Sir Michael Cullen, head of the Tax Working Group, has indicated that New Zealand is in a phase where best time to adopt a Capital Gains Tax is now, or we never take it. The comments come as the T.W.G. prepares to release its report into New Zealand’s tax structure and the changes that are recommended nearly a month early.
Dr Cullen was Treasurer of the Helen Clark Government from 1999-2008. During his time the governing Labour Party ran up significant budgetary surpluses. A capital tax was discussed on occasion, but never seriously considered as it would have been likely to give National and A.C.T ammunition for their campaign against higher taxation.
The report that Dr Cullen is preparing for Prime Minister Jacinda Ardern and her Treasurer Grant Robertson also deals on the ins and outs of a Capital Gains Tax. They are part of a Government of the only country in the O.E.C.D. that does not have a capital gains tax.
I personally have no problem with the tax if it means that the country’s high levels of social inequality can be addressed. I note that Australia only collects C.G.T. on realized capital gains, whilst Canada collects tax on 50% of realized capital gains on an individual tax rate. It is different in the United Kingdom where individuals who are residents or normally reside in the U.K. and are on the basic tax rate, pay 18% C.G.T. on profits from residential properties and 10% on gains from other chargeable assets. In the United States individuals and corporations pay on the net total of their capital gains. In Sweden’s case the C.G.T. may be up to 30% of realized capital income depending on the depot type..
Not surprisingly National have attacked and said that any C.G.T. will be disbanded should they win the 2020 election. A.C.T., the one man band of David Seymour, have said the same, with a dogmatic, ideological blindness in much the same way, Greenpeace have a blind dislike of oil and gas.
New Zealand First, who enabled Labour to get into power have thus far not said anything on the ins and outs of the C.G.T. It is possible that they are waiting for the report to be finished so that they can address internal ructions without a media circus taking hold.
What could a C.G.T. look like then?
I do not know whether a single C.G.T. rate that covers all forms of capital would be appropriate or not, or whether a better idea is to append the tax to assets and let the C.P.I. determine whether it increases or decreases.
I certainly believe that secondary properties that are not ones one normally resides in, but owns and may have holidays there should be taxed. As I am not believer of having anyone other than permanent residents and citizens own property, it would restricted to these people.
When would it be implemented?
National is committed to repealing it, as is A.C.T. Introducing one before the election gives them a visible target to aim at. Waiting until after the 2020 General election is therefore probably the most likely outcome.