CGT no panacea for housing

August 8th, 2014 at 12:00 pm by David Farrar

The Herald reports:

Labour and the Green Party have conceded that a capital gains tax would not be a “panacea” for New Zealand’s unaffordable housing crisis.

The two parties seemed initially flummoxed when a questioner at an otherwise friendly election forum organised by the Public Health Association in Auckland this morning noted that having capital gains taxes had not stopped housing price booms in Australia, the US and Britain.

“I don’t know why they haven’t worked in those countries,” said Green health spokesman Kevin Hague.

I do. It is because the artificial restrictions on supply of land are the major factor in house price increases.

National North Shore MP Maggie Barry said Labour proposed so many exemptions in its capital gains tax that it would be ineffective.

“Perhaps that’s why it’s been ineffective in other countries,” she said.

I support NZ having a Capital Gains Tax, but it must be with no exemptions, and more importantly income and company tax rates should be lowered to compensate families and businesses – so the overall level of taxation remains the same.

David Cunliffe has said that their Capital Gains Tax will see NZ families and businesses paying $4 to $5 billion a year more in taxation. That is why they are doing it.

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62 Responses to “CGT no panacea for housing”

  1. Liam Hehir (125 comments) says:

    I’m glad someone has at last asked put that extremely obvious question to CGT proponents.

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  2. geoff3012 (75 comments) says:

    I support NZ having a Capital Gains Tax, but it must be with no exemptions, and more importantly income and company tax rates should be lowered to compensate families and businesses – so the overall level of taxation remains the same.

    http://www.aintgonnahappen.com

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  3. virtualmark (1,531 comments) says:

    geoff3012,

    If it is going to happen then it would need to be put in place by the Nats/ACT, with the introduction of the CGT locked in alongside a programme of reducing income & company taxes as the CGT built up.

    But the reality is that the Nats wouldn’t have the balls to do anything that radical.

    And the reality is that Labour & the Greens would happily have the balls to make a radical increase in taxes collected, but with no intent of reducing the income & company taxes to offset that.

    So, because the Nats lack the fortitude to take any sort of initiative we will instead get shafted by the Lefties.

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  4. hj (7,033 comments) says:

    Government policies blamed for house prices

    Immigration and tax breaks for investment in residential property are being cited as the underlying causes of steep increases in the cost of housing over the past decade.
    New Zealand now boasts one of the highest rates of home unaffordability in the world as a result of prices rising far faster than incomes, and the government’s Savings Working Group blames that squarely on the policies of successive governments.
    Although “the favourable tax treatment of property investment” accounted for about 50% of house price increases between 2001 and 2007, the working group said, there was also strong evidence that rapid swings in immigration brought about price-rise “shocks”.
    There was a sharp spike in immigration in 2001, 2002 and 2003 and, said working group committee member Dr Andrew Coleman, it appeared that property prices did not fall anywhere near as greatly when immigration fell again.
    The report added that there was little evidence that immigration boosted local incomes. In fact, the need to build roads and schools meant that net migration contributed to the national deficit.

    http://www.stuff.co.nz/business/money/4622459/Government-policies-blamed-for-house-prices
    The problem with the land-supply solution is the need to provide infrastructure; if we left it all to market forces we would have dirt roads and chemical toilets. The other problem is that government policy is the result of lobbying by vested interests (the construction sector has grown by 10, 000 firms since 2002) rather than an economy growing on it’s tradeables sector: in other words a ponzi scheme
    http://www.rbnz.govt.nz/research_and_publications/seminars_and_workshops/Mar2013/5200823.pdf

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  5. fernglas (157 comments) says:

    One of the exemptions is for payouts from pension schemes including Kiwisaver. There is no exemption for unit trusts. It seems that there will be a significant tax advantage in having investments in Kiwisaver growth funds rather than with fund managers. Also, with an exemption for the family home, I would have envisaged people putting as much money as possible into that investment, which is likely to have a serious inflationary effect on housing. As we know, people who own property with the intention of selling it, or those who claim deductions on rental properties are already subject to capital gains tax. So if all the exemptions are exploited, and the current taxes are collected, what will be left to tax?

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  6. dime (9,980 comments) says:

    ““I don’t know why they haven’t worked in those countries,” said Green health spokesman Kevin Hague.”

    BAHAHAHAHAHAHAHAHAHAHAHA what a light weight.

    “I support NZ having a Capital Gains Tax” – awesome! add all the caveats you want. the left will chuck em out and its just another tax on top of tax on top of tax. even then Dime still wont be paying his fair share.

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  7. Igotta Numbum (463 comments) says:

    The problem is DPF, if you say that a CGT should be in place, but offset it by tax reductions then you still lose due to the levels of bureaucracy required to administer it all.

    We have a simple tax system as it is, stop adding more stuff into the mix, you’re starting to sound like Labour.

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  8. Colville (2,272 comments) says:

    Question.

    If a CGT were brought in to cover the house you live in, do you get a tax write off for costs? Mortgage and improvements/maint?

    If not, you spend $10,000 adding on a room then sell house later you have spent $10K tax paid income then get whacked with CGT (15%?) on that $10K in added value.

    Pretty rough for Ma and Pa average home owner.

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  9. hj (7,033 comments) says:

    In BNZ Chief Economist Tony Alexander’s weekly overview, Auckland house prices are set to move upwards nicely. Here are his 19 reasons why:
     

    3. The government is explicitly aiming to grow Auckland’s population as a means of achieving “agglomeration” benefits for economic growth which accrue from high interaction amongst economic players.
    13. The migration cycle appears to be on the cusp of turning and if the housing market has performed so well with net outflows over 3,000 in the past year the implications of positive gains are clear.
    14. The nature of net inward migration is changing toward greater numbers of people coming from Asia and with Asia’s middle class booming in size potential inflows of wealthier people are large.
    17. The government has announced its efforts to improve housing affordability (lower prices) and they are minor and unlikely to have a noticeable impact if any for many years.

    http://www.davidwhitburn.com/blogs/auckland-house-prices-to-rise-over-10-in-2013/

    As with farms. Money looking after money.

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  10. MT_Tinman (3,203 comments) says:

    I support NZ having a Capital Gains Tax, but it must be with no exemptions, and more importantly income and company tax rates should be lowered to compensate families and businesses – so the overall level of taxation remains the same.

    Why?

    Why support change for the sake of change?

    The status quo is considerably less expensive.

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  11. Dale 08 (32 comments) says:

    My girlfriend and I just bought a house in Perth. $50,000 wasnt enough for a 10% deposit on a $415,000 house because of stamp duty (land transfer tax ) and other legal expenses. Stamp duty was $14,000, this a direct tax to the state government. We also have cgt on the other side of the sale. So none of this slows down raising house prices. Car Rego twice what it is in NZ but we have massive congestion. We also have very good public transport compared to Auckland. So people will do whatever they want, taxes don’t seem to be the answer.

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  12. Brian Smaller (4,023 comments) says:

    They say it will not apply to the ‘family home’ but if Mum and Dad die and you inherit the house you grew up in and flick it, do you pay capital gains under the Labour proposal? My reading is yes. Can anyone else enlighten me?

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  13. Odakyu-sen (676 comments) says:

    If I bought a house for $100,000 at a time when bread (a proxy for daily necessities) was $1 a loaf, then sell my house years later for $400,000 (when bread is $4 a loaf), have I made a capital gain?

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  14. chris (647 comments) says:

    “I don’t know why they haven’t worked in those countries,” said Green health spokesman Kevin Hague.

    Which makes it sound like he thinks it *should* have worked, and that of course they think it *will* work here.

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  15. wreck1080 (3,923 comments) says:

    Mum is worried about a CGT so she might flick off one or two rentals if it is introduced.

    I wonder how many others would do the same?

    I do tire of people saying CGT never worked in Australia but they have no proof of this.

    Australia having a CGT with rising prices proves nothing. Where is the control to compare against? People are so stupid.

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  16. Tarquin North (305 comments) says:

    I hear Cunliffe is drafting up an apology for when it doesn’t work. If they want house prices to fall they need to open up more land. I can remember when they were talking about Helensville becoming a satelite city. Imagine that, there is tonnes of land up that way. Even the trains go through there on the way to Auckland. No idea what happened to that idea. Can you imagine the squeals in Auckland if the prices fall? I’m so glad I’m not on that treadmill. Interestingly, we’re starting to get quite a few Aucklanders who are close to retirement age moving up here to escape high rates bills. I was talking to a bloke the other day who had lived in the same house on the shore for 30 years. Not a flash place but on a fairly valuable section. He was paying over $5000 a year in rates and expecting it to get worse. He now has a near new home in One Tree Point 50 yards drom the boat ramp and a rates bill of under two grand.

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  17. chris (647 comments) says:

    @Colville I’ve often wondered the same thing. Surely if there’s a CGT it has to take into account all costs, including inflation. It’s not a capital gain at all if you only manage to sell it for the cost you paid for it plus the improvements done to it and the cost of financing it (i.e. mortgage interest and possibly mortgage payment related insurance). Ditto if you only sell it for cost plus improvements plus inflation.

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  18. redqueen (567 comments) says:

    Not sure I ever really understand Labour: they’re saying they want a 15% capital gains tax which exempts the family home. That will raise ‘$4bn – $5bn’. Based on that logic, they are assuming that there are between $26.6bn and $33.3bn of capital gains made per annum (which excludes a significant component of housing stock). This scheme involves capital losses, so they’re talking about a ‘net’ capital gain per annum. Now, I think that figure sounds rather high (representing around 13.3% – 16.6% of GDP). There is also no mention of what level of volatility is expected, as CGT is a generally unreliable tax (people buy things, they have jobs, and when these drop, we’re talking a few hundred bps, but a financial crisis comes along and may not be getting much CGT for a while, including spreading over a multi-year period from losses). Also, I am not sure they’ve factored in the net behavioural effect: at the moment, if I own shares or a rental property, I can sell them with little effect. There is no ‘transaction tax’, in effect, which will become a reality if I’m suddenly taxed when I decide to sell my shares in X and buy new shares in Y.

    And finally, there are the numerous technical questions which haven’t been answered here. By saying it won’t be ‘retrospective’, does that mean I will need to get a valuation every time I sell an asset which I’ve purchased post the implementation date? Are they expecting every individual to keep records of all asset purchases? (If I buy shares, transfer them to another broker, and then sell it, do I have to remember my original purchase date and price?). Equally, does my PIE get taxed based on any share transactions internally, or am I only subject to CGT upon realising ‘my’ gain? Or are I taxed on both? There are a plethora of details which need to be discussed and ‘fleshed out’ before any such tax can be judged.

    And I say that being very much against a CGT: it’s a ‘good idea’, but the administrative complexities and the distortion of behaviour are serious downsides (even for the ‘simplest’ system). Also, I would expect to see an asset freeze, as suddenly people will only purchase rental properties which they intend to keep, potentially passing them on to their kids. Instead of reducing house prices, you’ll see people not willing to sell to anyone (such as first time buyers), as they wan to avoid being taxed. This will simply lead us to the ‘next step': we’ll need an inheritance tax to deal with asset hording. So I see this nothing more as a thin end of the wedge.

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  19. Cactus Kate (551 comments) says:

    “I support NZ having a Capital Gains Tax, but….”

    Explaining is losing. And in this case disgusting.
    You don’t let alcoholics into a brewery.
    You don’t let politicians bring in new taxes.
    They can’t be trusted.

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  20. lastmanstanding (1,297 comments) says:

    More and more taxes. That’s the mantra of both Left and Right. Never any questions about whether the taxes already paid lead to quality spending.

    Fact is a CGT including the family home will initially at least see a steep rise in property prices.

    Why? Well most home owners will hang on to their existing home and spend the CGT they would otherwise pay on additions and alterations to fit their life style changes.

    So first home buyers will face a bigger problem raising the funds to buy a home.

    All both major parties know they have they forced local bodies to release large amounts of land on the city fringes for housing the result would be a major fall in house prices putting thousands of mortgagees under water. That is they will owe the bank much more than the home is worth so as in other countries like USA will walk away posting the keys to the bank vowing never ever to vote for the party that caused their problem.

    What we need but wont get is a total top to tail overhaul of our taxation system. Not the usual past tinkering around the edges but a new fresh approach that asked all the unasked questions and doesn’t hide from looking at new novel ideas.

    IMHO the best taxes are low flat rate easy to understand easy to administer with low compliance costs hard to avoid and evade with severe penalties for those who deliberately try and avoid and evade.

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  21. Allyson (47 comments) says:

    Will there even be Capital Gains once a Labour/Green etc. Govt take office. Is hard to imagine assets appreciating in value with a Government hellbent on economic vandalism and tax increases.

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  22. Hugh Pavletich (225 comments) says:

    Ah … clearly … David Farrar needs to be sent to a Nation Party Re-education Camp in stating the following ! …

    “I support NZ having a Capital Gains Tax, but it must be with no exemptions, and more importantly income and company tax rates should be lowered to compensate families and businesses – so the overall level of taxation remains the same.”

    The political focus needs to be on lowering the tax burden across the board and getting some sorely needed disciplines and lower costs in to our public bureaucracies, at both the central and local levels … as the Productivity Commission has made clear with its recently released final report … REGULATORY INSTITUTIONS & PRACTICES …

    http://www.productivity.govt.nz/inquiry-content/1788?stage=4

    The Americans are clearly telling their politicians … AMERICANS FED UP: NBC / WSJ POLL …

    http://www.nbcnews.com/politics/first-read/americas-fed-obama-approval-rating-hits-all-time-low-poll-n173271

    … and as Allister Heath made clear in the UK Telegraph a month or two ago … VOTERS HAVE HAD ENOUGH OF BLOATED AND DYSFUNCTIONAL GOVERNMENTS …

    http://www.telegraph.co.uk/finance/economics/10844203/Voters-have-had-enough-of-bloated-and-dysfunctional-governments.html

    The housing problems are “crystal clear” … land supply and infrastructure financing … FOCUS ON RESTORING HOUSING AFFORDABILITY …

    http://www.scoop.co.nz/stories/PO1305/S00325/focus-on-restoring-housing-affordability.htm

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  23. Miritu (30 comments) says:

    Odakyu-sen:”If I bought a house for $100,000 at a time when bread (a proxy for daily necessities) was $1 a loaf, then sell my house years later for $400,000 (when bread is $4 a loaf), have I made a capital gain?”

    Good point which shows that CGT is really a disguised form of expropriation. It imposes a penalty on trying to protect assets from inflation (itself fueled by govt spending). Measuring asset values in monetary terms creates a false impression of increasing wealth of home owners. True inflation is much higher than official measures which exclude property etc. and CGT targets those protecting themselves from effects of rising prices.

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  24. Cunningham (844 comments) says:

    I agree, we should have a CGT with no exemptions that is cost neutral. Why can’t National do this? Done correctly, it could be sold to the general public but they lack the courage to do it. Just like raising the retirement age. If there is a criticism of National, it is that they seem to be coasting along too much. They need to make more radical decisions for the good of NZ long term.

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  25. lastmanstanding (1,297 comments) says:

    BTW No taxes are fair equitable and just. All are theft by stealth.

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  26. redqueen (567 comments) says:

    Also, there is a further problem with CGT: it encourages the government to increase asset price inflation. Government, like people, have incentives and disincentives. Now, in the case of income, that is a good thing (whether a flat or progressive tax, it encourages the government to help people earn more), and in the case of GST a mixed bag (can be good if our living standard improves, increasing sales, but there is an equal potential for the government to increase unsustainable spending, such as debt-fuelled bubbles). Now, on that basis alone, I have serious reservations. We often hear tax mooted as a mechanism for ‘encouraging’ behaviour (usually discouraging, but semantics…). On that same basis, taxes which encourage bad things (such as inflationary asset growth, rather than real growth), should be avoided, compared with ‘good’ things. I don’t see how the government having bad incentives is ‘okay’, but people having bad incentives is ‘bad’.

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  27. emmess (1,428 comments) says:

    ““I don’t know why they haven’t worked in those countries,” said Green health spokesman Kevin Hague.”

    What an idiot
    So if we pass a law here, we should expect a different result?

    Can Labour and the Greens pass a law that allows solid objects to float off the ground?
    If they think passing a law to break the law of economics will work, why not the law of gravity?

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  28. artemisia (242 comments) says:

    fernglas (110 comments) says: August 8th, 2014 at 12:21 pm ……………… As we know ….. those who claim deductions on rental properties are already subject to capital gains tax. ………..

    Not so. Claiming deductions does not mean CGT is payable. At the moment CGT is payable on assets bought with the intention of selling for a profit, and does not just relate to residential property. Intention is all. Claiming deductions is not relevant.

    Also, never understood the TWG referring to “the favourable tax treatment of property investment”, especially since IRD have said more than once it ain’t so. I wondered if the TWG was taking leverage into account. If so, they should not have as plenty of assets are leveraged – not shares so much (though nothing stopping that if a lender can be found ) but certainly farms and businesses and their premises.

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  29. mandk (998 comments) says:

    @ redqueen,
    Absolutely correct. With an exemption for the family home, there is no way a CGT will ever raise $4-5bn in revenue in any year, let alone every year.
    Unless, of course, there is galloping inflation.
    But maybe that’s part of the Red-Green plan. The Greens will magic money into existence using printing presses, and the Reds will magic it away again using inflation.
    But at least if we have a CGT, we’ll have lots and lots more tax lawyers and accountants.
    Perhaps we could poll tax them to compensate for the money a CGT won’t raise.

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  30. uncle_tom (14 comments) says:

    hj – I know you are always going on about immigration but I think you have a point in this one. The US, Australia and UK all have relatively high immigration and hence population growth – similar to NZ. Japan, much of Europe and other places with a low population growth rate (or negative in Japan’s case) don’t have high house price inflation.
    DPF states “the artificial restrictions on supply of land are the major factor in house price increases”. There is some truth to that, however, he needs to quantify it. Most of the house price increases occur in desirable locations such as the Auckland isthmus, and excuse me if I’m wrong, but as Mark Twain said about land “they aren’t making any more of it”. If by artificial restrictions he means the inability to, at will and without planning consent etc, knock down a villa in Epsom and whack up a ten story apartment block then he has a point. However, subdividing farmland up in Helensville to build ticky-tack on the hillsides ain’t gonna make much difference to house prices in Remuera or Epsom.
    Clearly CGT doesn’t make a huge difference in US, UK or Australia, however, the idea of tilting the tax advantage in favour of productive enterprise needs to be sorted out – I think.

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  31. Allyson (47 comments) says:

    Doesn’t CGT discriminate against those with failed marriages who need sell family house, vs. happy ever after couple who get to leave house to kids in their will?

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  32. artemisia (242 comments) says:

    redqueen (468 comments) says: August 8th, 2014 at 12:34 pm Not sure I ever really understand Labour: they’re saying they want a 15% capital gains tax which exempts the family home. That will raise ‘$4bn – $5bn’. Based on that logic, they are assuming that there are between $26.6bn and $33.3bn of capital gains made per annum (which excludes a significant component of housing stock). This scheme involves capital losses, so they’re talking about a ‘net’ capital gain per annum.

    Labour’s policy on treatment of capital losses is to *only* allow these to be carried forward and offset against future capital gains. If any. So the net capital gain won’t usually need to take losses into account in the same period. Plus folk with only one asset resulting in a capital loss will never be able to offset that loss. Score for the government. The asset owner, not so much.

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  33. Nigel Kearney (1,019 comments) says:

    It’s better to have a tax on the unimproved value of land. This addresses housing prices without any perverse incentive to avoid creating value or to avoid selling. But it would be very unpopular especially with the elderly. Maybe this can be circumvented by having a long lead in time.

    Exempting the family home is nonsense whether it is CGT or a land tax.

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  34. Colville (2,272 comments) says:

    Exemption for family home means any investor will own 2, one as primary home one as beach house, wife will own one, kids one each. No tax on any of those and that is before you deal with Trusts….

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  35. insider (1,028 comments) says:

    Denmark has the most unaffordable houses in Europe. It has a CGT and severe restrictions on foreign ownership. Plus it is one of those cuddly Scandinavian social democracies that the left love to emulate.

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  36. Hugh Pavletich (225 comments) says:

    Not a load of laughs in Australia …

    Australian Coalition stomps youth as unemployment soars | | MacroBusiness Australia

    http://www.macrobusiness.com.au/2014/08/coaltion-stomps-youth-as-unemployment-soars/

    Immigration Department ignored visa rorts | | MacroBusiness Australia

    http://www.macrobusiness.com.au/2014/08/immigration-department-ignored-visa-rorts/

    Migration into Australia continues to fall (members) | | MacroBusiness Australia

    http://www.macrobusiness.com.au/2014/08/migration-into-australia-continues-to-fall/

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  37. Monique Angel (291 comments) says:

    Bring it on I say. Everyone who owns property is set to make a killing. As has been proven in other countries; those in for the long haul are virtually untouched by CGT. It’s those who want to buy in after CGT introduction who suffer.
    Celia Wade Brown at a local body level is a danger but no leftie fucktard in Govt has yet been able to tax me out of my rentals.
    I just ratchets up those rents.
    When you restrict supply with Tax or red tape; rents rise then property prices follow.
    Back if the envelope calculation based on prior experience would give me a gain on my properties of 100,000 per bedroom pretty much straight after the introduction of CGT;depending on how much land is attached.
    Have gained 25k per bed in a five plex since the Christchurch earthquake due to tenant demand. On a fenced four bed this equates to the 100,000 per property.
    For me that’s a half mil in cap gains in one year. If I decide to sell (which I doubt; not a trader, and the govt makes 10 -15 percent. I’d write every MP that voted Yay for CGT a personal thank you note and hand deliver the piddly 50k tax to IRD.
    Tax increases win elections but root the economy.

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  38. jcuk (693 comments) says:

    The housing problem is simply one of supply and demand.
    The major parties have over the past thirty years or more shirked their social responsibilities in respect to providing proper state housing.
    If more people had state housing according to their needs the demand would lessen and prices would reduce … there are all sorts of ancillary reasons and arguments but this states the basic solution …. build more State Housing.

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  39. Monique Angel (291 comments) says:

    Nigel. There is already tax on unimproved land. It’s effectively the bullshit hoops you have to jump through to get that land developed. You pay through the fucking nose for the pleasure of this torturous process. I’m pretty much smarter and have more endurance than Celia Wade Brown and her ilkotherwise I’d have long since Spraycreted my modest bits of land in Northern Wellington; turned it into a graffiti park for the good youths of Lower Hutt.

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  40. FeralScrote (220 comments) says:

    God knows how fucking stupid you would have to be to support extra taxation in this backwater banana republic.
    Grow a spine and tell any wannabe govt to stick cgt up their collective orifice.
    If you are that desperate to gift your hard earned spare cash to the govt ,be my guest, but I`ll keep as much of my own money as I can.

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  41. Ed Snack (1,883 comments) says:

    What’s the moral justification for a CGT ? I suspect it is “you have money, we want it, and if you don’t pay up we’ll use violence to take it”.

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  42. SPC (5,636 comments) says:

    A CGT is not part of housing policy it is a tax policy – to tax all income.

    The reason no one in the world CGT’s homes is because the homeowner is then unable to put the same equity into a new home. Buy a home at $400,000 and sell it at $600,000 attracting a CGT ($30 to $45,000 or so) – would mean having to borrow that amount to buy another house of the same value.

    As the home needs to be replaced there is no income to tax.

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  43. Hugh Pavletich (225 comments) says:

    … more sorry news out of Australia …

    Disastrous (Australian) job data will create more work for the RBA … Business Spectator=

    http://www.businessspectator.com.au/article/2014/8/7/australian-news/disastrous-jobs-data-will-create-more-work-rba?utm_source=exact&utm_medium=email&utm_content=853481&utm_campaign=kgb&modapt=

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  44. Neil (588 comments) says:

    I don’t favour a CGT. I have worked the sharemarket and I suppose over 40 years I am slightly up via disasters in 1997 and long periods of no movement.
    Like any person I take a risk in investing in productive businesses, providinjg capital for their actions. Just consider the alternative where the state controls all or like Russia where political cronies have the lever to wealth.
    A CGT is just another envy tax which in the end will hit the small investor like myself.

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  45. Reid (16,509 comments) says:

    It is because the artificial restrictions on supply of land are the major factor in house price increases.

    No, it’s not. And you can tell that by the very simple observation that the supply dynamics haven’t changed significantly since the 1980’s when the RMA came in, and house prices in Akld weren’t significantly out of step with the rest of the country, until the last decade or so. So what changed? Immigration.

    It’s not rocket science. And of course all the politicians know this, but neither side wants to mention it, because doing something like telling immigrants: welcome to the country, live anywhere but in Akld, because if they did that, it would piss off every single land-owner in Akld, were elections are won or lost.

    Thus all the politicians are abrogating their duty to represent their constituents for the sake of their own worthless political hides.

    That’s not rocket science either, is it.

    Hopefully by about the twentieth time this very simple clear and present observation is repeated, it’ll finally sink in. But I won’t hold my breath.

    There is nothing so vigorously defended as a vested interest disguised as an intellectual conviction.

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  46. Ed Snack (1,883 comments) says:

    Hugh P, I hope you have noticed that the immigration report in Aus is actually all about the shambles, dysfunction and corruption that occurred under the last Labour government; and how Immigration tried to bring this to the attention of ministers but were continually fobbed off.

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  47. kowtow (8,522 comments) says:

    The only thing a cgt will do is close the exemption currently on an untaxed asset.property.

    At the moment everything else is taxed so a cgt is attractive to tax gatherers ie big spending big government as well as populists pretending they’re making a difference.

    A better approach would be to cut govt spending ,reduce taxes and reduce the number of taxes we have.

    So instead of introducing yet another tax start with removing tax on savings at the bank.That would encourage savings and investment.

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  48. hj (7,033 comments) says:

    Monique Angel (254 comments) says:
    August 8th, 2014 at 2:08 pm

    Bring it on I say. Everyone who owns property is set to make a killing. As has been proven in other countries; those in for the long haul are virtually untouched by CGT. It’s those who want to buy in after CGT introduction who suffer.
    ….
    How about land taxes (recommended by the IMF, tax working group and approved by David Farrar but rejected by John Key)?

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  49. nickb (3,687 comments) says:

    Also, with an exemption for the family home, I would have envisaged people putting as much money as possible into that investment, which is likely to have a serious inflationary effect on housing. As we know, people who own property with the intention of selling it, or those who claim deductions on rental properties are already subject to capital gains tax. So if all the exemptions are exploited, and the current taxes are collected, what will be left to tax?

    Agree with your first part, not the second. You are not subject to CGT if you simply claim deductions for a rental. The only people that generally get caught from buying and selling rental properties are people who buy and sell 10 in 8 years (try explaining that to IRD) or utter morons like in this story:

    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11305039

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  50. oldpark (338 comments) says:

    @brian Smaller 12.28 pm Yes you are quite correct.It will be known as an inheritance tax.There will be no way to beat the insidious green/labour punitive Capital Gains Theft.

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  51. SPC (5,636 comments) says:

    Those who support a Capital Gains Tax, but only if there are no exemptions – know that this would not be popular with voters and so no party will adopt it.

    It is in fact a cynical way to oppose any other form of CGT.

    The motive for this opposition is obvious.

    They oppose government having more money to spend on public services or to re-distribute, and they oppose those on higher incomes being asked to pay more tax.

    Thus they would require that the CGT income be matched by a cut in income and company tax rates. This to prevent any possible transfer of the CGT revenue to programmes to public services or direct transfer to support the poor.

    This despite knowing that the CGT would only raise money in the future and the extent of which could not be known in advance.

    So there condition is an upfront cut in tax to themselves in return for a possible future CGT liability. This speaks to self interest not optimisation of (equity across) the tax system.

    The lack of a CGT has enabled some to prosper and often without any contribnutioon to the economy whatsoever.

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  52. slijmbal (1,236 comments) says:

    CGT? f**k that

    I’ve invested with income taxed savings for decades and have savings that I’m aiming to be sufficient to live off when I retire. A CGT would mean my savings have been taxed prior to investing and then taxed again because I’ve been diligent.

    Will a CGT make a difference not really? It’s an envy tax – we do have some who can take advantage but if you live off capital gains and not income then the IRD treat capital gains as income and tax it. That’s the law.

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  53. cosmopolite (9 comments) says:

    Any NZ government that introduces a capital gains tax without exempting the gains on owner-occupied housing, will lose the next election. Please keep in mind that selling an owned home soon after retirement, then applying the proceeds to buying a much cheaper flat and turning over the balance to Tower or AMI to buy a life annuity, is a major part of the typical Kiwi household’s retirement savings. About 70% of the net worth of Kiwi urban households consists of property. Shareholding and private superannuation are badly underdeveloped in NZ.

    I be that any CGT applied to owner-occupied housing will exempt gains that reinvested in a subsequent purchase made within 1-2 years. Hence the only gains that will be taxed are those realised upon retirement or death.

    In most cases, the USA effectively exempts gains on owner-occupied housing from taxation. I will spare you the boring specifics. The American family with a combined annual income of 80-120K p.a., and living in a US$200k house in a suburb of a boring interior city, will never pay a cent of CGT because of home ownership.

    New Zealand housing is much too expensive, with the main reason being that it is very difficult and costly to convert market gardens and orchards on urban fringes into suburbs.

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  54. alloytoo (546 comments) says:

    “I support NZ having a Capital Gains Tax”

    Why?

    It’s overly complicated, unreliable and clearly doesn’t send the economic messages it’s proponents claim.

    It’s a tax of envy, nothing more.

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  55. nickb (3,687 comments) says:

    It’s a tax of envy, nothing more.

    Rubbish. I generally find the only people saying this are self-interested landlords.

    All it is doing is saying someone that has sold a rental property for a $100,000 gain is in the same economic position as someone on a $100,000 salary. Yet our current tax system sees the latter subsidise the tax refunds and tax deductions of the former.

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  56. Anthony (796 comments) says:

    While correct nickb, the 15% flat rate proposed by labour would still make short term capital gains taxed more lightly and longer term capital gains that include a huge element of inflation taxed more heavily!

    That’s why I think land tax on land apart from a modest exemption for the family home would be best. Landlords don’t currently pay much tax at all so a regular land tax might discourage them from paying over the odds for old dumps that should be more affordable to first home buyers.

    Landlords don’t do anything to expand the supply of housing because they don’t build new houses!

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  57. adc (595 comments) says:

    So DPF, you’d be happy to have your assets “assessed” every year and have to stump up with the cash to pay the tax on the assessed gain?

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  58. adc (595 comments) says:

    Plenty of landlords build new housing. I’m working with one at the moment.

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  59. adc (595 comments) says:

    Also, there is already tax to be paid on capital gains associated with a business. If you are in the business of buying and selling properties, the gain is assessed as income and taxable. Same with shares.

    if you’re going to exempt the family house, it begs the question why do anything.

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  60. Anthony (796 comments) says:

    Only traders therefore pay tax on buying and selling properties or shares or whatever. People in the business of being landlords will never pay tax on gains!

    I don’t think DPF is saying to assess tax on unrealised gains! However, imposing a modest land tax on land that should be earning income is not a bad idea – I’d even say make the land tax able to be credited against any income tax payable from income from that land.

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  61. lolitasbrother (702 comments) says:

    tell us another story Farrar, nobody in New Zealand is buying houses as a business, its capital gains Farrar, got a better story yet, may be a walk in the South Island Hills, your argument is two sided and fundamental NZ Nat print out, believe your master

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  62. daniel carter (34 comments) says:

    I can’t understand what the problem is with raising money through capital gains tax. It lowers speculation a wee bit and brings money into the government to spend on services we all benefit from. Win win.

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