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Is a capital gains tax justified?

… and so the battle continues as to whether or not New Zealand should introduce a capital gains tax. Today labour released its tax policy – a capital gains tax was at its centrepiece. The proper income tax treatment of capital gains has raised much debate and controversy amongst New Zealanders for many years.

Any good tax system or tax policy requires equity (equality), certainty, convenience and efficiency. Given a capital gains tax has the convergence of these key tax policy criteria, I believe the case for the introduction of such a tax is justified. What is your view?

Where should tax come from?

Tax is topical right now.  The Tax Working Group reports have made headline news around the country.  Should a new land tax be introduced? Should GST be increased?  Is it time for a comprehensive CGT?

Whether we like a tax, however it is imposed, is largely irrelevant.  If a tax is imposed we’re stuck with it.  That said, it is generally accepted that a “good” tax is one that is seen to be fair (so that less effort goes into evasion) and one that is not so expensive to administer that it contributes little to the tax base.

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CGT – on TV3

Did you see Professor Craig Elliffe on TV3 yesterday morning? He was discussing the possibility of a CGT regime being implemented in New Zealand. Have a look at the TV3 interview:

http://www.3news.co.nz/Are-capital-gains-taxes-beneficial/tabid/369/articleID/116854/cat/772/Default.aspx

Is CGT a four letter word?

Even the government is not immune from the effects of the global economic recession, as evidenced by the Budget 2009. We have always been told that it would be political suicide for a party to introduce capital gains tax, but one has to wonder if there was ever a more convenient time for it to be introduced by the ruling party.

The tax base is pretty comprehensive in New Zealand but there is a glaring omission when you compare it with other OECD countries and particularly Australia – the lack of a capital gains tax on real property.

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Recent comments

  • Joanne Martin: Hi Would you be able to email me to discuss a small company that is an LTC which I need some advice on...
  • Rizwana Saheed: You are on the right track that there is an exemption when employees work overtime but whether or not...
  • bryan: as a group of employees we get paid meal money if we exceed 11hrs on any day. Employer says he wants to tax...
  • linda: My mother is 94 and has dementia. With govt assisted carers she is still living in a home gifted within the...
  • Sharon: Hi Daniel, Can you please advise how owners of a profit-making LTC pay themselves? The owners used to pay...
  • Another Anne: My Dad is in care on full subsidy. I am EPOA. Are we able to gift some money to my brother in UK so...
  • Twagilayesu Isaya: I agree with the author of this article that Inland Revenue Department need to provide clear...
  • Quinn: Hi. I would like some clarification regarding the valuation of the investments component of the owners basis...
  • QROPS Pensions: Interesting piece of writing, you always write the most useful content & TalkTax is no exception...
  • Davo: Jo, quite likely is that the transition to an LTC was not done in time and the company became a normal company...

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