He did emphasise that that a capital gains tax was ruled out on the family home, but I had the impression that we should watch out for such a tax on anything else.
In a somewhat meandering speech, he said that the government sector had gone through the roof, and the non-government economy had been in recession since 2005. A total of $240-million is being borrowed every week to pay for everything.
He sits next to Sir Roger Douglas in parliament, and seems to have borrowed the latter’s line of building a better, brighter future here so that we no longer have our children and grandchildren living and paying taxes overseas, mainly in Australia.
Mr Foss went away from the meeting with a list of recommendations, from the Hawke’s Bay Property Investors’ Association, which he vowed to pass up his food chain. They were:
1. Because of the success of the $14.6-million over three years tax audit project in gathering $63.6-million up to 11/09, we (the Hawke’s Bay Property Investors’ Association) suggest rewriting the relevant act around capital gains to make it simple, so its enforcement is simple and cost efficient and the tax rightfully owed will be paid.
2. The Government should look carefully at the structure of property investment and understand it. For instance, especially the fact that for 26 of the last 28 years the sector has paid tax, but for the last two years it hasn’t, because of the fact that it was impossible to buy cashflow-positive properties, thus creating a tax loss. Now once again it is possible to buy cash flow positive properties, so after initial expenses are paid they generally become profitable and pay tax as they have for 26 years previously.
3. The Government should look carefully at the situation in Australia in 1985 when the Hawke/Keating government ring-fenced losses on investment properties and two years later repealed the act. The reason was rents had risen 51 percent in Sydney and 37 percent across Australia. A similar situation applied in Ireland more recently and after two years the government repealed the legislation, as rents had risen dramatically as investors stopped providing rental properties.
4. The Government should realise that if investors lose the incentive to maintain and upgrade their properties, the standard of those properties will drop and all the good work done recently with insulation and heating subsidies will peter out.
5. If it is desirable to have more people invest in the share market, then the Government should clean it up so that the average Mum and Dad investor has faith in it, as clearly they don’t at present. Property is an obvious area for the average Mum and Dad to invest in and they have, as the average investor is Mum and Dad who own 1.5 properties.
I came away from the meeting with the distinct impression that the National-led government is playing around the edges of the problem.
While emphasizing that the government had none of its own money, that it was all taxpayer money, and while acknowledging the hike in government spending, he said nothing about profligate, vote-catching initiatives such as Working for Families, interest-free student loans, KiwiSaver, government ownership of KiwiRail, and so on.
Government spending is the problem.
The Government must reduce its spending, not hold it at current levels.
4 comments:
Thank you for a very good post.
"I came away from the meeting with the distinct impression that the National-led government is playing around the edges of the problem."
Well of course - historically that is what National governments do. They tinker around the edges lacking the gumption to make fundamental change.
Instead of trying to raise more taxes they should try shrinking the size of Govt expenditure. If they took it back to the level of expenditure (as a % of GDP) that we had in 2005 then they could easily pay for sizeable tax cuts across the board. But that is too radical, too extreme, too right wing for National - even though it was National who criticised Helen Clark for out of control spending during the 2005 election campaign. At the time expenditure was 29% of GDP now it is 36%. So if it was unacceptable at 29% why is it now OK at 36%???? Tinker tinker, fiddle fiddle - can anyone smell burning?
We own an investment home. Believe me, it is hard going. We borrowed 100% and we struggle to top up the rent to match the mortgage. Our reason for this struggle is that when we retire we will be able to sell and hopefully live a decent, happy life. There is also the worry of painting, roof leaks etc. As for investing, well we still have our bricks and mortar but the same cant be said for the poor investors who have lost their future happy retirements. I would never trust my money to be handled by anyone but myself. As you say, we will be putting our rent up to match anything the Government throws at us. We cannot afford to sell.
I understand the Government needs more money but I suggest they start in their own backyard.
Ian Ryan here but i do not know how to select the appropriate one of the listed options. eg what does open id mean?
To the last comment about rental property:
I have been studying the property price commentaries from many good sources [which excludes REINZ]. Although it depends on desperate housewives who may or may not have enough money to buy food even in wealthier homes, the other factors seem to indicate that there is far greater downward pressure than any upward pressure. By about 90 to 10 it is likely that prices will drop 20% to 40%. Anecdotal evidence is that it is happening already. But REINZ are basically fraudulent in their leadership attitudes by pretending that all is well. The fact is that the lower priced properties have all fallen 30% more than 12 months ago. Now the stress is hitting higher salaried people so now it is the turn for higher priced properties to be hit. But the REINZ median suggests that prices are rising. Of course the median is rising. More and more wealthier homes are on the block. REINZ deliberately confuse zoning and strata pricing to confuse the public who simply do not have time to understand. Remember Teresa Gattung 'confusion is a marketing strategy'. Telecom have got nothing on REINZ who have been professionals at misleading the public for decades. Even the agents do not understand. They are fed falsity by REINZ leadership. Give it a year to a couple of years and watch the median fall like a stone. By then it will be too late for the consumer to understand. That will only happen when all the stressed wealthy homes have sold for stressed prices. REINZ leadership are busy pocketing commissions on high priced properties and do not care that their false information makes people suffer badly.
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