As the Labour Party and other whingers of the left try their best to excite their mainstream media mates about why this country needs a Capital Gains Tax (CGT) perhaps it’s timely to remind the lefties about just who pays the most income tax in this country already.
I think they should not touch CGT. People that think it should be paid (Labour and Greens for example) believe that it is multiple house properties. And it isn't. If they really want to even out "tax" how about dropping the some of the corporates listed as charities and there are plenty of those some are multi billion corporations. Do they tax correctly and more prudent spending will help the country.
Hey Doug .. thanks for your comment. It depends of course on what entity is used to buy and sell the houses. If it's a registered company then it will obviously pay tax on asset sales. Legally, if the intention of purchasing a property as an individual is to sell it at a profit (outside the 2 year bright line test) then tax is payable. It's a question of how much enforcement is undertaken by the IRD. The reality is those is in the business of buying and selling assets of any sort will be liable for tax. If they're just holiday home owners (no doubt paying high dollars in rates!) what really is the point of a CGT? A lot of compliance for not much government revenue.
Yes - my comment was a simplified example, which was just to illustrate the comparison.
I do realise that assessing house sales for tax would be a complex issue for IRD. It would need to allow a certain percentage of valuation increase, then account for money spent on improvements, GST, money collected in rent, rates etc, etc. I suspect that the labyrinthine complexity is the main reason that CGT is a non starter in N.Z.
Perhaps the business 'leaders' are in favour of CGT because they believe that the corporate tax rate would reduce on CGT's introduction. This would increase business profits and probably increase the remuneration of the 'leaders'
Kiwiblog posted an xls from Treasury a while ago, showing allowing for WFF, those earning +120k a year were paying over 90% of collected personal tax.
So check that out with Farrar, Peter!
I think they should not touch CGT. People that think it should be paid (Labour and Greens for example) believe that it is multiple house properties. And it isn't. If they really want to even out "tax" how about dropping the some of the corporates listed as charities and there are plenty of those some are multi billion corporations. Do they tax correctly and more prudent spending will help the country.
Your points are well made, Pete. The number of people getting tax credits is shocking.
However - here's another perspective:-
If I run a business to make money by (for example) buying second hand cars and re selling at a profit, I pay tax on that profit.
If I buy second hand houses / properties and resell at a profit, I pay NO TAX !!
Is that a fair and equitable system?
Hey Doug .. thanks for your comment. It depends of course on what entity is used to buy and sell the houses. If it's a registered company then it will obviously pay tax on asset sales. Legally, if the intention of purchasing a property as an individual is to sell it at a profit (outside the 2 year bright line test) then tax is payable. It's a question of how much enforcement is undertaken by the IRD. The reality is those is in the business of buying and selling assets of any sort will be liable for tax. If they're just holiday home owners (no doubt paying high dollars in rates!) what really is the point of a CGT? A lot of compliance for not much government revenue.
Thanks for your reply, Peter.
Yes - my comment was a simplified example, which was just to illustrate the comparison.
I do realise that assessing house sales for tax would be a complex issue for IRD. It would need to allow a certain percentage of valuation increase, then account for money spent on improvements, GST, money collected in rent, rates etc, etc. I suspect that the labyrinthine complexity is the main reason that CGT is a non starter in N.Z.
Perhaps the business 'leaders' are in favour of CGT because they believe that the corporate tax rate would reduce on CGT's introduction. This would increase business profits and probably increase the remuneration of the 'leaders'