The Taxpayer’s Union has launched a campaign to axe the capital gains tax (CGT) :
New Zealand’s tax system is admired around the world for its simplicity, affordability, and fairness. The capital gains tax proposed by Sir Michael Cullen’s Tax Working Group would put all of this at risk.
It is bureaucratic, costly, and would be the harshest in the world. It will curtail entrepreneurship and investment, meaning a reduction in all New Zealanders’ economic prosperity.
The rate is one of the world’s highest, it would be unfairly levied on inflation, it would require costly and fraught asset valuation, and in many cases it would break the Government’s promises by targeting the family home.
New Zealanders deserve better than this unfair tax.
- It unfairly taxes people with assets for inflation
- It will unfairly tax 350,000 home owners who live on a lifestyle block even if they only have one home
- It will unfairly impose billions of dollars of compliance costs on 500,000 small businesses
- It will unfairly tax farmers who sell a farm in order to buy another farm
- It will unfairly lead to higher rents for over a million tenants
- It is an unfair double tax on 500,000 business owners who already pay company tax
- It will unfairly benefit tax lawyers and accountants who can exploit American-style loopholes
- It will unfairly advantage foreign owners of New Zealand shares and disadvantage 800,000 New Zealand investing in local companies
Who will be affected by the CGT?:
Anyone who owns a business, including a farm, shares, bach/crib/holiday home, lifestyle block bigger than .45 hectares, or rental property; anyone who claims expenses for a home office; has intellectual property, anyone who owns a home and moves into a rest home without being able to sell it within a year, or buys another and can’t sell the first within a year, or goes overseas for a while; anyone who buys a section for a new home that isn’t completed within a year; any homeowner who forms a relationship with another homeowner; and anyone who has taxable assets and migrates.
A lot of people would be hit by the tax directly but everyone will be hit indirectly when costs go up and the economy slows.
Tax officials advised the Government 15 months ago that our small companies, start-ups and innovators were better off without a Capital Gains Tax, Leader of the Opposition Simon Bridges says.
“Even before Sir Michael Cullen and others were named to the Tax Working Group in December 2017, Inland Revenue officials told the Government that the absence of a Capital Gains Tax in New Zealand was ‘potentially advantageous to start-ups’.
“Not having a Capital Gains Tax is ‘advantageous’ to every Kiwi willing to give it a go by starting a small business and creating jobs. People who take risks with smart ideas and build something bigger than themselves shouldn’t be discouraged.
“Governments should encourage innovators because smart people will take us to a better future. We need people who take risks and stretch themselves because the ones who succeed create more jobs.
“The Government was also told that the lack of a Capital Gains Tax ‘indirectly incentivises’ people to put more of their own money into a venture because they have the chance of a better return when they sell. That could be somebody who wants to stop working, sell the business and retire. . . “
That’s another consequence that would hit a l9ot of people – disincentive to invest and carry out succession as aging farm and other business owners hang on instead of selling.
The economy is slowing.
If it’s going to reverse that the government must take a much more frugal approach to its own spending and axe the CGT.