Labour has unveiled its tax plans, including a capital gains tax and they look worse for property investors than originally thought.
Labour leader Phil Goff announced the plans in Wellington this afternoon. He confirmed that capital gains tax (CGT) but also said it will ring fence property tax loses so that they can not be written off against future property income, but not against other earnings.
The key points in its tax plan are:
· A 15% tax on capital gains
· Increase the top tax rate for people earning more than $150,000 to 39%
· Ringing fencing loses on
· Remove GST on fresh fruit and vegetables
· Make the first $5,000 of income for everyone tax-free
· Bringing agriculture into the ETS two years earlier than presently planned
· Introduction of R&D tax credits.
Labour has put up its plan as an alternative to sales of state assets. It says the policy has been fully costed by BERL and it estimates it will raise $78 million in the first year, rising to the $2.27 billion in year 10. Over 15 years it will raise about $26 billion in total.
Goff says under the plan it will repay government debt as quickly and at the same level as what National is proposing.
The capital gains tax will be reasonably comprehensive covering, property, shares, farms and business investments.
However the family home will be exempt. Real estate, land and buildings in the Canterbury CERA area will be exempt for five years.
Finance spokesman David Cunliffe says the ring fencing policy was announced earlier this year. Treasury estimates have it generating $3.2 billion in the n years up to 2024/25.
He repeated the Tax Working Group said there was $200 billion invested in property, but property investors holding these properties reported net losses of $500 million.
“That’s right property investor declared a net loss on $200 billion of investments.”
Cunliffe says a CGT is fair as at present the major tax burden falls on individuals through wages and salaries and capital gains are not taxed.
“Huge sums of money can and have been made, but the fortunate recipient pays no tax.”
He also said that an expert panel will be put together to address other aspects of tax avoidance including a review of the taxation on trusts.
Labour says nearly every country in the developed world has a CGT. New Zealand can learn from these and implement a “best practice regime” which is low on compliance.
Goff rejected the argument
Cunnliffe says the new tax rate for people earning more than $150,000 is lower than Australian rates.
Given the current economic circumstances and the Canterbury earthquakes New Zealand cannot afford all of the windfall gains that top income earner have received in recent years.
“We need to ask the highest income earners to pay a little ore income tax to help out.”
He describes the changes which include making the first $5,000 of income tax free as necessary rebalancing of the tax system.
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