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“Outrageous” NZ has no capital gains tax - UK prof

Professor Robert Wade from the London School of Economics says it is “outrageous” that New Zealand has no capital gains tax.

LATEST: Stephen Franks: Inequality – Robert Wade and corporate governance | English 'dug his finger into my chest' says sloppy-speaking Wade

Speaking on the issue of growing inequality in New Zealand, Professor Wade told TVNZ’s Q+A programme capital gains tax should receive more political attention.

“And, I mean, it is I think quite outrageous that in New Zealand there's no capital gains tax… But of course if you have a situation where economic policy is being made by the top 1% for the top 1%, then the last thing you're going to get is political movement towards a capital gains tax,” he said.

Professor Wade says people who are concerned about rising inequality should be paying relatively less attention to issues of tax and public spending and look to “pre-distribution”.

“That is, examining the way in which government laws, regulations, policies have the effect of making market income – that’s before taxes and transfers – more and more unequal.”

Prof Wade says laws, regulations, and policies need to be examined to see how they’re impacting on income distribution.

“Corporate governance law has a very strong impact on income distribution. Why? Because the law allows senior executives of corporations to appoint the boards of directors, number one, and number two the boards of directors set the salaries of senior management. And so there is a 'scratch my back, I’ll scratch your back' kind of ethic that evolves and the result is a spiralling upwards of the salaries of senior management. So you need to change corporate governance law. You need to change trade union law so as to strengthen the rights of trade unions to bargain over matters of salary and other things. “

Prof Wade says incomes in developed countries like New Zealand over recent decades have become more unequal, especially in terms of concentration of income at the top.

“Concentration of income up at the top means that incomes lower down are stagnant or even falling. So this is a widespread phenomenon. That’s point number one. But point number two is that New Zealand is up towards the top in terms of how fast inequality has increased. There are countries in north-west Europe – Scandinavian countries, for example; Germany, Belgium, Holland – where they are much more prosperous than New Zealand but income concentration at the top has increased much less than it has in New Zealand.”

Watch the full interview here.

Comments and questions
100

And we need advice from a Pom
How is England going at the moment?

what a stupid comment. Are you saying that not a single person living in England has even a single relevant or intelligent comment or perspective on our economy?
The LSE is the pointy end of intelligent, liberal thinking in Economics in the western world. He's a professor there. You get considered for a position like that and perhaps your opinion will have a little more merit.

Liberal thinking is rarely intelligent.

Dogmatic thinking is never intelligent

And dogmatic liberals are the worst.

The only economist of any note to come out of the LSE was Hayek. You're showing your rust Iron Man...

Its quite a poignant observation actually.

The UK economy is stuffed. Adding another tax in NZ at the moment would seriously hinder the recovery.

The highest global growth in the world is currently occuring in the countries with the least regulation. Cause and effect is apparent to the thinking population. Capital gains isnt required we just have to start playing on its absence and this will ensure full employment, strong growth and prosperity for all. Instead we keeping on putting in regulations for just about everything which make doing business in NZ too hard. While the world goes in one direction - we should standout in the other and benefit. but to achieve this we need to get rid of the smokey looney left in the public service who are more interested in preserving their jobs and butts than taking NZ forward.

Professor Wade is not a Pom. He is a New Zealander.

Yeah, the London School of Economics is a shocking school eh?

Totally agree Kate. Watching this morning on TV, this guy was so out of touch about NZ that all he concentrated on talking about was the pitfalls of quantitative easing and had to be corrected a number of times that NZ had never actually done this. A typical academic socialist with no real world experience. Hey fella, if you really want to make a difference then put your capital where your mouth is, start a business, take risks and pay your staff the living wage you bleat on about, Until then remember that as a government funded academic you operate in the "non-productive sector" and suck from the government teat funded by the capitalists you so hate.

It's been well known for decades that LSE is a hotbed of extreme socialism

Of course you must be right. Didn't Marx and Lenin and Stalin start it?????

As NZ and Oz are some of the very few countries that survived the GFC I humbly suggest this guys ideas get relegated to the bin. Whatever we are doing worked fine. Don't tinker.

Same as we need a dumb comment from someone living in Hong Kong.

New Zealand not having a capital gains tax is a confusing one for sure, as a lot of activity that is taxed as a capital gains in other countries is taxed as normal income here.

IMHO the only thing that should be taxed is corporate income, as companies are a state creation and are provided with special rights and advantages over doing business as an individual, like liability protection.

I assume you are the joke poster.
Companies are far from the only structure created by the state.
If you take out sufficient public liability insurance,you can quite safely trade under a non corporate structure.
We will use a trading trust coupled with asset protection trusts,if you suggest we will escape income tax.

The US and the UK, where Professor Wade comes from, have Capital Gains Taxes but that has not prevented property booms there or wealth disparity increasing to the most extreme levels in the developed world.

Actually a CGT is bad for several reasons, including that exempting the family home tilts the balance further towards property investment as all investments are subject to CGT. Another is that it distorts business investment decisions as they have got to take CGT into account. Finally, CGT is destabilising to a country's budget as the revenue from CGT goes from positive to negative when boom turns to bust.

A wealth tax or a land tax (ideally without exempting the family home), as recommended by the Tax Working Party, makes more sense.

Good letter. If you have a capital gains tax you also have to refund capital losses. As well imagine the administration costs of any such tax. One can only imagine the invisible and unmeasured costs of such a tax. Who would bother to buy the old house in the good street, renovate for rent etc.

Judging from the state of the Auckland property market,a CGT would not dissuade investors.
Anything you spent on renovation is deductible either as repairs,or capitalised to the dwelling.
Under the Au CGT model.you are taxed on half the capital gain.
So the asute investor will ensure a deduction is obtain for any remedial work as repairs,but only half the Capital gain is taxed.

"A wealth tax or a land tax (ideally without exempting the family home), as recommended by the Tax Working Party, makes more sense."

You are correct.

Fine if you don't want people to own their own homes I guess.
And why should they when they can rent our spare ones instead and pay them off for us?
I mean how else are we going to pay for our rental properties, with our own money? God help us, what next? Wage increases? Give me a break.

As John Key has said,you cannot exempt the family home under CGT.
That distorts investment,as Carmel Fisher with her $8 million house on the North Shore,will have an unfair advantage over my residential house of $650k and my 21 house rental portfolio of $350k per house.

Mate, if a few people decide to overspend on their houses to avoid paying tax, does that justify preventing people from owning their own bit of security in life in the form of a home they can't be turfed out of?
If the rich among us (and good luck to them) couldn't avoid a bit of tax that way they'd find another way, so what's the loss?
You can't really justify a rule that impacts on the masses by reference to its effect on the spending decisions of a few.
Why don't you invet in something productive?
Capital gains, I know... sorry for asking.

Mate, a CGT in this country is inevitable given our reliance on Australia,as Australia has one in place.

Given the inevitable,I am in agreement with John Key in regard to the inclusion of the family home,and you are in agreement with the Labour/Green parties in exempting it.

NZ is already classified as a tax haven in world terms.
That is why there are so many offshore residents coming in here,buying and selling property,and escaping offshore with the profits,having escaped any form of taxation both here and at home.

There is a lack of traceability in NZ due to insufficient hooks because of no CGT.

For tax agents,administration of a CGT would make life simpler as there would be fewer areas open to debate.

You seem to have a strange ideology when you suggest that an $8 million home gives a person "their own bit of security in life in the form of a home they can't be turfed out of."

Mate for some people it is a $500k home, for some it is a $300k home,and for some it is a $75k home.

The ownership structure where the house is held is far more important than its value.

Once you have been at the defensive end of potential multimillion dollar claims,as I have,maybe you will figure it out.

The govt pussyfooted around with taking depreciation claims on rental properties which has increased the income tax take from that sector,but has not achieved the objective of dampening the house market.

Considering you have no idea what I invest in,and considering you seem to lack the ability to consider the overall economic picture,it is a bit rich for you to suggest I invest in something productive.

When a CGT is introduced,I assure you the Nats will not remove it.

Now tell me this.
You are a USA citizen.
Your house is sold at a mortgagee sale.
The sale proceeds do not cover the mortgage.
You may owe the IRS in taxes.
Why is this?

Isnt the UK a model of financial success. What rubbish. A capital gains tax would be the last nail in NZs coffin.

Inequality has little to do with what you earn. Its what you do with what you earn that makes the difference.
If you smoke, do drugs, drink and live at the pokies, keep a couple of dogs, you will be financial history.
If you study, save, invest a portion of earnings, have a good attitude to work and life you will do very nicely
Its not lack of money its lack of financial knowledge.
I watched Q and A this morning. What a real little lefty is our professor

I am impressed that you are so well acquainted with the personal circumstances of hundreds of thousands of people, and able to dvise them where they are going wrong. Marvellous.

lol, outrageous to who? What does this idiot know about New Zealand? How does he know that what is happening overseas is happening here? Has he made a study of it or just read a book?

Given how small how capital markets are, just how many New Zealanders are actually deriving their income or the bulk of their income from capital gains?

We already have a capital gain taxes on property flippers and share traders, so Wade is quiet wrong when he says there are no capital gain taxes in New Zealand. If those individuals are not paying their due on their trades, this is a matter that should be taken up with the IRD. Exactly when was the last time the commissioner appeared on TV and was asked to explain himself?

And why aren't TV journalists asking questions about how much tax was collected in capital gains last year on property and shares in New Zealand? I suppose it's because that would involve too much independent thinking.

Wade is correct. There is no capital gains tax in NZ. Capital gained can be treated as income and income tax is sometimes applied, although in certain circumstances a capital gain can remain free of tax. It's a highly desirable system. I hope it's never changed.

There is a "capital gains tax" in NZ.
The problem,as a long serving IRD officer said to me,is that there are too many exemptions.
If CGT was introduced,collection would not be as difficult as mooted.
For any tax payers who have an accountant/tax agent,it is simply a matter of arithmetic.
Au has had CGT since 1985.
I have never seen any taxpayer volunteer themselves to be a sharetrader,except during the 1980's when some of those who made losses,wished to claim an income tax deduction for them.

I think you'll find there is no such thing as a CGT, although capital gains can be subject to income tax. If you are correct, and there is a capital gains tax in NZ, would you be good enough to tell us the rate please?

You are being silly and just arguing semantics. The reality is that if you have a realised (or unrealised in some instances) capital gain on certain types of activities in New Zealand, you will pay tax on those gains. You can call it income tax, capital gains tax or Mary Poppins, it really is irrelevant to the fact that those gains will be taxed whether they are actually used as income by the recipient or not.

Someone who buys and sells cars, antiques, shares, property or any other commodity or stock on a regular basis, acting for profit. must include the profit as income and pay income tax on it. That is not capital gains tax. We do not have a capital gains tax, and it is you who is playing with semantics. We are free to dispose of our investments or our property without taxation on profits; or with no need to return profits or losses. The test in NZ as to whether or not a transaction is taxable is the intention at the time of purchase. That is not the case in countries where a CGT is part of the tax system.

New Zealand doesn't have 1 billion people on our door step so the humble income of NZ is not the same... love these experts... go home lad.

Why should NZ have more tax, we have a dollar one third the value of the UK. Sounds like more John Key agenda.

We don't tell the UK how to run its tax policy, so why should we listen to a leftie UK academic telling us how to run ours. It is interesting that all the academics who think we should have CGT never risked any capital to start up or run a business. They assume that all investment is profitable. They would be more honest if they proposed a tax on capital gains and a deduction for capital losses, Unfortunately, in most countries that have a CGT, the deductibility of capital losses is severely limited or barred, leading to a one way bet against investors by the tax authorities.

The professor is everywhere economical with the truth. Sweden's inequality has increased more than NZ's. NZ's inequality has been stable since 1995. NZ has a capital gains tax for shares and property except where capital gain was incidental to the investment. The effect is actually a higher rate of taxation than applies in most capital gains regimes since it is taxed as income.

Wrong. NZ applies income tax to share and property gains, but does not have a capital gains tax. Your last sentence is questionable, given we have not been informed of Labour/Greens proposed CGT rate, and our income tax rates are progressive.

Wrong yourself. A tax on capital gains is a capital gains tax irrespective of how it is named. If Wade knew what he was talking about he would be criticizing its limitations rather than denying it exists. In most countries there are constraints around applicability as well as substantially lower rates than income taxes. Labour/Green policies are totally irrelevant to these straightforward facts that you seem determined to muddy.

No. It's income tax. We don't have a capital gains tax. It would be quite ridiculous to have Labour/Greens promoting the introduction of a capital gains tax if we already had such a thing. Try investing in Australian shares - easily done online from your armchair, and you'll soon learn what a CGT is. I suppose if you don't care about the odd misnomer you might as well call GST a capital gains tax as well, given that it ultimately only applies to the mark-up or gain.

Oh yes, lets be like Denmark with 69% tax rates and 42% capital gains. What a stagnant disaster. All risk takers, clever producers and potential employers just leave the country, head for Germany, Switzerland, or South East Asia.
Ill take a guess and say our professor has had a life on the Government tit. Without rewarding risk takers we take a dive to the bottom.
Capital gains tax is nothing but an envy tax, just a handbrake on enterprise.

Where do the media get all these left wing wingers. Professor of economics London - what sought of dead end job is that. He could probably get a job in The Treasury here.

In my opnion, CGT is neither good nor bad. Just like any other tax. When first introduced, there will be those whine, complaint and curse. But over time, we come to terms with it and eventually settle to live with it. The end result being more money in the government's bank. Why not have it then?

Of course the government is so much more wiser about spending money than the people who generate it in the first place.
Such a display of wisdom.

"There are countries in north-west Europe – Scandinavian countries, for example" back to this old one again - these countries which up until recently comprised a single ethnicity are always held up as an example - however the impact on these countries to the movement of people from other places into the EU are causing problems and they are starting to have the same sort of inequality issues appearing - e.g. Sweden is up there with NZ in terms of growing inequality and have just had those riots.

Again someone selecting certain points and ignoring others to back his general point of view. In a Professor this is a major failing.

In the end it is really technology, not capital gains that is now having the major impact in inequality as technology is allowing us to replace jobs that unskilled people could do - and it is difficult within a generation to change the skill sets. e.g. online shopping Amazon with 65K odd workers would have some 600K workers if it was a normal bricks and mortar operation, I know that is an extreme example but this is happening in many areas, prefabrication, specialisation etc.

I didn't realise nepotism is unique to a capitalist regime. I also didn't realise that trade unions and socialist regimes were free of nepotism. How could I have been so blind!

The UK economy is seriously stuffed. Get your own house in order first.

The biggest advances in wealth inequality have come about with the introduction of more and more taxes, and more taxes that extend further down the scale. When the government becomes involved in 30-40% of GDP then income and wealth inequality is an almost inevitable outcome, as a lesser example of the vast wealth disparities exhibited in autocratic and communist countries when governments are involved with > 80% of GDP.

E.g. a capital gains tax will make poorer people poorer more than it will make rich people poorer. That NZ does not have one is legacy of our fast dying egalitarian past where a battler out on the land could still eke out a decent holding through hard work. A far cry from something a socialist academic from the City of London could comprehend.

Fairer wealth distributions can only come abut when the government gets out of the business of wealth "re-distribution" (robbing peter to pay paul) altogether and lets the chips fall where they may. Upholding property rights and the ability of citizens to retain their earnings is the best thing the government can do to bring about fairer wealth distributions. Amazingly, very few governments do this, I suppose wealth inequality is a guaranteed source of angst behind pushing for more government so why would they?

Just how does fairer wealth distribution come about by letting "the chips fall where they may"? Or is your idea of fairer simply that you can make more money easier for yourself?

Did you miss the meaning behind the fable of the cricket and the ant at primary school?

A fairer wealth distribution comes about by people who earn it get to keep it and people who squander it get to rue their profligacy and decadent lifestyles. It is not a number on the statistical economists spread-sheet.The big guy in the sky is keeping the ultimate ledger ... so just let the chips fall where they may, and leave the rest of us alone, thank you.

The diggers went to the other side of the world to fight for the freedom to go to hell in the manner of their own choosing.

Most of these comments are really quite disheartening and embarrassing. Simple fact is that if you tax all income except for capital gains income you effectively are penalising effort in favour of what are often fortuitous gains. What is the logic behind taxing some forms of income and not others? It's inconvenient? It is little wonder that NZers are so obsessed with the fortuitous gains that go with property speculation. The absence of a capital gains tax is fuel in the tank of that speculation - which is effectively our own little ponzi scheme. And looking at these comments its little wonder politicians from all sides are too scared to address it.The side effects include an over inflated NZ dollar, an absence of investment capital for non housing speculation ventures and a serious diminuition of long term competitiveness. I would prefer income tax to be cut and for the resulting tax take shortfall to be made up for with a capital gains tax. NZ productivity and competitiveness is being left behind and an uunbalanced tax system is making it worse.

Its called ,"RISK". Without people taking risks with their own capital we dont have production or employment. Risk where people loose everything if they get it wrong. Of course it may take many years for new ventures to become a success story.

A capital gains tax destroys the carrot at the end of the line and therefore destroys go getters even starting. They quietly move to a more receptive country.

We conveniently forget the other side of the coin where most new ventures fail and the sometimes massive capital losses will require a tax refund.

The fact is that the only investment I have seen in my lifetime that is worthwhile for the non entrepeneur,is land that you can do something with,be it land you can run livestock on,or land sitting under an Auckland house.
A property investor who can finance the same,can obtain an income tax deduction for the interest,but have the increase in value free from income tax.
In 1998 all NZ households received the booklet written by Mary Holm,Frank Pearson,Don Brash,Tony Alexander and Tore hayward,infoming us that "Too many NZer's have wrongly gone on assuming that by borrowing as much as possible,and investing in physical assets,they can keep making inflation-driven capital gains indefinitely."
This was misleading advice.
Those who took no notice have continued to make enormous tax free capital gains.

Strongly agree with you. The logic behind taxing all forms of income except one only leads to market distortions. It makes investing in property logically far more attractive than other options.

I'm a property owner, but want to see a capital gains tax, because at some point the whole house of cards will come tumbling down, and that won't be good for anyone.

But I wouldn't expect to see a comments thread on the NBR be anything other than down on a CGT given a readership which will be about policy being made by the top 1% for the benefit of the top 1%.

Every policy has a reaction and behind that reaction there is a set of other reactions totally unmeasured and invisible to the public. Open your mind to the bigger picture.

Your 1% comments can never happen under MMP. In fact nothing happens under MMP.

"Simple fact is that if you tax all income except for capital gains income you effectively are penalising effort in favour of what are often fortuitous gains."

So on that basis then we should be taxing lotto wins as well, to be consistent. After all, why should lotto winners not have to pay tax on their fortuitous gains just as everyone else must on theirs?

Taxation on lottery winnings is a common practice overseas so I imagine you must be as equally disheartened and embarrassed at our lack of tax on the good fortune of the country's lottery winners? Good heavens, when you travel, however do you hold your head up high?

Yes, - I think it is legitimate to also tax lotto winnings. Why not? If every dollar of fortuitous income can be taxed ahead of taxing productive income then thaty isnt a bad outcome is it? As for holding heads up high, I think based on the number of shrill comments here that assert our little country is "special" and knows better are in fact naive and possibly arrogant.

Where a capital gain is considered income it is taxed the same as any other income. A landlord who trades in houses as well as paying tax on rental profit may also be traxed on capital gained. However a property owner who also owns a holiday bach, generally will not be taxed on the gain; and that's fair enough. Although he may make a nominal gain, usually his gain will be little in real terms, and it's not the holiday home owner who caused inflation.

Capital gains tax will be promoted as the answer to everything by the Greens and Labour. Whether cgt is a good idea or not is irrelevant. It is whether they can gain votes by promising to introduce it; and they will. Unfortunately it isn't a simple solution. The downside of CGT can far outweigh any perceived benefits. It's an envy tax and many of its proponents don't seem to understand that income tax applies to capital gained in many cases. Having done my share of business in Australia, and seen directly how so many decisions are affected based on their cgt rules, we are better off without it in my opinion.

Minnie, just because something (eg other examples might be democracy and human rights) are difficult to implement effectively does not mean that they are without virtue. Surely the same can be said of a CGT? Yes, any rules would need to be carefully thought through but even a cursory study of the evolution of CGT in other countries reveals that the real issue is where the concept becomes bastardised in an attempt to appease the proponents of having no CGT. A clean simple CGT is best. Cactus Kate will hate that because it's probably not good for her tax practice - no simple tax system works well for the accountants, lawyers and unproductive asset speculators.

I did not mention anything about collection difficulties. That is a minor concern. The real downside, to put it pithily, is it stops things happening.

Of course, National could always promise to repeal any CGT introduced by the Labour-Greens, the next time it comes to power. After all, the precedent for that has already been well and truly set by the Labour-Greens' promise to renationalise MRP and other asset sales. Quid pro quo and all that?

Hahaha! Why don't we have stamp duty and Death duty too? After all the UK Economy is such a success to aspire to! You have to be joking!!

What's outrageous - or at least highly puzzling - is that a so-called professor of economics isn't aware that NZ does in fact have a capital gains tax.

Yeah right - and it covers all the areas of capital gains so effectively......

Really? What is the rate capital gains are taxed at then? I think you might be getting confused with income tax.

Afraid you're a bit confused yourself. Tax is levied on capital gains at the same rate as income tax, i.e., unlike in some jurisdictions where capital gains are taxed at a lower rate, that's not the case here.

Of course, unlike some other jurisdctions, this rate applies only to capital gains where such gains are the primary purpose of the investment. But it's still nonsense to assert NZ doesn't have a capital gains tax - as Wade now himself admits.

I agree with the above. NZ has not listened to England's finest for years, thankfully, why start now?.

One easy low cost answer is to remove all tax concessions from the residential property sector, require tax to be paid on rents and that will slow the people using the tax system to pay interest and deduct maintenance charges in the quest for tax free gains.

Retain the existing program for commercial sites and business as they produce jobs and proved places for those jobs .

Borrowers should pay market interest rates, not artificially low rates that we have now - that crazy idea fixes zero, it causes issues in other places all over the world as people try to put money into areas that beat the low interest rate regimes.

Limit non residents buying housing stocks, allow them to buy businesses only, make them work, not be landlords.

Do that and we will have a market that reflects the true price of owning a home to live in.

Capital gains is unpopular as it will cost us all - another layer of tax.

He just might be worth listening to
Professor Robert Wade
New Zealander, educated Washington DC, New Zealand, Sussex University. Worked at Institute of Development Studies, Sussex, 1972-95, World Bank, 1984-88, Princeton Woodrow Wilson School 1989/90, MIT Sloan School 1992, Brown University 1996-2000. Fellow of Institute for Advanced Study, Princeton 1992/93, Russell Sage Foundation 1997/98, Institute for Advanced Study, Berlin 2000/01. Fieldwork in Pitcairn Is., Italy, India, Korea, Taiwan. Research on World Bank 1995-continuing. Author of Irrigation and Politics in South Korea (1982), Village Republics: The Economic Conditions of Collective Action in India (1988, 1994), Governing the Market: Economic Theory and the Role of Government in East Asia's Industrialization (1990, 2003). Latter won American Political Science Association's award of Best Book in Political Economy, 1992.

Thanks for the enlightenment jp, he does seem to have a lot of knowledge about NZ's economy, doesn't he? I just hope our Government listens to him and models itself going forward on Italy or India, or Korea, or Taiwan. Then we'd really have an egalitarian society, wouldn't we....

And going by that, very little on New Zealand since he left it 40 years ago. When it comes to this country, it would appear that the good professor is horribly out of touch, a fact alluded to numerous times in the many posts above.

And so goes a list of the more stuffed countries (exception being Taiwan). Brilliant! Lets follow like sheep.

CGT has reared its ugly head again because it is seen as a way to quell spiraling property values. If values weren't rising so steeply, it wouldn't even be a conversation. Yet again, the proposition is to tax those who are prepared to take a risk (remember the prolific mortgagee sales a few years back - CGT wasn't even discussed then....) and give to those who don't. Our society flourishes when the property market is moving because investors "spend" and other taxes are gained through further investment, employment, and on going expenditure. Those who supposedly can't afford their "first" home should do what other generations did - drop your expectations, buy in an area you can afford, even if you have to travel, and ditch everything other than the necessities of life - and then the argument of CGT will go away. But that's all too hard because everyone deserves what everyone else has in an egalitarian society, don't they??

An all-inclusive capital gains tax makes absolute sense, and would be a positive step forward for NZ. However where it unravels is at the point where our politicians bastardise the thing to the point where it would present simply another politically massaged 'tool' creating its own distortions and encouraging further unproductive behaviours. For example there is simply no reason why the family home should be exempt from CGT. At the very least include it over a certain value and allow an indexation adjustment for CPI or similar. Also why incentivise investment in non-productive assets such as bullion and artworks by excluding them from a CGT (this was part of Labour's whacky CGT). I say bring on a CGT, and drop the income tax rates with it so it is fiscally nuetral. The idea here should be not to gather more tax, but to gather it in a different way, from a broader base. However, don't believe the political dross from the left when they say a CGT is easy - my Australian colleagues reckon at least half of their tax advice they give is around CGT.

proposalspoliticians would bastardise it to the point of being

I don't ever want a CGT and neither do most of my friends, simply because currently we make very good money out of capital gains and it is quite easy to ensure we never pay any tax on any of them or that anyone gets to know about them.

That is gold! Never was the case for CGT more succinctly and convincingly argued.

Although nothing, of course, appears to have any potential at all to escape the long eyes of the GCSB.

Right, and UK is clearly the epitome of economic prosperity.

The mention of CGT and the slum landlords of NZ are out in force, protecting their investment by rubbishing the notion, whilst throwing in some anti POM sentiment for good measure.

Spoken like a true Labour/Green-ite. No thinking at all. If the properties become slums, their value will decrease and any profits will be minimal if at all.

Have you seen the private housing stock for rental in NZ? It is very poor indeed. Many landlords do not maintain property to a reasonable standard and rely on housing shortages and the influx of immigrants to keep them rented. And FYI, I voted Nats (probably for the last time!). You don't have to be a green or labour voter to see that CGT can make good sense!

Clearly Sarki you are one of those envious of those who succeed. If it wasn't for the landlords, people like you would have no place to live. And yes, like any profession or occupation, there are ratbags, but don't tag us all the same. We charge a very fair rent for an investment unit, and the tenant gets a great deal. If we didn't have it, there would be one less place available. Multiply that by several hundred - then you'd start complaining. Oh, that's right, you could blame the "Gummint". I'm sick to death of those who get the benefit bagging the very people who "support" them by at least giving them a roof over their heads....

Ha, ha! I am a senior exec on a substantial salary. I own property, cars and a boat. I am certainly not envious of those who succeed. I applaud them. But those who succeed by taking advantage of a flawed tax system - not so much.

But I have experienced renting in NZ as my job has meant that I moved around from time to time. I have also rented in other countries and can say with some confidence that in Europe rental stock is substantially better than in NZ and cheaper - even with CGT!

So for you, it is less of an investment with a major tax loophole and more a service to society? What a saint you are!

If you provide quality accommodation at a fair price, I believe that you are in a small minority. Perhaps you should check out rentals on Trade Me and maybe you will get the point. Better still, visit a few and check them for yourself - they rarely match the photos in the ads!

And a CGT will improve the rental stock how? It will encourage landlords to put their rents up in order to make up the loss from theCGT. Is that what you really want?

There is no evidence of that!

Much more worrying to me about Prof Wade was his confident ignorance of company law. See http://www.nbr.co.nz/article/inequality-%E2%80%93-robert-wade-and-corpor...

CGT represents a dim view of human spontenaity, because we are so free everything must be taxed?

If capital depreciation is a valid deduction, why is not it's counterpart, capital gain, taxable?

The reward of a successfully executed risk is profit. Profit - aka surplus - is surely the single most viably taxable item.

Depreciation on rental housing investment was deductable, but when you sell for a profit you have to repay it. It's only an interest free loan which Bill English removed three years ago.

Capital gains taxes doesn't reward a long term investor. I'm supplementing my retirement savings with direct investment now the mortgage is paif off. From time to time I'm making risk based decisions about share holdings that would be distorted if CGT was payable on sale. It would actually act as an dis-incentive for investing other than rental housing.

So you are telling me you wouldn't invest in shares if there was a CGT ? How would a CGT change your risk based decisions when you would still be gain on the transaction notwithstanding the tax ?

I think it's outrageous that Drury et al and those horrid folks at Diligent, and those fearsome chaps at Moa, have made all that money when their clear intention was to increase the value and sell at a higher price and they are just going to buy nicer houses which they will make money on because other people want to buy more houses too.. and there's not enough land... and people who are smart and work hard get ahead faster, and it's all just horribly unfair... oh well, pass the nuts.

New Zealand and one other country in the OECD haven't a capital gains tax. All the rest have so why not here.

Because clearly all those other countries you fondly think of went down the toilet during the GFC and we didn't. Kinda hints we are already doing many things right don't you think?

Probably because most of those governments run social and left wing agenda's, and we all know that there is never enough tax to support all the voter bribes, the ballooning beaurocrats, the massive hand-outs, the interest on borrowings mad for spending on fruitless ventures. So capital gains tax is a tax to tax you on your assets before you die, then they tax you on those residues all over again. There's nothing fair in this at all!

What may not be generally appreciated is that in NZ we do actually have something which goes even further than a Capital Gains Tax; under the FIF rules if you hold shares in non-exempt overseas companies you have to pay what amounts to a straight Capital Tax - irrespective of whether those individual shares appreciate in price or not.

Since when is it outrageous for a country to buck the trend. Send the silly meddling academic back to his failed state. Why do these losers come all the way here to peddle their failed nonsense? Who paid for him to come here? Follow the " taxpayers money" .

I believe a law is a bad law if it encourages the population to dishonest, and indeed break the law. This is the case with New Zealand treatment of capital gains.
If a person buys an item in New Zealand with the intention of selling it later at a higher price, then that gain is said to be income and is taxed.
If a person buys an item in New Zealand with the intention not to sell it but to use it, or rent it, or derive other income from it, then when that item is sold, if there is gain, it is called capital gain, with zero tax.
So which is which, who decides which item is brought for future sale at a profit or bought for rent but subsequently sold for a gain? The person decides, so of course they are encouraged by the law to say, "I bought this extra house because I thought my mother would live in it, not to do it up and sell it 12 months later at a profit", or "I bought this Xero stock because I thought it would pay a dividend, not because I hoped I could sell it 12 months later for double what I paid".
At the very least this law is grey, at worst it supports and encourages outright dishonesty, and therefore should be changed. To what level we should tax these gains is another question, but lets clear up the encouragement of dishonest behaviour please.

But things aren't working in NZ. Isn't the NZ government borrowing 400million every week.

yes we need best thinkers on the planet like one's from the best universities in the world. LSE is an international university in the top 3 in the world in economics. Concepts like inequality, capital gains taxes are standard issues...

Comments on the commentators race and nationality should be no bar bloggers giving respected to a world renown academic.

Why do u think the tories passed legislation - ops too big a word...
taking advice by hiring an English citizen as head of treasury to give $bill English.....

Message to UK prof: stick to commenting on your own tax system. Possibly comment on present investigation into Prince Charles' tax-free millions if you want to say something.
When we want your opinion we will ask for it.

I selling all my rental properties and taking my money out of NZ while I still can before the capital gains tax takes effect in 2014 election year.