TaxBlog

There are quite a few articles out today discussing introducing a CGT to make housing in New Zealand more affordable.

This has been mentioned quite a bit lately in the attempt to make housing more affordable. In the first link below the The New Zealand Manufacturers and Exporters Association (NZMEA) say:

The almost unique absence of a Capital Gains Tax in New Zealand is one of the factors that drive this outcome. It is clear that the tax rules favour assets over activity.

Their arguments are:

“What is there to fear from a Capital Gains Tax that does not affect the family home or increase the overall tax load? We need to balance the tax treatment of all gains and income to encourage more investors into the productive sector of the economy where jobs and wealth are really created.”

“A Capital Gains Tax has long been framed as politically untenable in New Zealand, but it is difficult to see why, when it will both make housing more affordable, and help create jobs and real wealth. If the Government is serious about improving productivity and creating jobs then this would be a good place to start.”

The NBR article follows a similar path quoting the EMA, but interestingly also has an article about how other factors incuding the Resource Management Act (RMA) are to blame for the low housing affordability.

In response to the calls from the EMA Revenue Minister Peter Dunne has two press releases. He states:

“It’s a hoary old chestnut and it’s time it was put to rest once and for all – no government is going to bring it in,” Mr Dunne said.

“The idea of a general capital gains tax has been around since the 1980s but has never gained any real support.

“As I’ve consistently said, it is simply not going anywhere and the time has surely come to bury it because no government will ever implement it, so these periodic discussions on it are a waste of time,” he said.

Mr Dunne said it would be political suicide for any government to implement, and it was time that “the theorists and ideologues understood that”.

I agree with Mr Dunne that it would be political suicide for a government to introduce a CGT. This is uniquely so because of New Zealanders love of bricks and mortar investments. Part of this may be due to the lack of quality capital markets here (stocks and bonds).

However in theory a CGT would remove some of the distortions in the market that currently incentivises people to purchase property. Mr Dunne offers no reasons to refute this. Perhaps such a move would also increase investment in private equity and small business.

Links:
2nd most unaffordable housing – balance tax system
Capital gains tax would help housing affordability
People don’t like tax reveals Peter Dunne
Dunne: Mothball capital gains tax idea

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News out on Friday that the government is considering a “crime tax”.

How it would work is that $50 would be levied on every person convicted of a crime, where they are required to go to court. These offences would range from traffic violations to murder and would be collected by the current Ministry of Justice system.

The proceeds would then be used to help victims with funeral costs, travel costs and things like counselling.

My question is: Shouldn’t this rightly be called a fine, not a tax?

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News out a couple of days ago reveals that Barrack Obama is going to hire Tim Geithnerger as Treasury Secretary despite not paying his taxes.

Geitnerger failed to pay self-employment taxes when he was working for the International Monetary Fund totalling $25,970, which was found during Obama’s vetting process.

Time reports:

The confusion over the self-employment tax arose from an unusual system used by the IMF. Though its U.S. employees receive W-2s, they have been treated for tax purposes as though they are self-employed.

Can you imagine what would happen here if the head of the IRD had a record of not paying thier taxes?

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This is an interesting story from America about how the Senators on the Finance and House Ways and Means committees pay tax agents to complete their tax returns.

Even more interesting is some of their comments:

“It’s onerous and everybody knows it,” said Rep. Richard Neal, D-Mass.

Isn’t that like kicking yourself in the head? One of the few people who can change the tax system is saying that he doesn’t like it.

How about this one for stupid quote of the week:

Rep. Jim Ramstad, R-Minn., does not do his own returns, but he agreed it might be a good idea to try. “I think it is important that we operate in the real world,” he said.

He’s saying he’s not in the real world? No, no he’s in political world.

And to top it off:

“This… is truly revolutionary because no one can remember the last time a member of the tax-writing Senate Finance Committee actually completed their own tax return”

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Australian low income earners are paying more of their income in tax:

New figures from the Organisation for Economic Co-operation and Development show that average tax burdens have risen for all workers, with the biggest increases for those on the lowest incomes.

A person on about $33,000 a year, or two-thirds of the average wage, now pays 20.3per cent of their income in tax, compared with 18.4per cent five years ago, because of the federal Government’s failure to adjust the tax scales for inflation. After allowing for inflation, that is an increase of 10.4per cent in the amount of tax paid.

One would think it’s a politically bad move to be seen to be taxing lower income earners higher amounts. This isn’t a political blog, but it would seem that an article like this wouldn’t do a governments popularity any good. It’s the kind of thing that the opposition would use to help boos their popularity. ‘Bracket creep’ in NZ would be worse than this, so why hasn’t the National party gone to town with it?

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