Home > The Body Politic > A Capital Gains Tax?

A Capital Gains Tax?

Ok – hands up all those who think it’s a really, really neat idea;

The Dominion Post
NBR

Herald on Sunday

Gisborne Herald

Waikato Times

The Greens

The IMF

The OECD


and columnists,


Paul Little

Mike Hosking

Gordon Campbell

Anthony Hubbard

Patrick Smellie

Vernon Small

Corin Dann

Andrea Vance

John Hartvell

Matthew Hooten

John Roughan

Duncan Garner

John Armstrong

Bernard Hickey


Gareth Morgan

plus 
Academics,  tax experts, economists, and Treasury
 (Source:  Tumeke)

Hmmmm, not bad.

Ok, who is against it?

The National Party  – which is hardly surprising, considering the vested interests that National MPs currently have, in property investments.

Landlords – fair enough, I guess. Turkeys are hardly likely to vote for an early Christmas, I guess. Not that I’m calling landlords “turkeys”. Most of them are quite nice folk. Although landlords might pause to consider; do they really want to be seen by the rest of society – who pay their fair share of taxes (some more than one form of tax) – as bludging of  taxpayers, and expecting some sort of special, divine-inspired, tax exemption?

Believe me, folks; you don’t want to rark-up the Angry Mob. Just ask Ian Wishart.

Considering it?

ACT – Although in a speech which Brash gave in 1998 (as Reserve Bank Governor) he spoke about the tax advantages of property investment:

It is not at all clear to me why, given an already-strong tendency for New Zealanders to invest in property, we should give special tax advantages to that form of investment.” – Source

Although what he sez/thinks now is anyone’s guess. We know he doesn’t like Maori. Which ain’t that helpful in this debate.

Basically, what the whole CGT issue boils down to is two points:

Point One: Fairness

We all pay taxes. Whether you’re the bloke/blokette running your local fish & chip takeaway – or Fletcher Construction; whether you are a sex worker or the Prime Minister; whether you have $1 or $1 million in a bank account – we all pay taxes.

So why a specific sector of the economy should be exempt from paying tax… well, there is no real clear reason. None that makes any sense. (Well, there is the matter of greed. That kinda makes sense.)

Point Two: Market Distortion

As sure as Evolution made Little Green Apples, if we allow one part of the economy an advantage over the rest, then the money will flood to where that advantage provides best return. As Ganesh Nana (BERL) said today on National Radio this morning (15 July), it’s like having holes on a sporting field. (Mixing of metaphors a bit.)

Hence why New Zealand has suffered housing booms; money moves to where investors can get the best, tax-free return, and that is property. So with Supply & Demand being what it is, prices rise, and we have a “bubble/boom”.

This means that effectively we are pricing homes out of the reach of our children. (Home ownership has dropped remarkably in the last twenty years, as affordability worsens.)

On top of that, the Reserve Bank – faced with rising house prices and creating inflationary pressures – is forced to raise interest rates, to dampen demand.

This makes like for our farming, industrial, and business sector hellish, as they cost of borrowings rises. The most productive sector of our economy pays the price because of a glaring anomaly in our economy.

Not good.

So a capital gains tax makes sense. National opposes it, of course, because they don’t want Labour to gain benefit from a sound. sensible policy. So for the benefit of beingf re-elected on 26 November, National is prepared to play politics with this very-real fiscal problem.

Definitely not good.

Will voters support Labour and an introductionfor a CGT?

Considering how voters supported Muldoon in 1975, which saw the canning of Labour’s superannuation fund (bribed with our own money), I’m not terribly reassured. The public have a track record for making the wrong collective decisions, and then wondering why we are up Sh*t Creek with no paddle, as a consequence.

Go on, New Zealand. Prove me wrong.

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  1. June Girl
    16 July 2011 at 7:58 pm

    It makes sense but the Nats are more interested in serving the interests of property owners than fairness in the taxation system. I can’t understand why some people think that profits from selling houses should be tax free but if I make a profit selling veges at my local market, I’m expected to pay tax. This is unfair and simply encourages people to evade paying taxes.

    It’s time for change!

  2. Howard B
    17 July 2011 at 1:03 am

    Well said June Girl!

    It seems so unfair that the rest of us pay tax on what we earn and spend but property investors are allowed to get away scot-free.

    I will never be voting National again. (Yes, I voted for Key in 2008. Sorry people.)

  3. 20 July 2011 at 7:54 pm

    A capital gains tax makes sense – which is why the Nats will never support it. Tax free capital gains IS one of the biggest loop-holes in this country and it staggers me that it hasn’t been closed yet. The only thing stopping us from having free tertiary education is our inability to pay for it. Time to plug this gap and provide decent funding for our social services!

  4. George XIII
    21 July 2011 at 1:54 pm

    +1 ALH84011!! Nailed it!!

  5. john costello james
    27 July 2011 at 7:35 pm

    A capital gains tax makes sense, Frank, but the Nats will never do it. Their business friends won’t allow it. And it’s Big Business that calls the shots with National.

  6. GGB
    29 July 2011 at 10:57 pm

    Without a comprehensive capital gains tax, investment will continued to flow into the unproductive sectors of our economy, and we’ll see distorted house prices forcing many young people out of the chance to own their own homes.

    This will have disastrous consequences for our society as well as economy.

  7. K. Young
    1 August 2011 at 4:59 pm

    I pay taxes on every cent I earn and then I pay it again when I spend it. Now I hear John Key explaining why property speculators shouldn’t pay their fair share???

    Screw that.

  1. 28 February 2013 at 4:52 pm
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