Rushed policy is bad policy

Written By: - Date published: 7:10 am, May 19th, 2015 - 24 comments
Categories: capital gains, housing, national, tax - Tags: , , ,

When Labour presented its capital gains tax policy it spent months in development. It consulted widely and presented a robust policy that won the media battle (despite National’s usual hysterics). In contrast, The Nats have rushed and bungled the process (all the while assuring us that there is no housing crisis!). National’s definitely not a capital gains tax that just happens to be a tax on capital gains is being made up on the hoof:

Capital gains tax policy rushed through development

It’s emerged the Government’s new policy stance on property taxes has only just been developed. … Minister of Revenue Todd McClay confirms they were developed recently. “We’ve been working through a number of things through a period of time. The current one is for a 4-5 week period.
…
Green Party Co-Leader Metiria Turei … says it shows the Government’s desperate to take measures to cool the housing market. “A month ago John Key was saying that a capital gains tax was off the table. Now he’s done a massive u turn.

https://twitter.com/grantrobertson1/status/600013007884660736

As is usually the case with rushed policy, they have made a mess of it:

New property rules too little too late

From a tax policy perspective the rule appears so narrow as to be almost inconsequential. … The Government has been arm-twisted by its critics into a tax response to address Auckland property prices. But from the range of options available it has come up with the least effective.

In short, National have opened the door to more effective capital gains tax, thus irritating investors and their base, while probably not achieving anything in practice. From their point of view that’s the worst of both worlds. Labour is right, the whole process is “panic-Key”:

“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.
…
“These are the actions of a bystander Government that has watched the Auckland housing crisis unfold and then done too little too late,” Andrew Little says.

https://twitter.com/grantrobertson1/status/600026665591308288

It just might be at that.

Bonus question:

Yesterday Jessica Williams sparked an interesting discussion:

nat-cgt-discussion

So (asks Keith Ng) – are the Nats effectively underwriting losses when the property bubble bursts? Free money!

Bonus John Key lie:

“Housing crisis worse under Clark’s Government – Key”. Bernard Hickey called him out:

24 comments on “Rushed policy is bad policy ”

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  1. Lanthanide 1
    19 May 2015 at 9:12 am

    Re the losses thing: it is likely you won’t be able to claim losses. Someone said on National Radio that in most other countries, losses can’t be claimed at all, or can only be offset against future payable capital gains.

    • mickysavage 1.1
      19 May 2015 at 9:18 am

      This is the sort of detail that the Government should have worked through already. The fact they do not have a response shows how ruched this policy is.

      • stever 1.1.1
        19 May 2015 at 10:06 am

        🙂 “ruched”

        ….how appropriate…the Nats are ruffled!

      • John 1.1.2
        19 May 2015 at 2:33 pm

        It’s so rushed, that the same tax applied under Labour over a decade age.

        The difference is that back then there were so many loopholes that nobody paid anything.

        After ordering the IRD to clamp down on people using loopholes in this tax in 2010, and again in 2012, 2013, and 2014, we now have yet another clamp down in 2015.

        After five years of consistently clamping down on a tax that’s been around for decades, it’s now a “rushed policy” “made up on the hoof”

        Yesterday, five years of consistent clamping down on an old tax was a called a “u-turn”.

        What will it be called tomorrow?

    • alwyn 1.2
      19 May 2015 at 12:09 pm

      Are you sure that they said that you won’t be able to claim capital losses?
      I is fairly common, eg Australia, UK and the US to write them off against Capital Gains, and to be able to carry any excess losses forward but I don’t know of countries where you can’t claim them at all.
      Even the NZ Labour Party policy in 2014 was going to allow them, although there seemed to be a bit of confusion about it early in the piece.

      • Lanthanide 1.2.1
        19 May 2015 at 12:12 pm

        I said it was likely you wouldn’t be able to claim losses, not that they have said that you can’t. And again, if you can claim losses, it will likely be against future capital gains – but some people will end up in a position where they can never claim them.

        • alwyn 1.2.1.1
          19 May 2015 at 12:19 pm

          “some people will end up in a position where they can never claim them”
          I know that only to well. I left Australia just after the start of a tax year and, while tidying up our affairs, I ended up with a CGT loss for that final year. It was only a couple of hundred dollars but they have owed it to me for nearly 20 years…….
          Sob, sob, sob.
          I’m not planning to go back there to live though.

      • Enough is Enough 1.2.2
        19 May 2015 at 12:13 pm

        David got himself tied up in knots a bit explaining losses during the campaign at a meeting I attended in Hamilton, but yes my understanding was that under the Labour policy you would be able to claim losses.

        • Herodotus 1.2.2.1
          19 May 2015 at 5:46 pm

          Losses, were under labours proposal were able to be offset only by any future capital gains, and was not able to be offset by other forms of income. From memory this had a time out clause of about 6 years.

  2. Colonial Rawshark 2
    19 May 2015 at 9:49 am

    The NATs are still bungling the PR of this big time. They’ve lost their focus on who they are presenting their policy to. It’s like their PR advisors are still on holiday in Scotland.

  3. Old Mickey 3
    19 May 2015 at 10:51 am

    “Rushed policy is bad policy” except for Andrew Little’s promised R&D policy.

    • One Anonymous Bloke 3.1
      19 May 2015 at 10:58 am

      “Promised” – ie: not yet delivered.

      “Rushed” – ie: delivered too soon or with insufficient attention to detail.

      We need better wingnuts.

    • joe90 3.2
      19 May 2015 at 11:00 am

      Yes, three years before an election a proposal is rushed policy.

      idiot trool

  4. esoteric pineapples 4
    19 May 2015 at 11:49 am

    It may be rushed, it may be far from perfect – but it has been presented by National whereas anything from Labour, Greens etc would not be acceptable to New Zealand’s conservative voters. This means the most difficult task of introducing the concept has been done. Now I expect it to be incrementally improved over a period of time.

  5. Enough is Enough 5
    19 May 2015 at 11:59 am

    I am not going to criticise this. This government does many nasty things to Society on a daily basis so when they actually come out with something half decent we shouldn’t just all automatically oppose it.

    The best analysis I have seen of the policy is right here on The Standard.

    “The real effect will be to slow down the property market in Auckland, and elsewhere. It will knock the top edge off the market, winding it back just a little bit. Together with the Reserve Bank’s new rules about the deposits that Auckland property buyers must have, the heat may be taken out of the property market. There will still be pressure due to inwards migration, but frantic speculation in property should calm down.”

    That can only be a good thing.

    • alwyn 5.1
      19 May 2015 at 12:14 pm

      Go on. Pretend you are the Labour Party leader.
      Tom Scott got Little’s approach perfectly this morning.
      If John Key announces something, anything, it is evil

      http://www.stuff.co.nz/blogs/opinion/cartoons/6736460/Tom-Scott-Murdoch-and-others

      • Lanthanide 5.1.1
        19 May 2015 at 12:20 pm

        Reminds me of when Cullen suggested indexing the tax bands to inflation and it was derided as a ‘chewing gum tax cut’.

        Then Labour announced tax cuts in the 2008 budget and National said it wasn’t big enough, and promised “north of $50 a week” for someone on the average wage, which they then failed to deliver.

        The whole point of the opposition is to point out when the government isn’t doing a good job. So actually all you’ve highlighted is that Little is doing his job well. I sincerely hope National will be just as effective when they’re in opposition.

        • Enough is Enough 5.1.1.1
          19 May 2015 at 12:22 pm

          “So actually all you’ve highlighted is that Little is doing his job well”

          Really?…I think Tom is trying to take the piss out of Andrew Little

    • Lanthanide 5.2
      19 May 2015 at 12:16 pm

      You shouldn’t give them a free pass, though.

      Just because they’ve done “something”, doesn’t mean what they’ve done is sufficient, or even the right thing to do. 2 years isn’t much of a burden to work around at all – 5 years would be, and would have some real impact.

      Another thing they could do which would make quite a different for investors is simply restrict the availability of interest free loans, which are used by investors but not owner-occupiers. If there was a speed limit, say only 10% of the banks mortgages by volume could be interest-only, they’d really put a crimp on how many people could get them. They could even put in time-limits, so no more than 3 years IO loan for a particular property; gets tricky if people can shuffle the houses between different entities to keep resetting the 3 years though.

      Anyone who is routinely using IO loans is sending clear signals that they’re only in it for the capital gains.

      • Enough is Enough 5.2.1
        19 May 2015 at 12:20 pm

        Yes and No.

        I think as far as a CGT goes the electorate has well and truly told Parliament over the past two elections what is acceptable, and a comprehensive broad tax is for better or worse, not an option in New Zealand. I think Andrew Little and Labour have accepted this.

        Key’s announcement is not a silver bullet and won’t in itself fix the problem. But it is a step in the right direction.

      • miravox 5.2.2
        19 May 2015 at 3:27 pm

        “Another thing they could do”

        Remove tax loopholes on rental income.

        • John 5.2.2.1
          19 May 2015 at 3:46 pm

          Like changing depreciation rules and tightening up claiming loses via LAQCs.

          Except that was done in 2010.

          • miravox 5.2.2.1.1
            19 May 2015 at 4:09 pm

            That’s cool. So the people we know who tell us they still buy unseen rentals in places they’ve never been to write off their rental expenses against PAYE tax are telling porkies and will soon end up in court.