Business group endorses Whitehead's call for change
A business group today endorsed a call from Treasury Secretary John Whitehead for significant reform of the taxation system.
Mr Whitehead called for a broader based tax system, including capital gains, or property taxes, to encourage investment into productive activity.
New Zealand Manufacturers and Exporters Association chief executive John Walley said shifting the tax base to include more capital gains taxes and a higher goods and services tax would allow corporate and personal taxes to be lowered.
Taxing capital gains on property would take away an advantage for investors in land in buildings and reduce housing bubbles.
"The Government seems to be determined to ignore the advice in front of it, instead preferring to look for any group willing to endorse their pre-conceived ideas.
"Prime Minister John Key has said that a capital gains tax is not likely to get beyond the discussion stage as it is not something he supports, nor is it something he would expect a National-led government to implement.
"If the Government is serious about increasing productivity, then these attitudes will have to change," Mr Walley said.
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Comments
The simple way to stop these
The simple way to stop these housing 'bubbles' is to restrict the offsetablility of Losses incurred in 'rental' type businesses(both residential and commercial) against other income.
Restricting them to say $10,000 per year loss offset (the rest to be carried forward to future years) would ease the huge distortion of negative gearing and make people think before ploughing into ventures which make poor rates of return income wise but huge(hopefully!) capital gains.
It would do them a favour because,as they have seen in the last year or so, if things look too good to be true they generally are.
The same ought to apply to any passive investment type arrangement(eg equity partners in Dairy Farms who also would have had their education furthered in the last year)
Putting in Capital gains is a draconian measure and the Employers and Manufacturers want to think on - one day they too will wish to sell their businesses at a massive capital gain and a CGT will catch them too.
Re: Draconian Measure?
I would hardly consider imposing a capital gains tax an a draconian measure considering every other country has it.
Most small to medium size businesses do not see a major capital gain as their business is based on the skill and the energy they bring to it. its quite sad that these hard working people have to pay high taxes on their hard work for every dollar they earn; while people investing in low risk assets like properties have to pay no tax further more they get tax back! where is the equity in that?
further more NZ has one of the lowest ratio's of investing in productive assets. this will lead to a lower standard of living in the future if we dont try and change this.
As such I cant see the down side of taxing captial gains on properties. the only reason we dont have it is because there is no political will.
Taxation review
Surprise surprise ... the Employers & Manufacturers are seriously in Draconian times still ... they are still sitting on their hands expecting the government to improve productivity for them and worse, they expect investors to support their weak kneed attempts at commerce instead of investing in real estate. Grow up fella's ... it's 2009 .. not 1979, the good old days when you ripped off all of the then sharemarket investors with your lazy management, export incentives, tarrif protection etc. If you can't compete in 2009, then get out ofthe kitchen and go on the dole .. which by the way is the same as tarrif protection, expoet incentives etc. And you clowns wonder why mum & dad investors won't put their hard earned savings in support of your Walt Disney type enterprises !!~
Reform...
Capital gains tax is desperately needed as we have already seen this housing bubble that so much resources are wasted in the housing sector that would do much better in a more productive sector. I have always wanted capital gains taxes and am pleased to see the politicians talking about it. But I am not so pleased about increases in GDP and talks about decreases in company and income tax.
The last thing we need is our government cutting company tax in response to other governments cutting because someone else did. Because we can't have the governments going arround and encouraging a price war on company tax to attract companies. However if cutting the company tax is aimed at stimulating the economy by leaving companies with more money then this is bound to fail in doing so. Because that money would be spent regardless whether the companies spent it or whether the government collected it as tax and spent it. The difference would probably be that the companies would take the money back home and the government spend it here. However if the companies tax cut is aimed at keeping our tax at the same level as other countries to deprive companies of more reasons to not be in New Zealand then I sadly accept that.
However I am no fan of cutting taxes in times where our government collects less tax due to the bad climate; and their spending has increased supported by loans in an attempt to "stimulate the economy". Decreasing income tax would just increase the governments deficit even further and mean they borrow more money; which will do the opposite to "stimulating the economy" in the future as we try to pay this pointless debt back. So I am against income tax unless it is in an attempt to provide financial relief to the people.
But if it is to provide relief then it is poorly directed as their would be better ways to provide relief like perhaps better GST regulation which would allow us to have different tiers of GST (e.g. a food gst, a machinery GST rate etc). Any form of relief should be specifically and precisely targeted otherwise it won't work. That is why I think that any sort of relief for the people should not be giving them more money as some companies will just hike prices and squeeze the relief money out of the people (e.g. power companies, food companies, gas companies, places like farmers and the warehouse, petrol stations and other companies we cant go without).
Any GST increase would just make things more expensive and put more pressure on people who are already struggling and is a big step back.
It is just a shame to watch and see our country go down the drain with most of the people not understanding whats happening and most of those that do just not caring.
If the people aren't spending their money in unproductive sectors of the economy their either buying foreign goods and services or buying from foreign companies.
And worst of all the government does not just sit around and watch it but they jump in and do things like awarding large contracts to either unproductive sectors of the economy that shouldn't exist as private companies (e.g. the roading companies that have 1 client the government) or they are giving contracts to foreign companies. Our own government even price fixes the electricity markets. And they happily watch as our money goes overseas and foreigners by up our country under the guise of "foreign investment" (really foreigners investing money in buying our country).
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