Prime Minister John Key floored David Cunliffe last night when he couldn’t answer whether or not Labour’s capital gains tax would apply to homes owned by trusts.
After the debate he said it wouldn’t but that’s not what the policy says:
David Cunliffe’s inability to answer the most basic questions about Labour’s proposed capital gains tax underlines key problems identified by successive tax reviews, National Party Finance Spokesman Bill English says.
“David Cunliffe’s failure to explain how he would implement a new capital gains tax, which has now been Labour policy for more than three years, will leave many thousands of New Zealanders confused and uncertain,” Mr English says.
“Nowhere in Labour’s capital gains tax policy does it exclude family homes owned by trusts. In fact, Labour actually says: ‘We will ensure trusts are not used as a means of avoiding a CGT’. David Cunliffe cannot have it both ways.
“And now Labour is trying to say the test for whether a capital gains tax applies is not whether a trust owns the property, but who lives in it. That would require Inland Revenue to confirm the living arrangements of householders in deciding whether the tax would apply.
What if there are adult children paying rent?
What if there is a boarder?
What if the boarder is a relative, for example an elderly parent?
Would it make a difference if the relative lived in a granny flat?
Would it make a difference if someone living in the granny flat wasn’t a relative?
What if there’s more than one family in the house?
“This latest confusion follows Labour previously making contradictory claims about whether the KiwiSaver accounts of 2.3 million New Zealanders would be exempt from their new tax. They now claim they would be exempt, but this is not reflected in their policy or their costings.”
Mr English says Labour’s proposed capital gains tax was already full of holes, applying only to only a quarter of the housing market, but to every New Zealand business and farm.
“All of this underlines what tax experts and independent reviews have said over the past 20 years. Implementing an extra capital gains tax would be much more complicated and confusing in practice than it appears in theory.
“By contrast, National’s clear economic plan is successfully supporting higher wages and more jobs. It is steering New Zealand back to surplus this year and ensuring government spending is invested wisely to deliver better results.
“The five new taxes promised by Labour and the Greens would stall the New Zealand economy and cost thousands of jobs.”
People who trade in property or shares already pay taxes on the capital gains.
CTG CGT would add cost and complexity to the tax system which wouldn’t be justified by the money raised.
Labour wants to introduce a
CTG CGT and four more taxes for the worst reason – so it can spend more.
The best way to increase the tax take is through economic growth which enables businesses to make bigger profits, increase jobs and wages.
The worst way is to increase tax rates and add new taxes which add complications, complexity and costs and put a hand brake on economic growth.