Capital Gains Tax finally on a major party's agenda

[HenryDorsetCase]

The objection is that "capital" (savings) arise originally from tax-paid money. Now the government wants a second bite. CGT looks like an attack on being provident.

But ok, leave that aside. I could live with a 15% CGT if income taxes remain flat. My objections are:

1. It is an idea which comes too late. The property boom is over. The time to introduce CGT was in 2000.

2. Tax yield from CGT takes a long long time to become a decent amount of money because only a small proportion of property is sold each year. About 15 years to reach fruition.

3. CGT will make no difference to property prices - other nations with this tax experienced the same and even greater property booms as NZ.

4. CGT will have exemptions which immediately introduces tax-dodging behaviour. Plenty of work for lawyers and accountants. Mmm...ok, so it isn't all bad.

That is the root of my objection, too.

but with Trotsky and co at 29%, provided JK doesnt get caught screwing a goat or something, its a non-issue.

[Clockwork]

So what you are saying then is once you have accumulated enough wealth that you can live off you investment earnings and not need a salary income you should no longer need to pay income tax. After all you must have already paid your fair share to get that wealthy in the first place, yes?

[HenryDorsetCase]

So what you are saying then is once you have accumulated enough wealth that you can live off you investment earnings and not need a salary income you should no longer need to pay income tax. After all you must have already paid your fair share to get that wealthy in the first place, yes?

well, my personal view is that I shouldnt have to pay any tax at all, and that you, personally, should support me like a James Bond villain in a hollowed out volcano, equipped with nuclear missiles and comely wenches.

[Clockwork]

Fembots? Sharks with Frikin' lasers? Anything else? I'll need to redo my budget.

[avgas]

Fembots? Sharks with Frikin' lasers? Anything else? I'll need to redo my budget.

Got a delivery here for Mr Clockwork.
If you could just sign here, you can take your package of FemSharks with Lasers and I will be on my way.
Thankyou.

[Clockwork]

Last time I order anything on the internet..... not only the wrong items delivered but the wrong fuckin delivery address too!

Interesting point about about the distribution of taxes collected in NZ made earlier though, I wonder how it would correlate with the nation's wealth distribution?

[avgas]

[Winston001]

well, my personal view is that I shouldnt have to pay any tax at all, and that you, personally, should support me like a James Bond villain in a hollowed out volcano, equipped with nuclear missiles and comely wenches.

AHA! So you are the guy with the key to those little doors in the side of the Lyttleton Tunnel (being inside a volcano).

So what you are saying then is once you have accumulated enough wealth that you can live off you investment earnings and not need a salary income you should no longer need to pay income tax. After all you must have already paid your fair share to get that wealthy in the first place, yes?

Theoretically. It would depend on what age you retired and how much you expected to spend each year. Age 40 - you'd want $3 million and with inflation even that might not be enough if you lived to 90.

The famous book "Rich Dad Poor Dad" by Robert Kiyosaki teaches financial freedom through owning property. The principle is other people (tenants) pay off the loans for you and after 25 years, the rent goes to you as income - taxable of course.

Personally I don't like Kiyosaki or his books...but his message is age-old and correct.

[oOGixxerOo]

I will vote Labour just for this capital gains tax, it is a fair tax and all profit should be taxed, period...

[Winston001]

Ok, so lets say we accept a CGT on property and business sales is fair enough. That new tax should go to the area where its created - your local council. Local authorities have huge expectations placed on them by government and citizens but only ratepayers to get the money from. I notice Dunedin currently has an $8 million shortfall which is a crisis for them.

[Swoop]

A Labour Party plan to charge capital gains tax on businesses operating out of residential properties could affect people with a home office.

If a business owner works from home, when the property is sold they will have to pay 15 per cent capital gains tax on the part of the residence used for running the firm, Labour says.

Associate finance spokesman David Parker said the idea was to capture businesses such as motels, where only part of the property was residential.

But he agreed that the rule could be extended to people such as a consultant who worked out of a spare room. Tax experts would need to clarify that. "The principle behind it is if you're claiming expenses [for working from home] you can hardly say that's not a business asset.

"You do need to have a rule around that, otherwise it would be unfair."

The proposal is contained in the party's taxation policy made public earlier this month. But it appears to have gone largely unnoticed.

Ernst & Young tax partner Jo Doolan said Labour had claimed that only a small proportion of New Zealanders would be impacted by capital gains tax, but because most firms employed fewer than five people many owner/operators could be affected.

"It's quite clear in [Labour's] document ... but they're hoping they can distract attention from it," Doolan said. "Let's not be sneaky about it and pretend it's not going to impact on a lot of people."

Small and medium enterprises (SMEs) could choose not to claim tax deductions for a home office, and would therefore avoid the capital gains tax. "Either way you're going to be paying more tax. We want our SMEs to grow and that's absolutely critical to the future. We can't afford to be hitting them."

Iain Craig, tax partner at Auckland accountancy firm BDO, hoped "commonsense would prevail" if Labour came to power.

The costs of a home office were things like furniture, computers, internet access and some insurance and rates. "None of these are items that point to an asset that's being applied to derive a capital gain. You're almost renting the asset for use as a home office."

There would also be issues in policing it, defining the areas used for operating the business, and valuing those areas, Craig said. Many entrepreneurial companies kept costs low by working from home. "Why would you punish that efficiency? It's going to add a whole lot of compliance obligations for very little practical effect," Craig said.

BusinessNZ chief executive Phil O'Reilly described the proposed tax as "absolutely counterproductive". If a person owned a house for 10 years but ran a business from the home for only half that time, which part would be subject to the tax? "It just shows you the ridiculous nature of this proposal."

It would also lead to a great deal of lobbying from interest groups to get themselves excluded from the legislation, he said.

"That's another classic of sand in the wheels of the economy, where people are not arguing about how much business they should be doing but how much tax they should be paying."

Expert says unwelcome idea right move

Auckland investment consultant Ed Schuck isn't thrilled at the prospect of having to pay capital gains tax on his home office should he sell the family home.

However, "with my investment consulting hat on" it's actually the right idea, he says. Schuck went into business for himself two years ago and hasn't looked back. "When you have your own business you eat what you kill." While other SME owners may not share his views, he says there is a case for capital gains tax in the economy generally. "From a consistency point of view it wouldn't be fair ... for folks at home to get away with it."

He disagrees with the argument that small businesses don't set up a home office for capital gain and therefore the asset should not be applied to the tax base. "I don't think [any] businesses own property for the purposes of speculative gain."

[Oscar]

Ok, so lets say we accept a CGT on property and business sales is fair enough. That new tax should go to the area where its created - your local council. Local authorities have huge expectations placed on them by government and citizens but only ratepayers to get the money from. I notice Dunedin currently has an $8 million shortfall which is a crisis for them.

Is that debt anything to do with the Stadium & Edifice Fixation that infects local body councillors throughout the land?

[cold comfort]

I will vote Labour just for this capital gains tax, it is a fair tax and all profit should be taxed, period...

Although i tend to agree (as Warren Buffett and Sam Morgan say its not fair they pay no tax on CG) can't help wondering why, if its so great, Labour didn't introduce it in the 9yrs they were in office.

[Big Dave]

Not surprising they only have a 30% approval rate. Tabling this when there is nothing to lose is good strategy.

When the incumbent Govt eventually fails, it will be below the radar.

[Oscar]

Although i tend to agree (as Warren Buffett and Sam Morgan say its not fair they pay no tax on CG) can't help wondering why, if its so great, Labour didn't introduce it in the 9yrs they were in office.

That's an argument you can use with pretty much all Labour policies.