Capital Gains Tax

July 25th, 2013 at 2:00 pm by David Farrar

The Herald reports:

A on property makes little sense unless it also applies to the family home, says Finance Minister .

Speaking at today’s Mood of the Boardroom event in Auckland, English told the country’s top business leaders the government was maintaining its “clear position” on the capital gains tax debate.

“We’re not supporting the extension of the current capital gains tax,” he said.

“The overseas experts who tell us we need it all say that it should be comprehensive on all capital gains. And if you don’t do the whole thing then it probably doesn’t make much difference.”

I broadly agree with this. My position on Capital Gains Tax is this:

  1. We should have a comprehensive capital gains tax (many capital gains are already taxed, but not “incidental” ones)
  2. There should be no exemptions, including the family home. To do so will just encourage tax avoidence by giving each family member a home etc.
  3. Other tax rates (income and company rates) must drop by at least as much as the extra revenue a CGT would generate for the Government.

You need to do all three together, to get a broad based low rate tax regime – which is what is best for economic growth. What you shouldn’t do is bring in an exemption riddled CGT and use it as a way to screw taxpayers over for more money to fund extra spending – which appears to be Labour’s policy.

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63 Responses to “Capital Gains Tax”

  1. redqueen (563 comments) says:

    David, you’re forgetting two things: capital gains tax will reduce turnover in properties and make people less mobile (why would I move, if facing a no exemptions tax, unless absolutely required to) and will be administratively complex / expensive. Equally, this will reduce the desire to sell investment properties as the tax consequences will now be higher, and I can still withdrawal equity via borrowing (which can then be tax deducted). In terms of the administration, just trying to figure out what a property, shares, etc. were worth, and keeping documentation for them, will be a true pain. Finally, taxing ‘productive’ capital (shares, for instance) as compared with rental properties and family homes (which are not particularly productive, in the economic sense) will create further distortions in our economy (as people are already risk adverse, hence the predominance of property as an investment class). Instead, why not favour a land tax or a removal of rental property interest deductability?

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  2. nickb (3,687 comments) says:

    A comprehensive capital gains tax with no exemptions (in the absence of abolishing all taxes and replacing them with a poll tax, but I digress) is vital to the fairness of the tax system.

    However, I don’t support it in the current political landscape. Both Labour and National are locked into a never ending cycle of tax and spend. All it would mean is an extra tax with no corresponding reduction in other taxes.

    Even National’s recent so called “tax cuts” were fiscally neutral as GST was raised to compensate hammering the worse off in the community.

    If it was used as a substitute for more growth harmful taxes on income then I would be fully supportive.

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  3. Manolo (13,777 comments) says:

    Fuck this. Why would people who advocate for higher taxes don’t pay them now?
    Nothing prevents the generous bleeding-hearts from donating more of their own money to the greedy state.

    There is little or no difference between Labour and Labour Lite, DPF’s position is proof of it.

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  4. tas (625 comments) says:

    Manolo: How about a law that says taxes can only be introduced or increased when half the country voluntarily starts paying them?

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  5. Jimbob (641 comments) says:

    The problem is that no. 3 would never happen. It would just mean everything that moves will be taxed, the Government would spend the revenue instead of the private sector spending it more efficiently for the economy. The states and Aussie have a CGT, pay more tax and have or had massive housing bubbles.
    If interest was not tax deductible on a rental, the speculative housing market would tank over night. CGT is a tax on a tax, make the system get the tax on the way through as you earn it, but tax deductions is the area that needs looking at, so the tax is collected up front, not back ended as CGT would do.

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  6. nickb (3,687 comments) says:

    Agree it would be complex redqueen but it could hardly be more complex than most of our existing tax regimes. Try looking up the Income Tax Act and trying to make sense of the LTC, FIF, associated person provisions etc.

    It would definitely have no effect on house prices, at least in dampening their growth. IMO it may even lead to higher house prices.

    Removal of rental property interest deductibility would tank the housing market overnight and wipe billions of dollars off Kiwis’ wealth. Seems rather fascist to me.

    And levying a CGT on only property and not other classes of investment assets only creates more distortions. The point of a CGT should be to reduce distortions.

    My take on all this is that a capital gains tax should be in place because capital gains are in fact income in the purest economic sense. A $10,000 “capital” gain (even using that term is pejorative, what has occurred is more like “wealth increase”) should be treated no different than $10,000 of salary.

    Historically, economists have defined income as the gain in value of wealth over a period. This is the purest definition of income and clearly includes what people consider “capital” gains.

    Disclaimer before landlords like Viking start screeching: I own investment properties

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  7. Cunningham (844 comments) says:

    So the plonkers on the left want to exclude 75% (by memory) of the housing market from this tax and they think it will be effective? Why should someone who buys a house and makes a money on it not be taxed because it is their family home (yes I own a house) yet other people are? So people who sell their family home make money on it, aren’t taxed and then use the capital gain to pump up the price of the next house they buy. How is this going to control house prices?

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  8. nickb (3,687 comments) says:

    screw taxpayers over for more money to fund extra spending – which appears to be Labour’s policy.

    Unless you know something that we don’t, namely that National intend to continually reduce the personal income tax brackets to reduce fiscal drag, then this statement equally applies to National.

    The government will take a temporary hit on personal tax takes until economic growth and inflation pushes more people into higher brackets, but the extra GST revenue continues to increase. No fiscal neutrality there.

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  9. Jack5 (5,137 comments) says:

    What about the king of capital gains taxes – death duties? Very economical to collect. One transaction and summing up.

    The biggest problem with death duties was with family businesses – chiefly farming. If the estates were given time to pay – say 2 to 3 years – that should solve the problem, though.

    There are aspects that need to be fixed, such as trusts, and ensuring company and top personal tax levels are aligned.

    You have to agree with DPF that any new tax should be offset by lowering another tax. We need a maximum pool then decide how to divide it up between the methods.

    Contract out state services, change welfare for workfare, get us off the insane drive of tertiary education as the basis for all training and livelihoods … these are a few of the things that need to be done in parallel with both shrinking the overall tax take and finding more rational means of raising the tax that the country absolutely needs.

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  10. nickb (3,687 comments) says:

    What about the king of capital gains taxes – death duties? Very economical to collect. One transaction and summing up.

    Tried and failed. Far too easy to plan around using trusts. It just created a massive estate planning industry and fattened lawyers and accountants.

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  11. Ross Nixon (559 comments) says:

    If one buys a house, and years later sells it at a 50% profit, is there *any* capital gain if inflation (or CPI index) of 50% occurs over the same time?

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  12. nickb (3,687 comments) says:

    Ross, to answer your question is no I think. I believe Labour’s policy took inflation into account.

    Which is only fair, because it wouldn’t be fair to levy capital gains tax on a capital gain which was not a capital gain (due to being eaten up by inflation)

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  13. simpleton1 (228 comments) says:

    Let inflation rip. ! ! !
    Plenty of $capital gains tax$ to be collected. ;-)

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  14. nickb (3,687 comments) says:

    In my opinion the toughest part of a capital gains tax to grapple with is whether the tax should apply on an accruals or realisation basis. In other words, do you need to account for your capital gains every year, or only on the sale of the asset?

    It is generally accepted that an accruals basis is by far the most efficient and raises revenue much faster (this is why Phil Goff was hammered by Key in the 2011 election when he proposed a realisations basis CGT) but it will also place a large compliance burden on taxpayers.

    It may not be so bad for taxpayers who own shares for example and is therefore easy to ascribe an opening and closing value at each tax year. However, for people like home owners who are not already filing tax returns it makes it much harder as they would need to place a value on their home each year and potentially pay CGT when they would not otherwise be involved in the tax system as private individuals.

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  15. simpleton1 (228 comments) says:

    Property may seem to go up but there are times when people have sold at a loss.
    So will capital losses be offset against income ? or other property gains?

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  16. nickb (3,687 comments) says:

    In Australia and most other countries capital losses can only be offset against future capital gains tax liability I believe.

    There is no chance you would be permitted to offset capital losses against other income.

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  17. seanmaitland (500 comments) says:

    I’ve got 3 properties, and would be happy if there was a CGT. It would mean I would hold on to my properties for longer before selling, or I would raise the price of them – but thats what happens when you add tax onto something – the price goes up.

    The whole CGT thing is completely misunderstood by most people (including mugs like Bernard Hickey) – they spout it as a way of lowering house prices and decreasing the demand for houses – but its going to decrease the supply of houses for sale (for the reasons I mentioned above) as well as likely increasing prices at the same time, so people can recoup the tax they’ve lost.

    The whole not putting it on the family home is just a pathetic example of the hypocricy of most New Zealanders – people are happy for there to be CGT on properties, but only happy if its not them paying it.

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  18. Cactus Kate (551 comments) says:

    Dpf your 1-3 is a joke and akin to dangling heroin in front of an addict. #3 will never happen.
    CGT does nothing for housing affordability. Even on a common sense level relying on CGT for government coffers means government has a self interest in values always increasing. A bit like rates.

    To make a difference in the housing market you need a flat duty as HK has brought in on all sales. It’s effectively stalled the bubble. Not made housing cheaper mind you, transaction numbers are virtually non existent.

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  19. nickb (3,687 comments) says:

    Well said Sean. The irony of a CGT actually increasing house prices is not lost on anyone apart from property armchair experts like Bernard Hickey and Mary Holm. Two reasons why the Herald business section is a load of rubbish.

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  20. kowtow (8,487 comments) says:

    One big problem is inequality in tax treatments of different investments.

    Why should stocks or savings be taxed when a capital gain on a home isn’t? That does not make sense.

    What we need is a regime where there is no tax on savings or investments,that would get more money into the productive economy.

    To those who say the state would lose out on revenue,tough. The state has to cut it’s spending .Then it wouldn’t gobble up so much private wealth in taxes.

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  21. Mark (1,488 comments) says:

    Rather than looking at new ways to impose tax the government would be much better served by looking at new was to cut government spending, why is this very simple concept so difficult for governments to comprehend?

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  22. Mark (1,488 comments) says:

    nickb CGT will not increase house prices unless it reduces the supply at a greater rate than the reduction in demand. Basic economics that this and the previous labour government have failed to understand in respect of the Auckland Housing market.

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  23. simpleton1 (228 comments) says:

    After WW2 the New Zealand government tried to control land prices, but it was worked around with under the table payments, so as to get the sale through, but kept the declared price below the radar/tax. Of course you will not hear of all the ways to bypass the effects.

    It was the others that could not figure this out that paid the full cost of it.

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  24. Viking2 (11,471 comments) says:

    Nickb says: Disclaimer before landlords like Viking start screeching: I own investment properties.

    Screeching. FFS nick You don’t agree with others so now you consider their point of view screeching?
    Clown born everyday. You should join the Greens. They have screechers.

    Capital gains tax has never worked anywhere in the world and will never work. Once again its an attempt to rob the rich to give to the poor.

    Tax is only required to fund politicians election bribes. All that is required to reduce taxation and therefore eliminate the need for excessive taxation is for constraints to be placed on politicians and Parliament. That and Govt. not owning anything that moves or provides a service or god forbid a product.

    There are so many things that Govt. wastes taxpayers money on the taxpayers if they were required to pay for would simply not indulge in.

    Reduce Govt. spending down to necessities rather then all the nice to gives etc and allow people to be responsible for themselves.
    And before the screaming harridans like nick start, I have no issue with helping those that can’t help themselves in many situations.

    No doubt nickb you properties are commercial so the argument over housing probably doesn’t affect you, so that’s why you rant in your smug way.

    God I get tired of this CGT argument. its bloody pathetic, just like those that support it.

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  25. seanmaitland (500 comments) says:

    @Mark – I’m a property investor and a CGT would make me hold onto my properties or increase the sale price. At the same time our population will be increasing steadily until it hits 5, 6, 7 million people. Demand is not going to decrease, unless everyone starts living in tents.

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  26. nickb (3,687 comments) says:

    You just proved my point with your strange rant Viking.

    And I support cutting expenditure as much as anyone. However, we are discussing a tax system in an inmperfect society where both major parties want to spend to the hilt.

    I agree that a capital gains tax won’t work in terms of reducing house prices. However, it will work in terms of increasing revenue and equity to the tax base. Did you read any of my above posts before spilling your gin and going off?

    The only reason we are in the scenario of needing to raise more revenue is due to NZers like you voting in line with your own self interest all the time ( in your case no doubt for whoever is giving the most favourable rental property tax breaks).

    And no, I own rentals and a home, so it does affect me.

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  27. Odakyu-sen (655 comments) says:

    How on earth are families going to accumulate wealth over generations so that they can fund the education of their children as well as the retirement and medical care of their elders without becoming more reliant on government?! (Capital gains taxes and (God forbid) death duties make families more dependent on government.)

    (No, I don’t want to see the rise of the aristocracy or the so-called “idle rich”; just strong families who can pay their way in the world without government support.)

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  28. Pongo (372 comments) says:

    Hideously difficult tax to collect, doesn’t take a count of inflation, needs tot many exemptions and thresholds to be fair and won’t make a jot of difference to house prices. If as Labour keep saying it will direct investment out of the housing market WHY, if everything has a capital gains tax it won’t change incentives at all, logically.
    Then you have the huge problem of your tax flows being huge and then terrible as in the bad years people claim deductions for capital losses.
    It’s a terrible tax that is incredibly hard to administer.

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  29. slijmbal (1,236 comments) says:

    @kowtow

    “Why should stocks or savings be taxed when a capital gain on a home isn’t? That does not make sense.”

    Unless you are a trader then capital gain on directly owned stocks is not taxable and dividends typically have a pretty good imputation credit so aren’t normally liable for much tax, which is why it’s a good idea to own shares and not just kiwsaver/unit trusts. You end up paying less to the taxman and no ott management fees.

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  30. Paulus (2,627 comments) says:

    What about Stamp Duty on domestic property sales.
    This would be graduated from say sale price of $300,000, like UK and Australia for example.
    Every time a house sells the purchaser or the seller will be liable.

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  31. Rick Rowling (813 comments) says:

    Mostly no-one benefits from capital gains on the family home – because they’re moving into a new family home in the same inflated market.

    The whole “feel rich” thing because your house is worth 20% more than it did before is an illusion – assuming you still want to own where you live, and want to keep living in the same standard of house and area, you’re no better off at all.

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  32. Jack5 (5,137 comments) says:

    Nickb posted at 2.19 on death duty:

    Tried and failed. Far too easy to plan around using trusts. It just created a massive estate planning industry and fattened lawyers and accountants.

    Death duty, or estate tax, is applied apparently successfully in many countries, Nick. For example in the United States both at a federal level and then secondarily by some states. Also, to name a few national examples, in Britain,Germany,Sweden, Japan, France, Norway, the Irish Republic, and at a canton level in Switzerland.

    Nick, trusts fatten lawyers and accountants already. NZ trust legislation and administration needs reform, though. I understand there isn’t even a national register of them. What a great potential rort for world money launderers.

    In the meantime, isn’t a pity that when politicians and others talk tax reform, there’s no prior agreement that there will be no increase in the total tax take as a proportion of national income. It’s way too high for peace time. Surely, any new tax surely should be balanced by reduction in some other tax.

    Regarding property price-influence tools, Cactus Kate’s 3.08 post on Hong Kong’s flat tax is most interesting. Hong Kong has been a paragon of capitalism and free enterprise, but it it has such a tax, and controls its currency, linking it to a basket of currencies. In both these areas – property transactions and currency management – Hong Kong apparently stands in contrast to our welfarist, leftist, NZ.

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  33. leftyliberal (651 comments) says:

    I support a comprehensive CGT for pretty much the same reasons as DPF: Nothing to do with housing prices, nothing to do with raising revenue, all to do with broadening the tax base and reducing distortions. Thus, I’d support that it was introduced alongside reductions in other taxes.

    Collecting it annually is likely best – it’s not hard to collect on property as it’s already done for rates.

    To eliminate double taxation in business, one could work with a minimum return on capital model. That minimum return would then be taxed at the usual tax rate. If a business is earning more than that minimum return on capital, they pay nothing more than they would normally in company tax anyway. If they don’t, they pay tax on the minimum return on capital, and can optionally carry over a tax credit to the next year for the extra they paid if the earnt less than the minimum return. This then encourages productive use of assets.

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  34. s.russell (1,642 comments) says:

    A point too easily forgotten in the debate about CGT and house prices is the effect on rents. Do not forget that one great feature of the present situation is that rents are remarkably low in comparison to property prices – a phenomenon that greatly benefits those who cannot afford (or do not want) to buy a house. Measures to (supposedly) help first home buyers by hammering property investors may end up hurting the poorest group (renters) far more than it helps the upwardly mobile who want to buy. Has Labour even thought of this?

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  35. dime (9,972 comments) says:

    So Dime buys a house for 750k.

    5 Years later he sells it and gets 1,050,000 for it. 50k goes in agent fees and he collects 1 mill.

    He then has to pay 34% on the 250k. That comes to 85,000 in new TAX.

    So that is 1,050,000 – 50,000 – 85,000 = 915,000 in settlement.

    Dime can now successfully downgrade his house and break even.

    O for fucking ORSUM!

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  36. nickb (3,687 comments) says:

    Death duty, or estate tax, is applied apparently successfully in many countries, Nick. For example in the United States both at a federal level and then secondarily by some states. Also, to name a few national examples, in Britain,Germany,Sweden, Japan, France, Norway, the Irish Republic, and at a canton level in Switzerland.

    I’ll give you a hint why it is successful in those countries… most of them are civil law jurisdictions and have no domestic trust legislation – they have no trusts. You may be interested to know that a hugely increasing number of people from civil law jurisdictions just like these are in fact using New Zealand trusts to dodge estate duties in their home countries.

    Even in the countries like USA and Britain which do have domestic trust law, estate duties are so full of holes and exemptions that you could drive a truck through them. They generally only kick in for super wealthy people… who have the resources to use trusts to dodge them.

    NZ trust legislation and administration needs reform, though. I understand there isn’t even a national register of them. What a great potential rort for world money launderers.

    Lucky New Zealand has just completed a reform of its trust and money laundering laws, then.

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  37. Manolo (13,777 comments) says:

    I support a comprehensive CGT for pretty much the same reasons as DPF…

    @leftyliberal,
    Of course you would. Both of you are left-wing liberals.
    By the way, are you also a National Party member?

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  38. nickb (3,687 comments) says:

    @leftyliberal,
    Of course you would. Both of you are left-wing liberals.

    Manolo, tell us what you really think!! You are going to go into full meltdown mode when we have a Labour/Greens/NZF/Mana/Maori Party/Peter Dunne “grand” coalition :)

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  39. dime (9,972 comments) says:

    “I support a comprehensive CGT and any other hair brain taxation scheme the politicians can come up with. some people are just richer than me and its not fair. wah wah wah”

    fixed it for you

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  40. Manolo (13,777 comments) says:

    @nickb,
    With a bit of luck I’ll arrange my own affairs and depart for greener pastures (taking all my capital). :D

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  41. nickb (3,687 comments) says:

    @nickb,
    With a bit of luck I’ll arrange my own affairs and depart for greener pastures (taking all my capital). :D

    In true Atlas Shrugged style?

    I heard the Caymans and the Bahamas are nice. No CGT in sight either :)

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  42. Jack5 (5,137 comments) says:

    Nickb’s post at 5.45:

    …Lucky New Zealand has just completed a reform of its trust and money laundering laws, then…

    I knew the Law Commission had reviewed trust legislation, and I think its approach was supported a few months ago by the Institute of Chartered accountants, but I didn’t relaise the Government had implemented legislation to reform trusts. Or did you, Nickb, mean “review” rather than “reform”?

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  43. nickb (3,687 comments) says:

    Yes, you are quite correct I could have been more clear there. They are about to make their final recommendations to the government this month, and their recommendations are likely to pass into law unchanged. It is widely known what the recommendations are going to be however, based off prior issues papers.

    AML laws came into force on 1 June.

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  44. OneTrack (3,107 comments) says:

    Nicks – ” I believe Labour’s policy took inflation into account.”

    But what about the controlling partner in the 2014 coalition. What is their policy? And what will NZ First and Mana want to change?

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  45. nickb (3,687 comments) says:

    A CGT will be the least of your worries OneTrack!

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  46. kowtow (8,487 comments) says:

    Death duties are theft.

    Theft of private property.

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  47. OneTrack (3,107 comments) says:

    Nickb – don’t I know it :-)

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  48. leftyliberal (651 comments) says:

    Thanks for the useful contribution, dime.

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  49. Viking2 (11,471 comments) says:

    Nickb says:I agree that a capital gains tax won’t work in terms of reducing house prices. However, it will work in terms of increasing revenue and equity to the tax base. Did you read any of my above posts before spilling your gin and going off?

    Your brain needs a revamp if you really beleive this.

    The only reason we are in the scenario of needing to raise more revenue is due to NZers like you voting in line with your own self interest all the time ( in your case no doubt for whoever is giving the most favourable rental property tax breaks

    Is that the very best that you can do.
    I also have several businesses and spend half my time helping others so I vote for sensible policy that will allow Kiwi’s to be self sustaining and self fulfilling unlike your constant whining and attempts at control like the control freak you really are.

    Those who appear to have the greatest self interest are lefties, politicans and lawyers, in no particulkar order.

    One day you just might figure out that no matter what you and the politicans and lawyers et al devise in your ineveitable scheming there are smarter people than you lot around and they will always find a way oaropud, over or under any fence you erect. Muldoon never figured that out and it seems plenty of others still have his mindset about rules.
    Rules are made to be broken.
    Didn’t you ever learn that.
    ——————-

    Pongo (339) Says:
    July 25th, 2013 at 4:02 pm

    Hideously difficult tax to collect, doesn’t take a count of inflation, needs tot many exemptions and thresholds to be fair and won’t make a jot of difference to house prices. If as Labour keep saying it will direct investment out of the housing market WHY, if everything has a capital gains tax it won’t change incentives at all, logically.
    Then you have the huge problem of your tax flows being huge and then terrible as in the bad years people claim deductions for capital losses.
    It’s a terrible tax that is incredibly hard to administer.
    ———————
    Absolutely correct. Provided you will allow me to claim my losses as well then i could have sold some a couple of years ago very profitably for me.

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  50. nickb (3,687 comments) says:

    Do you even paragraph? I don’t have the energy to respond to your wall of text viking. Sorry to disappoint.

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  51. flipper (4,067 comments) says:

    I say bullshit to a CGT, whoever advocates one, and in whatever form.

    Their thinking is shallow, nay half arsed, as illustrated by many CGT supportive comments (including observations by folk clearly familiar with tax law) above.

    Capital gains, be they from shares or property are now taxed if the activity is specifically income generating. To include the family home, as some (DPF included) is rubbish. So every bit of interest paid, every bit of maintenance, every capital improvement, insurance, rates and so on, is to be deducted…. or ignored by the ravenous state?.

    Have the US/Euro nations so beloved by the OECD spendthrifts that have fucked the world economy forgotten about those deductions? You bet they have, and they ignore the fact that bringing CGT in here would require a massive shift in policy. CGT is silo thinking garbage.

    Any CGT as proposed by Labour is designed for just one purpose- to raise money to increase spending and income re-distribution.

    Half arsed CEO advocates have probably thought the issue through and concluded that, as in the US, their high priced tax lawyers/accountants will relieve them of any obligation to pay much. Only the little folk will pay…. and then bugger all, if all inputs are accounted and deducted.

    My prediction: No political party will go to the polls on a comprehensive CGT. Labour will regret its policy because National will nail them to the cross … and burn them.

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  52. nickb (3,687 comments) says:

    Capital gains, be they from shares or property are now taxed if the activity is specifically income generating.

    What? No they’re not.

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  53. hj (7,023 comments) says:

    Land taxes are the way to go because you can’t hide it or put it in a trust and as the values rise so the tax take rises.

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  54. hj (7,023 comments) says:

    It’s all been chewed over
    http://www.victoria.ac.nz/sacl/cagtr/pdf/tax-report-website.pdf

    but what is the use when politcians just say “no”?…… as they do.

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  55. Viking2 (11,471 comments) says:

    nickb (2,281) Says:
    July 25th, 2013 at 7:34 pm

    Do you even paragraph? I don’t have the energy to respond to your wall of text viking. Sorry to disappoint.

    Not a disspointment at all. You are redbaiter 2 when it comes to rubbish and a lack of human understanding.

    “A true capitalist, an entrepreneur, knows how to take a dollar and turn it into a hundred dollars. Give a bureaucrat a dollar, and they’ll spend a hundred.” Rich Dad
    Helped no doubt by many.

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  56. nickb (3,687 comments) says:

    You have one thing correct – lack of understanding (of your broken english)

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  57. Viking2 (11,471 comments) says:

    A school teacher then. Should have guessed.

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  58. nickb (3,687 comments) says:

    lol

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  59. simpleton1 (228 comments) says:

    If capital gains on property have to be paid then gst on rates should also be claimed back.

    If capital gains and/or land tax also has been mooted then comes in, then I believe that some Councillors and MPs will be left swinging by the frustrataion of tax payers and rate payers.
    Because what happens it is then claimed that the further out areas plus taxpayer will have to help out as the town/city rates are too high for the ordinary business or house owner.

    Many local councils ( not all ) have been able to keep their rates down as they have simply BORROWED
    from 6.07 to 16.49 Larry Mitchell
    http://www.radionz.co.nz/audio/player/2563372

    Just a quick skim of the audio
    Auckland pays 1 million interest a day (still to borrow more?) that is at a level of just one third of what is proposed.
    Christchurch new covered stadium 500 million, debt ? sell assets ??
    Larry Mitchell League table
    700 mill spend more than they bring in, sustainable?
    Statistics, released shows the Nile in local government NZ
    Mr Laurence Yule is wrong for local government and behind times, not up to date
    241 million expenditure increase 2012 June
    Payroll up $51 million
    Largest operating deficit since 1993, not put rates up but just borrow makes it easy for Councillors since 1998
    fund infrastructure required
    150 million to find, for Horowhenua yet nothing on their balance sheet for urgent water and waste water
    1 $ out of every $5 just to pay for interest
    Prudent stewards ? ? ?
    auditors missing in action for a long time
    Tauranga to borrow 700 mill just as a figure, looks it will then join the other councils at the bottom
    Wanganui, Horowhenua, Rotorua, Buller, Kaipara, Western Bay, Hamilton, Invercargill, Kawerau, Palmerston North, Whangarei then add Tauranga
    Parsimonious Presbyterian very good then at the bottom poor performers
    per rate payer Horowhenua is a poor affordability not wealthy, not good set up flash buildings and community facilities, basic infrastructure has been ignored.

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  60. simpleton1 (228 comments) says:

    Steep increase in rates inevitable as I can see by my own local council, and still they increase expenditure,knowing that some other sod will have to enforce increased rate collection and have massive cut on services.

    This was the Herald item that Larry Mitchell was referring to and that That Lawrence Yuler was out of date with his figures and easy going interpretations
    “Local Government NZ head Lawrence Yule said councils had tried to keep rates as low as possible since the economic downturn and so had incurred some operating deficits.”

    “It’s nothing to worry about, it’s simply reflecting the tighter operating environment where councils have deliberately been trying to keep the rates down … and that potentially exposed us to slightly more deficit situations,” he said.
    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10902755

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  61. Tom Jackson (2,553 comments) says:

    A school teacher then. Should have guessed.

    If he can spell properly, he can’t be a NZ schoolteacher. ;)

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  62. rouppe (971 comments) says:

    Labour say a cgt is to stop speculators. Speculators should already be captured by the existing rules.

    I have owned my rental properties for over 15 years. How is that speculation? They’ve been rented out continuously. I pay net tax on them. They are an investment, pure and simple.

    Maybe there should be a rule. Owner occupied for more than 7 years or paid net tax for 3 or more continuousyears

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  63. Mark (1,488 comments) says:

    seanmaitland (304) Says:
    July 25th, 2013 at 3:36 pm
    @Mark – I’m a property investor and a CGT would make me hold onto my properties or increase the sale price. At the same time our population will be increasing steadily until it hits 5, 6, 7 million people. Demand is not going to decrease, unless everyone starts living in tents.

    Sean, Your ability to increase the price on sale will have little to do with tax and will rely upon supply and demand pressures and your ability to influence that is going to be somewhat limited. But on your second point you are right. The Auckland housing market pricing issue is being driven by supply to keeping up with demand. If Auckland continues to grow at the current rate the Government simply has to address issues such as the RMA and land supply for the market to function efficiently. For far too long this government has talked about dealing with the RMA but has failed to deliver on the rhetoric. So in comes Wheeler with a bumble fuck proposal to constrain lending. This may have a short term impact on demand but simply does not address the problem of supply failing to keep up with the demographic driven demand. The down side consequence politically is that the hardest hit by Wheelers proposal will be first home buyers which is scaring the shit out of National.

    Now Nick Smith is starting to look at increasing access to Kiwi Saver accounts to deal with the first home buyer problem so instead of working with the RB to deal with the problem the Government is looking to bypass the credit constraint solution that Wheeler is trying to apply, genius!. Neither proposal addresses the problem of supply. (before you all jump to the minutiae – Sure there are other factors that will influence house price inflation such as building material costs and labour cost/supply but when you have a market that year after year builds less than half the housing units it needs to accommodate the growing population eventually it is going to bite you in the arse).

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