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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