National has clearly decided to mount a full on attack on the Tax Working Party’s proposed capital gains tax which has been described as an attack on the kiwi way. And National has, god bless their cotton socks, overreached. Simon Bridges has sounded like he wants a CGT to apply to the family home because otherwise it would be unfair.
Bridges felt he had to go onto video to try and explain himself. Explaining is losing Simon.
And in a series of own goals he proceeded to be, and the technical term is, owned.
I can’t help but think that the manufactured rage from National and capital gains tax opponents is nothing more than unmasked greed. And considering that three quarters of National’s caucus has interests in two or more properties there is a lot hanging on this.
So what do others think about the proposed tax? What about Westpac economist Dominic Stephens?
Stephens said the combination of the proposed tax cut and the implementation of the CGT would “lead to higher long-run living standards for New Zealand”.
He said one of the biggest impediments to the New Zealand economy in recent years has been what he calls “skewed investment choices” due to an uneven tax system.
“[The Government] taxes the income earned on investments very heavily, but [it] taxes the capital gain earn on investments hardly at all.”
In other words, people’s paychecks are taxed according to their income level but if someone sells a house for a large profit, they haven’t had to pay tax on that gain.
He also believes the tax will have a beneficial effect on the housing market.
The Tax Working Group’s CGT, Stephens said, would help skew investment away from housing.
“Introducing a CGT should level the investment playing field, leading to more diverse investment choices.”
He said a CGT would reduce what property investors would be willing to pay for a property, which would make home ownership more affordable for regular Kiwis.
This would, however, slow the economy, he added.
His is not the only expert voice in support of a capital gains tax. Matthew Theunissen at Radio New Zealand sought academic comment on CGT systems in Australia, England and Canada:
RNZ spoke to academics from Australia, Canada and the UK. All said it was no longer controversial and had become an accepted part of their taxation systems.
Aussies have been taxed on their capital gains from assets like property, shares and leases since 1985.
University of New South Wales tax professor Chris Evans said the debate that’s raging here at the moment was one Australia resolved long ago.
“It was a political hot potato, no doubt. But people got used to it and it settled down quite quickly,” he said.
Mr Evans, who did some research for New Zealand’s Tax Working Group, said any fair and sustainable tax system needed to include a capital gains tax.
“New Zealand’s an outlier on this, it’s quite surprising. If you look at the 35 countries that are currently in the OECD, New Zealand’s the only one without.”
And, he said, this country had the opportunity to avoid some of the mistakes made by Australia.
“New Zealand has been far more sensible, in the sense that it’s going to treat capital gains just like it treats any other form of income, and so you won’t get that complexity of trying to drive a wedge between what’s a capital gain as opposed to a revenue gain and all those sorts of problems.”
So a capital gains tax will redress inequality, improve the economy and make housing more affordable. And the downsides are?