The worst kept tax secret for some time is out. Labour has today unveiled its tax plan to help win the election.
The centre piece is, as leaked last week, a 15% tax on capital gains. Or as Labour’s finance spokesman David Cunliffe says; people will be able to keep 85% of the capital gains. (And the tax is on gains less costs such as agent fees).
The tax is forecast to raise $26 billion over 15 years.
While the CGT information was much as expected there was one other thing in the announcement investors may not have known. It was only dealt briefly, but Labour plans to ring fence tax losses on property.
Property investors won’t be pleased with what’s planned. I attended the media conference today and one of the underlying themes that came through is the anti-property theme.
Cunliffe trotted out the (disproved) Tax Working Group argument that says landlords pay no tax on $200 billion of assets.
NZ Property Investors Federation president Andrew King has on many times explained why that number is wrong.
However it felt there was an anti-property theme to what is planned.
Labour’s economic development spokesman David Parker said things like: “Our tax system currently favours the speculator and penalises the productive export sector.”
“The OECD and Treasury both say it is wrong for our tax system to have advantageous tax rules for property investment.”
The theme being that property investors make too much, don’t pay tax and are holding back the economy.
Without trying to defend the CGT idea it’s worth suggesting that some form of CGT is inevitable. It will happen some time. New Zealand is finding it is harder and harder to escape pressure to doing things like other countries.
There is an argument that CGT is political suicide or a “third rail” issue. Touch it and you die.
That argument is intellectually lazy.
What would be good would be to see one of the big two political parties being prepared to address the other third rail issue and raise age of eligibility for New Zealand Superannuation.
Is there anything good about a CGT? One of the redeeming features is that it is reasonably comprehensive and covers other assets and excludes the family home.
Also it is not retrospective. The idea is there will be V-Day when the value of all assets are set. The gains will be from capital appreciation from that point in time.
While V-Day stands for Valuation Day, there is no doubt Labour thinks it’s V-Day, as in World War II terms, for them in the general election this November.
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