people are looking at about $300,000 for their baches, and if Labour had won last night, they’d have just lost $45.000 to the Government
15% of the gain right? I don't think they would have got the hypothetical holiday home for free.
I’ll put it this way Greg, if you’d owned a 300k holiday home yesterday morning, would you have voted up to $45,000 off it’s value yesterday afternoon?
Buy a holiday home for $300k, sell it later for (say) $400k... you only pay 15% of the CAPITAL GAIN, not the sale price. In other words you'd pay $15k.
Well there we have it, I don’t understand the policy, But still, same thing applies, many baches have been in families for decades, I know my grandad bought my granny her bach there in the 1950s for less than $100,000 and most of the neighbours are the same. Regardless, more simply, if you’d owned a 300k holiday home or second property yesterday morning, would you have voted to reduce its value yesterday afternoon?
It’s not about the monetary figure, it’s simply about the principle. I’m not sure how many people own a bach or even access to one, it’s simply that it complicated the dreams and aspirations of too many people. It’s easy to say:
Get in the while the iron is hot, all stock must go, sale ends Saturday "you only pay” $15,000!!!
but that’s not a turn of phrase I’ve ever had the luxury of issuing let alone acting on.
It all depends on the detail of the law, too. There are many ways to implement CGT, some of them indexing to inflation. If the gain was only inflation, then there is no tax to pay at all. Of course we would have to include property prices in our inflation statistics, which for some reason we don't, despite them being by far the biggest cost in our lives. More than 60% of our household income services our mortgage on our modest house worth roughly the national median and much less than the Auckland one, and we have 40% equity.
It's not about the monetary figure, it's simply about the principle.
I understand what you're saying Mark. But a better example might take a foreign investor... the classsic Belgian dentist will do. He has loads of spare cash and buys 5 homes in Auckland for $800k* each. He rents them out but his declared outgoings exceed the rental income so he pays no tax on that money. Three years later he flicks them on for a mill each and pockets $1m in cash, tax free. Thanks New Zealand!
* These figures are off the top of my head
While the Nats successfully put the frighteners on those who own or aspire to family cribs (or "baches" if you live north of Oamaru), it's the big money people who are distorting our housing market and they are the people a CGT should be targeting.
But a better example might take a foreign investor
Foreign investors didn’t tick National for their party vote, I’m not really here to debate the merits of the policy as quite obviously my understanding is too vague =), but I’d imagine I’m not alone, I’d wager there were quite a few who couldn’t quite grasp it. And yes, definitely it is the big money people that should be targeted, but my reckoning is, the way to target big money people is to go after trusts almost exclusively.
It’s not about the monetary figure, it’s simply about the principle. I’m not sure how many people own a bach or even access to one, it’s simply that it complicated the dreams and aspirations of too many people.
Its a comms problem, like most things. I bet you can outweigh bach owners with renters - who would love to see a slowdown in the massive rent increases of the last decade, but probably don't realise/believe that a CGT would help with that.
And yes, definitely it is the big money people that should be targetted, but my reckoning is, the way to target big money people is to go after trusts almost exclusively.
Still not convinced we can achieve that in a country where the "money people" with trusts overlaps entirely with the set of "elected people".
Yep, comms, for sure, I've glanced over the policy, I've read articles on the policy and even still I thought that tax was on the full resale value of the property. With renters still their is that curtailment of the dream. But yeah, looking at the margin of victory in the election, outside the centers, after 2 election defeats, it does look to be a dead duck, at least under that name.
Still not convinced we can achieve that in a country where the “money people” with trusts overlaps entirely with the set of “elected people”.
I agree with that. If Labour had replaced their CGT with a policy of cutting GST and increasing the tax rate in the top bracket, they could have won this I believe. John Key mentioned “5 new taxes”. Never having been bothered to verify this, can anyone list these?
Basically, despite what the media may say about dirty politics, or Kim Dot Com, or left wing factions, At the end of the day I believe that the average kiwi voter, and maybe this applies everywhere, is always going to vote with one hand on their wallet. Any threat to the wallet, no matter how big or small, is a massive election risk.
Coming back to your example Alfie, I strongly agree that this is a problem and there need to be limits on foreign speculation, e.g in China, as you’d expect they are ruthless; if a foreigner wants to buy a property they must prove they are residing there (this may have changed). I’m not sure how to write policy for New Zealand, but there’s a sense that everyone get’s a bit nervy when people start debating this, someone inadvertently mentions the Chinese, someone calls someone a racist,, people return to their corners. David Cunliffe was good in the first debate when he explained very clearly that it’s about all foreigners and reeled of a list of countries, including Belgium coincidentally, but the problem was that the CGT wasn’t just for foreigners. If a policy specifically targeting foreign speculation were proposed, it would be an easy sell:
Non-residents who are not New Zealand citizens would be ineligible for home ownership except if a genuine need to do so can be demonstrated.
Anyway, just my opinion. Thanks for clearing up my misunderstanding of the CGT.
I’m not sure how to write policy for New Zealand, but there’s a sense that everyone get’s a bit nervy when people start debating this, someone mentions Chinese, someone calls someone a racist.
Notice how I cleverly avoiding accusations of xenophobia by refering to Belgium? ;-)
There are lots of examples of countries successfully restricting land sales to foreigners. Some of these refer to larger blocks of land but the principle is the same.
It is possible to pass legislation which puts off speculators without scaring kiwis who own baches. Recent polls on farm sales suggest that the majority of kiwis support this approach. It comes down to how well you sell the message; something which Labour failed at spectacularly.
Yeah, I think if they’d limited it to foreign sales, as NZF did very well with, then this may have been a triumph. Never overestimating the length of the voter’s attention span is a must. Thanks for those examples.
Sorry ^that^ reply was meant for Alfie, but still, with regards to your ideas, which all make perfect sense and are needed for the CGT to work for the majority, I’d imagine that you’d lose about 1/4 of voters around about the point you reached the word ‘indexing’.
I’m a simple a fellow with this oft times genial disposition and occasional hankering for steak, but I know what I like, and I’m not going to bag members of the Labour Party or call for anyone’s resignation, or second guess the the campaign slogan. Rip-roaring effort guys!! but you may need to rethink a couple of the ideas even if just to reconsider how they may come across to the average kiwi whose only possessions are a Holden and a dream for the weekend.
Yup. They used to do it that way in Oz, before Howard changed it. It's quite a straightforward idea, that the tax is only on genuine profit. You're not going to have to pay 33% of the value of your property on the place you purchased in St Mary's Bay in the 1970s for $10,000, and sold in 2015 for over a million dollars. You'll just be paying for how much over the national average rise that it is.
Yeah, I noticed quite early on in the election there was a bit of noise from whoever along the lines of “It doesn’t work in Australia”, possibly at some level attributable to the relative perception following any change like that (I’m assuming based on reputation that Howard made it worse so correct me if not). Even more simply, I’d never underestimate the value of a rebrand when introducing a policy to a new market, if only to offset the kind of easy dismissal as occurs in debates and the like. Ideally though I’d dump it and never look back, 1 election maybe, 2 elections with votes split like that, no way at least not if you want to win in a country where the dream is to own a house and a bach.
Agree the coms on the CGT was poor. Because a/ you only pay when you sell b/ it only applies to the price difference and c/ it was never intended to be retrospective. So it'd only apply from the date of implementation. There aren't a lot of people saying there are big capital gains to be made in property. Far more talk of over-valued property. So the boomers who've made a pile get to keep it tax free- and if the market tanked probably claim loss against any future gain.
It's miles from a radical policy.
It’s not radical, but it offers very little obvious benefit for the voter. It’s a case of either having some not too bad idea that’s failed to sell twice, or winning an election. I’ve not observed a NZ election since 2002, but watching this one, despite how I wish things were, the KO occurred a day or so after the Stuff.co.nz debate when it became about the tax on inheritance. Any instance of these two words together is anthrax:
The CGT isn't about house prices. It's not. There's a gigantic hole in our tax system that a lot of people use to not pay any tax at all. National tightened it up a tiny bit in the previous term so it's much harder to count against current income, but there's still bunches of people in New Zealand on very high real incomes pay effectively zero tax.
You make a book loss on your rental properties, you dump money (often subsidised for insulation and such) into them to improve the value, you flip them on for capital gains, and there's no tax because you never make money on anything that's taxable.
A CGT stops that stupid fucking untaxed home-improvement business that every man and his dog is having a go at with yet another new kitchen and so on. Yes, coincidentally, the lack of tax drives up house values, because it's an untaxed investment that the banks will support without limit, but the house prices are a whole 'nother story.
You make a book loss on your rental properties, you dump money (often subsidised for insulation and such) into them to improve the value, you flip them on for capital gains, and there’s no tax because you never make money on anything that’s taxable.
Isn’t that one of the pastimes middle New Zealand aspires to? Aren’t there popular TV shows about doing that? I’m not sure if your comment was directed at me. And I’m not so focused on what CGT is designed for as much as voter perception.
Genuine question Tussock. Can you tell me why CGT is good for the me the voter rather than how it cashes in on what someone else is doing? In the first debate I recall John Key mentioning there was already a tax for whatever/property, how does this apply?
In the first debate I recall John Key mentioning there was already a tax for whatever/property, how does this apply?
My understanding of that argument is that if you have a company which engages in property speculation, the company will be taxed on its profits. However if you do exactly the same thing as an individual, you won't be taxed.
Now if you were wealthy enough to speculate on NZ's property market, as many people obviously are, which approach would you choose?
Ok, thanks Alfie, the feeling with the CGT in regards to this and what Tussock said specifically is that it’s too big a net, I can understand why it wasn’t popular but there must be a way to address these issues by targeting the length of time properties are owned or something no? Looking back at the CGT policy just now, the inheritance component of the CGT was never going to be an easy sell, but the trusts component looked fine for the majority. But generalising, and regardless of the boost to the tax intake, something that muddy is not the type of policy that an opposition party should be actively campaigning.
As for the baches. Well there’s a fair few on the market lately, In a place like Mahia where there are a lot of would be vendors right now, people are looking for about $300,000 for their baches, and if Labour had won last night, they’d have just lost $45,000 to the Government. No one with 2 properties is going to vote away a percentage of the value of that property to the Government, and no one with a dream or realisable ambition is going to forgo that dream.
It’s not wealthy people and farmers who have these kinds of dreams, it’s middle class New Zealanders, It’s not about 70 pages of policy, it’s about having the best policy. And just because a million New Zealanders live in Auckland doesn’t mean the rest don’t, that’s the maths of it. These are the reasons why I was against this on the CGT thread.
I do despair.
I can't accept there being a 'comms problem' when the answer to this question is contained in the name of the tax itself.
This is a tax on people who own and sell second homes. They are heavily weighted to middle and upper incomes. It's a flat tax that acts progressive in nature as a result. It closes a massive loophole in our tax income net - there are people who do this as their full time work and they make large amounts of money and pay no tax whatsoever. It will help ease pressure on house prices, on rental prices, and it will redirect investment towards the productive economy, while raising a pile of cash for the government.
Even if it only does half the things it's supposed to do it'll be fantastic. That's why Labour have come back with it again this election after being spanked with it last election.