The data behind CGT


The Tax Working Group (TWG) used an unreliable survey by the Department of Statistics as the basis for its argument that the majority of the proposed capital gains tax () will be paid by the top 20 per cent of households measured by wealth.
Repeatedly, since the final report was published, Sir Michael Cullen has quoted the “statistic” to the media that 82 per cent of the assets that will be subject to CGT are owned by the top 20 per cent of New Zealand households measured by net worth.
He goes on to state (as factual) the second 20 per cent of wealthy households will be responsible for another 11 per cent , then only 4 per cent for “middle” New Zealand.

In reality, this information is based on what most reasonable people would describe as little more than guess work.

Not based on actual IRD data but a survey by Stats NZ.

By the Department of Statistics own admission, it contains data that is so unreliable they cautioned against its use.
According to the Department of Statistics website people “should take care when interpreting income, expenditure, or wealth estimates with sampling errors greater than 20 per cent. They are less statistically reliable than estimates with sampling errors less than or equal to 20 per cent”.
There are 50 individual categories of data collected in this survey (or data cells). Of the 50 cells, 20 of them are considered by Department of Statistics to have a sampling errors of between 20 per cent and 50 per cent.

That is some pretty huge sampling errors. You can’t avoid that without making the survey much larger, but it shows how thin the basis for the argument by Dr Cullen is.

Senior Treasury officials who wrote this report to the TWG obviously knew the information couldn’t be safely relied upon.
Hidden in the fine print of the Treasury report, it states “care should be taken when interpreting wealth estimates because the confidence intervals around any point estimates vary widely”.
In layman’s terms, this is like Treasury saying to the TWG: “You probably shouldn’t be using this information as we really don’t know if it’s accurate and some of it’s completely unreliable.”

A good translation.

The reality is, we don’t have enough reliable information to draw any conclusions at all about which households will pay the most from the proposed CGT.
We do know, however, that there are hundreds of thousands of farmers, business owners, lifestyle block owners, bach owners and sharemarket investors who will pay a lot more tax if Labour are successful in implementing CGT.
There are an awful lot of hardworking ordinary Kiwis who don’t consider themselves wealthy who will pay CGT if Labour are successful in convincing Winston Peters to support it.

Let alone those indirectly impacted such as everyone with a KiwiSaver account.

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