New Zealand Needs Capital Gains Tax

April 15, 2015 Taxation in New Zealand

WELLINGTON – Property investors in New Zealand could soon face a capital gains tax, as the currently overheated housing market poses risks of economic instability for the entire country.

The government of New Zealand needs to reconsider implementing a tax on capital gains garnered from the sale of investment properties, according to new information release by the Deputy Governor of the Reserve Bank of New Zealand Grant Spencer in a speech delivered on April 15th.

The Deputy Governor explained that New Zealand is one of the few advanced economies in the world that has not see a major correction in housing prices over the last 45 years.

He added that current imbalances in the housing market are increasing the risk of financial and economic instability in the country.

The capital gains tax on investment properties could cool the overheated market for investment properties, which is currently being boosted by the tax free status of such returns.

Aside from the proposed tax measure, the government should also look into reforms of measures to boost the supply of housing supply, including streamlining the approval process for residential development.

Currently housing prices in New Zealand are seeing a significant rise, with the cost of residential homes in the biggest city, Auckland, increasing by 17 percent since last year.

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