crooked? Taxing capital gain is like taxing a thief.
But glad you have clarity of the fraud being perpetrated, at a political level it is treason and should be punished as such (ie: you heads roll or a rope around the neck). You won't see meaningful change until you do see it punished, all the talk in the world won't change a thing.
I agree scarfie.
Unfortunately, when the goal of mankind is "wealth and prosperity", ergo money and money like things and things deemed to "store" value, all of the above will be overlooked and deemed acceptable. It's obvious that if one can get as much for themselves and as easily as possible then they will especially if it means they meet societies standards of success.
We can blame governments, and central banks, and corporates and everyone else as much as we like but we are the only ones responsible.
At the end of the day, it will be the savers a haircut. Just like what happened in the 2007. This time though it will likely be savers money in the bank affected, and not the finance companies, as savers have moved money into banks, and it is the banks now taking the bigger risks by lending to an over inflated property market. They should really be requiring far larger deposits in Auckland, as there is no way property is worth the amount it is selling for long term. Like the sharemarket, you will be rises and falls, and it is the falls that will leave banks very exposed.
You really don't know that.
According the RBNZ the "average" mortgage currently being taken out is only $200,000
The problem with that amount is it's a national figure. It is not an Auckland-only figure
If that amount of $200,000 is representative of Auckland-alone mortgages then the banks are more than adequately covered in the event of a severe downturn
Sure, there will be some higher than that, but correspondingly, some must be less in order to arrive at that average
That is the problem - nobody knows - or - those that do know don't tell
Until meaningful data is published one can only guess - and that is dangerous
Iconoclast - you are 100% incorrect on average mortgage prices.
The RBNZ mortgage series shows the number of mortgages by discrete unit. That is - a single house being purchased with say 3 or 4 different floating instruments - 2 years, 3 years, 5 years and floating. That is one home, with a number of different maturities.
Sorry mate.
Where?
I was just going on the last couple of articles published here on interest.co.nz
That was the figure clearly stated, and that was the way it was stated
So, most borrowers are holding multiple (up to 4) mortgages over any one property?
If that's the case, I have completely misunderstood the articles
You can find the data here, its not good to look at
http://www.rbnz.govt.nz/statistics/key_graphs/household_debt/
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