Will New Zealand get a capital gains tax? The Government has put this question to its tax working group, which will be trying to figure out how best to tax us all.
One of the trickiest issues will be the idea of a capital gains tax: it’s seen as a way to level the playing field and remove the tax advantages of investing in real estate. It would be a popular move, but would it actually solve any problems?
A few facts caught our eye in this CGT debate:
- Australia has a capital gains tax and its house prices in Sydney and Melbourne could only be described as “severely unaffordable”, so CGT isn’t necessarily going to keep house prices in check.
- The United States has lowered its CGT top tax rate twice over the past 20 years and the general consensus seems to be that this has boosted the economy.
- The main argument for introducing CGT is fairness. But, as one commentator points out, it may only result in everyone being slightly worse off.
For what it’s worth, we think fairness is important. In this case, though, it seems as though a fairer tax wouldn’t be much of an advantage to anyone. It will be interesting to see what the tax working group decides to do.