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02-11-2014

Labours leadership contest: Good news for Capital Gains Tax?

The Labour Party looks likely to change its capital gains policy, irrespective of who wins the leadership election, according to Radio NZ. While this appears to be good news for many New Zealanders, including tenants and rental property owners, the word "change" is being used rather than "reject". Whether the outcome is specifically good for tenants and rental property owners is still to be determined.

The following comments were on the radio NZ website and were taken from a debate of the leadership contenders on TVNZ's Q&A program.

Speaking on the CGT policy, former Party President, Andrew Little, said Labour needed to recognise its policies, including the capital gains tax, were unpopular. "If we, the Labour Party, care about ensuring there is a fair society, less inequality, dealing with child poverty, we need to be in Government. We put a bunch of our things out there, asking people to vote for us, that turned people off us. We've got to be honest about that."

Nanaia Mahuta, said the tax was hard to explain on the campaign trail. "People who said to me on the campaign trail, you know, we're modest income earners. All we've got is our family home. But when we die, our kids already own their home, when we pass it over to them, what's going to happen?"

The acting leader David Parker, said the tax was a good policy, but changes needed to be made. "We had a few glitches as to how we sold it. If on review we do keep it, you can bet your boots that if it comes back under me it won't ever apply to the family home and it won't be an inheritance tax."

The former deputy leader, Grant Robertson, said Labour emphasised detailed policy, such as tax policy, too much. "If we get obsessed on the detail of those policies then we get drawn down a path where New Zealanders don't understand what our purpose is and what we stand for."

While Little and Mahuta appeared to recognise that there were problems with the tax policy, Robertson and Parker appeared to think that they just didn't sell it correctly.

Others calling for change to Labours tax policies are saying that it should be directed solely at rental property. This would be completely against established tax policy design, which says that tax should not be used to influence investment decisions. If rental property was the only industry to have a CGT, this would certainly be the case.

As it has been presented over the last three or so years, Labours CGT was unlikely to achieve its aims of halting house price growth and raising revenue. If solely applied to rental property, the CGT would have no show of raising significant revenue,  meaning it is even less likely to work.

The full Q&A program can be seen here

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