Call for Capital Gains Tax in New Zealand

August 10, 2009 Taxation in New Zealand  No comments

The call has once again been sounded for the introduction of a Capital Gains Tax in New Zealand.

Installing a capital gains tax system could yield benefits of up to NZ$2.7 billion to the country, $1.36 billion of which will be in the form of direct tax revenue for the Government, according to Craig Elliffe, Auckland University tax policy and law professor.

Craig Elliffe said “People pay taxes because they believe other people pay taxes,” in reference to New Zealand’s current scheme of personal taxation. According to him, it is unfair that while one individual would see a tax bill of $38,000 on their $100,000 income, another would see no taxation on the equal income earned from a property sale. Further, he added “The [tax] game we have been playing as a country is Monopoly, and the dice have been loaded in favour of the knowledgeable and/or well advised.”

The capital gains tax suggestion was brought forward 10 days after Norman Gemmell, the Treasury’s professor, said that the Tax Working Group, which was created by the Government to advise it on tax matters, was endorsing an increase in the Goods and Service Tax (GST) from 12.5% to 15%. According to Norman Gemmell, this could see an additional $2 billion in tax revenue, which could theoretically be used to fund personal tax cuts.

Peter Conway, Council of Trade Unions secretary, along with Craig Elliffe criticized the nature of GST increases, primarily due to its unequal effects on low income earners. Instead they have called for the alternative of lowering GST to spurn an economic spending along with the implementation of Capital Gains Tax. They drew attention to a similar moves in the United Kingdom where lowering the VAT 17.5% to 15% saw a £2.1 billion increase in retail turnover. Further they pointed an OECD survey conducted in the US, the UK and Australia, which indicated that capital gains tax was an indispensible part of those country’s economies “because of the protection it gave them on their income tax base”.

Leave a reply