Labour's capital gains tax figures don't add up, says Key

John Key

Prime Minister John Key is already peppering Labour’s capital gains tax proposals with political buckshot, even though Labour is yet to formally announce the policy.

The policy though was informally announced on television last night, and all reports say much the same thing: a 15% capital gains tax, with the family home exempt, with the promise this will reap $4.5 billion a year for the government.

Prime Minister John Key told a Wellington business breakfast this morning Labour’s numbers do not add up.

A capital gains tax would need to be levied at 30% to raise the revenue Labour is talking about, he said, and it would also have to be cast much wider than investment properties.

“You could only raise anything like $4.5 billion if you have a 30-% capital gains tax on all farms, on all shares, family baches, and all investment properties.”

Because the tax is typically only levied when the asset is sold, it would take a long time before the government collected much extra revenue.

At 15%, it would be 15 years before the government collected $500 million a year, he said.

“So they’re going to have a $12 billion hold in their first three years [if Labour were elected]” he said.

“We have had two tax reviews in the last decade - the Mcleod Review in 2001 [under the last Labour government] and the Tax Working Group last year, and both of them rejected a capital gains tax for New Zealand,” he said.
 

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LOLbour

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While it may suit Labour's front bench to watch Goof fumble his way thru the election and get the boot afterwards... I would be decidedly nervous if I was sitting anything lower than about No.15 on the Labour party list.

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Goff's a goof if he thinks this will run. Wonder if he has the gonads to fall on his sword pronto pre election if the polls go against him and this silly idea.
Shonkey must be dancing with delight.

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Overseas-funded bank mortgages on rental properties and a landlord-friendly tax regime have together severely damaged this economy. The disincentive for this type of unproductive investment is 30 years overdue. And John Key just wants to have a fire sale of key assets to fund his excessive borrowing!

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I'm not even going to start on telling you how weak your argument is, when most of the policies and outcomes you are talking about are due to the Labour government

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you have a point but.....
people who invested in finance companies lost all their money.

the Share market in NZ is not a real strong base to invest in which means you need to invest offshore.

People who invested in property did so because it was deemed safe and they understood it.

So its all very well to criticise but at least offer a logical alternative. Problems are easy to jot down, what about solutions?

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Excellent point!

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My bet is that you don't have a rental property!

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My bet is that you don't have a rental property!

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Phil - when would the base line be drawn? Would it be from a valuation when the CGT is brough in or would it go back to 15 years ago when I bought the property? What expenses could be claimed if the property has not been rented? Need answers now!

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Capital Gains Tax has to come: all concerned and informed commentators back it.
Key should have had the balls to back the Tax Advisory Groups recommendation.

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rubbish..typical left wing comment, as usual no idea as to the facts

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Wonder who decided that with Liebour dead in the water ,they are trying to be born again and reinvent themselves .First stop land tax affecting retirees or other people suffering from the do nothing

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iF CAPITAL TAX COMES IN THEN I WILL UP THE RENT ON THE RENTAL I OWN

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Indeed.
Those running a bona fide property investment business wil simply adjust their managemnt to take into account any up- coming taxation. After all in most cases they will only sell if it is good for thier business strategy and they cover their costs.

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iF CAPITAL TAX COMES IN THEN I WILL UP THE RENT ON THE RENTAL I OWN

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I totally agree with you and will be doing the same on my renters.
Curious though how seeing as NBR slapped an earlier post I made on this topic with 'delayed for moderation' and it has never appeared....how you got 2x posts allowed <g> by the way your caps lock is stuck. Seems NBR has trouble with these blogs, they cant stop ads for rolex , perfume and Penny Bright, but dump others at random.

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Comments are not queued before appearing. I will check and see what the issue was with your comment.
Thanks

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Chris Kealls very interesting NBR - Blog NBR publisher to NetHui: comments will stay anonymous - has jammed for moderation at 9:40 AM
Something amiss pleased to see rather than censorship.

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We heard you the first time. Please stop yelling.

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Pt2 continued. Leibour Govt who allowed thousands of investors to be robbed by finance companies.Wonder why the defacto leader Helen Clark running the Liebour Party from New York has had a change of heart on CGT.After all she has or had quite a few investment properties.

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Hey Phil and LieBore...let me give you a tip on a clue to men's characters: the man who damns money has obtained it dishonorably; the man who respects it has earned it

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When facing an election the party in power hopes for an economy that is purring along AND / OR an opposition that presents a policy that scares the b jez out of the population.

Well done Phil, you just played Russian Roulette with 6 rounds loaded in the magazine. I hear you're going to pull the trigger on the policy soon, don't worry if the first shot doesn't work there will be plenty more opportunities to pull the trigger again before the election.

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Years ago the then government introduced a speculator tax that lasted one year. My next door neighbour was in that lark and never paid a bean, large gin palace boats were traded for $1 then bought back later the same day to avoid the tax on property. The only ones caught by this tax were a few very small time traders...which was why it was dropped in a year as unworkable. The rich won't pay this, just ordinary the citizens. Give it up its a bad idea

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Jey Phil...degrees of ability vary, but the basic principle remains the same: the degree of a man's independence, initiative and personal love for his work determines his talent as a worker and his worth as a man. Independence is the only gauge of human virtue and value. What a man is and makes of himself; not what he has or hasn't done for others. There is no substitute for personal dignity. There is no standard of personal dignity except independence

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The freedom of speech of private individuals includes the right to not agree, not to listen, and not to finance one's own antagonists!

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Four main advantages of a capital gains tax on property

1.A tax on profits from capital gains means we can pay down the deficit without having to sell assets like our power companies.

2. The government can use the money it gets from taxing profits on capital gains to reduce tax on income earned other ways.

3. People will begin to change their behaviour in ways we need as an economy. If someone has some extra cash to invest, they will ask themselves - should I buy a second house, or should I invest in a growing, exporting business? We need more investment going into productive business, instead of into housing speculation. Extra investment in business helps the economy to grow.

4. Young families trying to buy their first home won't have to compete in the market against speculators. That makes home ownership more affordable.

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If investing in the business /export sector is such a clever move , how come the Banks will only lend if they have mortgage security over property /land buldings etc ?
Obviously they know where the best security is to be found in all cases,so guess what - the more prudent private investors want to play by the same rules as the fat cats who pull the strings - Phil you are a loser - get used to it !!

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Oh, hello? this tax will take years to return any real money to the govt because it depends on property sales which will slow down and be bound up in red tape and accountants if this tax goes ahead. It will cause rents and house prices to increase as owners try to offset tax losses. This will in turn encourage foreign ownership of investment property and land. And if you really think Labour will lower taxes in other areas (at least ones that make a difference to people who live in reality, not the dole), you are certifiably delusional.

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Oh, hello? this tax will take years to return any real money to the govt because it depends on property sales which will slow down and be bound up in red tape and accountants if this tax goes ahead. It will cause rents and house prices to increase as owners try to offset tax losses. This will in turn encourage foreign ownership of investment property and land. And if you really think Labour will lower taxes in other areas (at least ones that make a difference to people who live in reality, not the dole), you are certifiably delusional.

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Good on ya Phil, a nice easy target so we can spend it on the welfare system. Phil Goff and your cronies - you really do not know your target market do you. Its almost like you really don't want to win the election. Maybe hats the plan after all its much easier being in opposition - you get to criticise everything the government does but dont have to do anything yourself.

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TAX THE RICH. AUSTRALIA WANTS THEM.

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Poluitical suicide. It may affect future investor decisions but it will also reduce effective housing supply as landlords hold leading to the obvious re prices and rents - all at the low end of the market where low-income earners/the youth rent and first home buyers seek a foot in the market.

If nothing else Labours resounding defeat on the back of this and Phil Goff's ineptitude will once again sideline any talk of CGT as a viable option in NZ for another decade or so.

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Phil and Cun*Life need to realise that a“collective” mind does not exist. It is merely the sum of endless numbers of individual minds. If we have an endless number of individual minds who are weak, meek, submissive and impotent – who renounce their creative supremacy for the sake of the “whole” and accept humbly that the “whole’s” verdict – we don’t get a collective super-brain. We get only the weak, meek, submissive and impotent collective mind.

So go and rob someone else.

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Every government interference in the economy consists of giving an unearned benefit, extorted by force, to some men at the expense of others.

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I can't understand why idiots like Goof and others refer to investment in the property market as the "unproductive sector". This has been a populist term originally espoused by disaffected fund managers and sherbrokers, and those that use it generally put their mouths int overdrive and brains into neutral. So I start a factory making kitset sheds. That is the kind of business that is the "productive sector" - employs staff etc. My business grows so much that soon I am making commercial
warehouses and quick-build houses. Practicality dictates that now I have to assemble these away from my factory, and on-site. I am now employing lots of carpenters, plumbers etc. But, according to Goof and many other poor misinformed souls, I am no longer part of the "productive sector" because many of my customers are investors who are buying properties to provide much needed rental housing. After all, the Govt is not in the business any more of providing state owned housing en masse, and they even provide incentives and underwrites to private developers to build low cost housing, which many investors buy. So, the govt hammers my clients with capital gains tax. A big part of my business dries up because investors no longer get the returns they need to make it stack. This execerbates the shortage of houses in some areas, such as Auckland and Christchurch. rents start to rise in those areas 'cos of lack of supply. People start to scream at the govt that they are not doing enough to keep rents down! The govt says it is not a priority nor is it cost-effective in these tough times for them to build more state houses. They provide incentives to developers - maybe something like a LAQC or capital gains tax exemptions. History repeats and all the economists say they saw it coming! Meanwhile, many people are upset at all the money they have lost in the NZ stock market because of poor regulation, lack of transparency and subtle insider trading. After all, the average investor has absolutely no real control over a listed public company, but the majority shareholders and the fat cat directors and senior management are the real winners! People nostalgically think - after filing their worthless share certificates in the bottom drawer - at least I had control over that rental property I had many years ago. Should've hung onto it - my monet would have doubled by now just thru basic inflation. After all, they ain't making any land! Of course property is part of the productive sector! That statement ignores all the people that are employed directly or indirectly in construction apart from the basic social need for an ongoing supply of reasonably priced rental accomodation. I think Goof must have obtained his understanding of economics at the same place as Doctor of Geography Culen!

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I dont work with collectives. I don't consult, i don't co-operate, I don't collaborate.

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Phil you and your party can evade reality, but you cannot evade the consequences of evading reality.

Bring on November.

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Economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman's tool is values; the Liebore bureaucrat's tool is fear.

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A few thoughts:
capital gain is mostly inflation. If you sell your house or farm to buy another one, why should you be taxed on the inflation, that has happened in the intervening years?
What about the morgagee sales that happened in the last couple of years? Those people had mostly a capital loss. Are they going to get a tax refund?
I think CGT will have its place, but probably when you sell your last house or farm: call it death duties perhaps.

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farmer H - In support of your idea, is there not a precedent with share traders that IRD took interest in and didn't it result in court action such that they could legitimatly claim costs and losses? as you say plenty of capital loss abounds outside Auckland in real estate we only hear of the lucky few.

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Those Labour Party liars, voters and apparatchiks who tell you that man is unable to perceive a reality undistorted by his senses, mean that they are unwilling to perceive a reality undistorted by their feelings. "Things as they are" are things as perceived by your mind; divorce them from reason and they become "things as perceived by your wishes."

Go away Goof.

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When facing society, those most concerned, those selected by effort to do the most and contribute the most, have the least to say. It's taken for granted that they have no voice and their reasons they could offer are rejected in advance as prejudiced--since no speech is ever considered, but only the speaker. It's so much easier to pass judgment on a man than an idea isn't it Goofy?

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Outrageous claims by Liebour regards the collection from CGT. (with the primary residence exempt) If there is to be no retrospection applied, new investment punters will be long term players, ie 10% CGT will eliminate most of the 'flip' sales and produce less than $100m pa, well short of $4billion BS!

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In any compromise between food and poison, it is only death that can win. In any compromise between sanity and socialism, it is only socialism that can profit.

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I do not seek the good of others as a sanction for my right to exist, nor do I recognise the good of others as a justification for their seizure of my property or their destruction of my life.

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The housing price rises occurred under Labour Government; why didn't they introduce the CGT tax idea then? Can't blame Goff for Clark's inaction?

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The age of the skyscraper is gone. This is the age of the housing project. Which is always a prelude to the age of the cave.

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Phill what is the state but a servant and a convenience for a large number of people, just like the electric light and the plumbing system? And wouldn't it be preposterous to claim that men must exist for their plumbing, not the plumbing for the men?

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"Being National-lite was a one-way ticket to defeat."

Yep. Let's hope the people of NZ recognise how important the implementation of this tax is as a first step away from the neo-con economic policies - the ludicrously failed "trickle down" scam - that have driven the country into the ground over the past 30 years.

It's crucial that sensible alternatives to asset sales be presented by labour. This is the first and probably the biggest, a chance for a real strike against the decline of the NZ economy.

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