“According to Labour’s own modelling, where house prices rise by 3 per cent and inflation sits at 2 per cent, the vast majority of the revenue collected from Labour’s Capital Gains Tax comes only from inflation rather than real gains.
“Under those conditions, a couple who buy an $800,000 rental and sell it five years later for $927,000 would have to pay a tax of $35,600. Once inflation is accounted for, that amounts to an effective tax rate of 81 per cent on the couple’s real capital gain.
Any CGT must be on real gains, not nominal gains, otherwise it is just a tax on inflation. The higher inflation is, the greater the tax take.
“If property prices only rise by 1.5 per cent per annum, a business owner with a $600,000 property who sells up after ten years will face a tax bill of $27,000, even though the value of their property has declined in real terms by nearly $35,000.
Yep people who make a real loss, will be taxed on the nominal gain and so end up paying $27k tax on a $35k real loss!
David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders
3 comments:
Yep, a potential tax on a loss. Another outstandingly stupid Labour policy and this is going to fund free Dr's visits and Willie's Maori Broadcasting etc.
Even worse than their last policy of first-year free for Uni students. They certainly know how to corner the market for dumb ideas and yet some people still want them in charge of the treasury benches.
Is Farrar a National party member? Is he qualified to talk about this? This seems a bit sketchy.
One assumes that to be EQUITABLE dear old Liebour/Greens et al would ensure that any CGT would allow for inflation as an offset plus allow a tax credit to be booked if one makes a capital loss? Frankly, the way they run the books NZ will take such a dive, we will all end up in negative territory and so a tax credit would be lovely thank you!
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