6. Dr RUSSEL NORMAN (Co-Leader—Green) Link to this
to the Minister of Finance
Does he agree with the OECD which found in April this year that “New Zealand is one of the few OECD countries with no comprehensive capital gains tax on any asset class” and that this “favourable tax treatment of housing” should be removed to lower house prices, lower wealth inequalities, and level the playing field for saving and investment decisions?
Hon BILL ENGLISH (Minister of Finance) Link to this
We do agree that New Zealand has no comprehensive capital gains tax, and generally we agree with its objectives, and we have chosen other means to achieve those objectives.
Does he agree with John Walley from the New Zealand Manufacturers and Exporters Association—
Mr SPEAKERDoes he agree with John Walley from the New Zealand Manufacturers and Exporters Association, who said recently: “A balanced tax system including taxation on property is needed so that capital is used to invest in revenue and job generating businesses …”; if so, why does he continue with a tax system that has this bias for housing speculation?
I do remember agreeing with him once. Look, we share with Mr Walley the objective of moving this economy to an export-orientated economy built on higher savings, high-quality investment, and high productivity. The Government has taken a number of very significant measures to achieve that, including major tax reform. In that context, we made the decision that there were means of achieving a correction in the taxation of property other than a capital gains tax. As I said, the big problem here is for the Opposition to come up with a high-enough rate of capital gains tax covering a broad-enough base to pay for the very expensive other promises that they have made.
Why does the Minister reject the advice from the Tax Working Group that a capital gains tax, excluding the family home, would raise $4.5 billion a year, which was in its report, whereas on the other hand he is willing to accept its advice that a capital gains tax is too complicated; why does he not accept its number, $4.5 billion, but is happy to accept their recommendation not to proceed?
In respect of the number, I understand that it was based on what we call an accrual regime, which means that any uplift in value is taxed each year, regardless of whether the property has been sold. A realisation-based tax, which is when we pay when we have the money, would realise quite a lot less money. The group most harshly affected by the regime that Labour is proposing is superannuitants, who have low cash incomes but would have to come up with tax to pay accrued capital gains. The only saving grace is that in current conditions there is almost no capital gain, so they would not have to pay, but it means that Labour would get no revenue from it.
Why is he ignoring the advice of the OECD, Treasury, the IMF, and the Savings Working Group, which have all found that New Zealand is now an outlier in not having a comprehensive tax on capital gains, the absence of which seriously undermines Government revenue and the competitiveness of our productive sector, which he has repeatedly said is central to his economic strategy?