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Axe The Tax

Were the millions of dollars and countless hours analysing the fairness of the tax system worth it, asks Mark Withers?

By: Mark Withers

1 May 2019

Our last communication to you on the subject suggested it was not worth speculating on a Capital Gains Tax (CGT) until Winston Peters had made his position clear. And so it has been proven. Winston has not been willing to offer NZ First’s support to Labour and the Greens for their CGT proposal and with that, the matter has died a political death.

Many of our clients hold firm views on CGT, both for and against, but something we believe most people agree on is that to be truly effective in its goal of addressing fairness in our tax system, CGT had to be comprehensive.

There has been much speculation that CGT would be watered down, many picking that it would only be applied to residential property, but to be effective, applying CGT to only one asset class would never have been fair, and would never have yielded sufficient revenue to deliver tax cuts. Especially when existing tax laws that tax speculation in the stock markets go unenforced.

‘Something we believe most people agree on is that to be truly effective in its goal of addressing fairness in our tax system, CGT had to be comprehensive’

The residential property market is already struggling under the multiple impacts of the foreign buyer ban, the five-year Bright Line Test and the ringfencing of residential rental losses. All these measures have resulted in investor demand for residential property declining and there is simply no material tax left to mine from a CGT on property, when existing measures see property prices in decline.

This outright rejection of CGT will likely mark a turning point for tax change in the property sector. It was the one remaining material threat that was creating uncertainty and anxiety for existing and potential property investors.

Was the millions of dollars and countless hours of effort by those that submitted to the working group all worth it? We will leave it to you to decide. Onward and Upwards.

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