Labour did a U-turn on a capital gains tax so it could take pot-shots when we Nats changed direction

Alf has confessed to his drinking mates that maybe he wasn’t paying attention, when capital gains taxes were last discussed by our caucus.

He has a strong recollection of scoffing at Labour’s capital tax proposals during the election campaign last year and he was hugely amused when the lefties decided this policy had been a mistake.

He also recalls the strongly expressed rejection of a capital gains tax from Bill English (our splendid Minister of Finanace, if you aren’t acquainted with his importance to our economic well-being).

Not too long ago he was disputing an OECD report which said the growing gap between rich and poor in New Zealand is leading to lower overall economic growth.

A report from the Organisation for Economic Co-operation and Development said the countries with the biggest increases in income gaps over recent years are New Zealand, Finland, Israel, Sweden and the United States.

Radio NZ put us in the picture:

The OECD said governments wanting to boost their economies should boost taxes on high income earners and do more to help the bottom 40 percent of earners.

But Bill English told Morning Report today that was not the answer and half of all New Zealand households paid no net tax at all.

“In an economy that’s not growing – as New Zealand grew poorly for quite a stretch up until about the early 1990s – in an economy growing poorly everyone gets worse off and the people at the bottom are affected the most.”

More to the point, last month Bill said the election result last year had ended the debate on a capital gains tax.

Here’s what Interest.Co.NZ had to say:

Finance Minister Bill English has directly rejected the Reserve Bank’s call for a fresh debate about removing tax incentives for landlords, saying two official Tax Reviews and the public in two elections had decided against any such widening of taxation of landlords.

“There’s been a lot of discussion over that issue over two tax inquiries in New Zealand under the previous government and under this government and in both cases they came to the conclusion that, on balance, it wouldn’t make much difference,” English told reporters in Parliament when asked about Reserve Bank Governor Grant Spencer’s call for a debate about a widening of taxation of capital gains.

English was referring to the 2010 Tax Working Group review of taxation and the 2001 McLeod Review of tax.

“In the end you have to find something that’s going to be generally supported and the fact is that in New Zealand that further taxation of property was certainly not supported in the last election campaign by the public, or the election campaign before that, so I think you can say various proposals have been tested analytically and politically and there hasn’t yet been a decisive tax measure or tax change that has broad support,” English said.

“I think the lesson, particularly out of the last election campaign, is that the public do need to support changes in taxation of housing because it is, for by far the majority of New Zealanders, their main asset, and for many of them, a significant investment asset. We are always testing the balance of public opinion, policy purity and effectiveness of policy so we have had a few debates about capital gains tax, and it is pretty clear it doesn’t have the support of the public and politicians.”

That seems to take care of the argument.

Alf accordingly wondered if his brain had been over-addled by the splendid scotch he had consumed last night.

He happened to be listening to Radio NZ when he heard Jane Patterson, their charming Parliamentary Chief Reporter, tell us the Government is going to introduce a capital gains tax on properties that are sold within two years of purchase.

“Well, bugger me,” one of his mates spluttered. He had been thinking about robbing a bank to raise the readies to buy an investment property in Auckland.

As for Alf, he was in serious danger of toppling from his bar stool in surprise at this turn of events.

Could it be true?

Dunno for sure, at time of writing.

But Mrs Grumble did establish that The Boss had made some sort of announcement at the party’s lower North Island regional conference in Silverstream, near Wellington.

She also tracked down a print copy of the Radio NZ report which said:

Unlike the current regime, the new tax will not rely on proving a seller’s intent to make a capital gain.
The new tax will not apply to the family home, death estates or properties sold as part of a relationship property settlement.

It will come into effect from 1 October and the rate will be the same as the seller’s income tax rate.
Other measures will require all non-resident buyers and sellers to provide a tax identification number from their home country along with identification such as a passport.

They must also have an Inland Revenue Department number and New Zealand bank account.
Mr Key said there was already a tax for people buying properties with the intention of selling it for a profit but enforcement of that tax relied on proving intent.
He said these new rules would help keep track of overseas buyers and sellers in particular, to help the IRD collect tax owed.

The Budget will also include $29 million for the IRD to increase its property tax compliance activities.

Patterson apparently has had a chat with Bill English who said he wanted to assure people the family home would not be included – but he said it was equally important that people buying residential property for gains met their tax obligations, whether they were from New Zealand or overseas.

Alf now awaits a response from the Labour side of the divide. He imagines they must now criticise a policy they would have enthused about before the election.

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