capital gains tax

 

PHOTO: CGT

A comprehensive capital gains tax (CGT) will ease house prices, says the tax working group that yesterday recommended implementing the tax to make New Zealand’s system fairer. However, housing experts do not believe a CGT would have a lasting effect on prices.

The working group estimates $8 billion could be raised through the tax over five years, potentially going towards changing the bottom tax rate and reducing tax on KiwiSaver for low- and middle-income earners. But REINZ chief executive Bindi Norwell said it may cause people to over-invest in the family home, “also it may disincentivise other investment, people buying property for the rental market for instance”. “So this may push up prices in the rental market.” Andrew King of NZ Property Investors Federation said a CGT would not have a significant impact on the property market. “There’s a CGT all around the world and it’s never slowed down property. Australia has a CGT and their prices have been increasing at a huge rate, they may have been going down now, but they’ve increased an awful lot, same with Canada, same with England.” The working group also recommended putting shares and business assets in the tax’s crosshairs.

Rocket Lab founder Peter Beck took to Twitter about the idea, saying taxing intellectual property and stock will decimate the already-fragile New Zealand start-up industry. Finance Minister Grant Robertson, however, had a different take. If there were start-up investments “and it doesn’t work out you can claim the loses of that back”, he said, citing the report. Tax Working Group chair Sir Michael Cullen said the capital gains tax recommendation came about through “concerns about the structure, fairness and balance of the tax system”.

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