Capital Gains Tax

[fungus pudding]

I think some form of capital gains tax would be fair -

If properly implemented it would be fair. No doubt about that. The problem as I see it is many prop. investors, traders, businesses and developers are subject to income tax already on capital gained. If a separate CGT tax was introduced, would they pay both? If not - which one would they pay? Or would it still remain a matter of intention? Where would the line be drawn?

[whirly]

From what I've read it sounds like fiddling with numbers that ultimately will not end up making much difference at all to most of us. Much like the great tax cuts. Give with one hand and take with the other.

[POSSUM THE CAT]

Fungus Pudding be careful what you wish for The flat tax could be 100% & the state would give you a living allowance

[fungus pudding]

FP, Sorry I didn't make myself very clear. I was not referring to wage slaves that have no other investments and are stuck paying PAYE. I was referring to the majority who earn over $150k from many more than once source and how they ensure they are taxed on far lower incomes. E.g. a friend who earns a salary of 180K and yet pays tax each year on about 32k. This is a high capital worth individual who will get caught by the CGT. He's remarkly sanguine about the whole CGT issue as well.

There's something missing from that info. If he is making gains regularly through transactions of any kind, those gains will be subject to income tax. So he's not declaring it which is a dangerous game, or he's winding you up. (High capital worth is irrelevant. It's income we are taxed on)

[Aaron]

I think that is a separate issue and needs to be addressed specifically. We all know that that commonly involves using negative gearing losses to offset other incomes.

I think that is the issue. Belgarion's friend is making very little income due I assume to borrowing to invest. If he invests well any gains will be tax free. Good on him to for taking the risks and getting the returns.

The issue is, why is the return from his efforts earning income being taxed but the capital gain portion of his investing efforts remain untaxed. Is it harder working 9 to 5 or holding an asset that is increasing in value by 5%-20% per year. We tax income and consumption why not wealth? In fact wouldn't the wealthier we become mean we are in a better position to contribute to society.

Another important election issue is how are they going to spend our tax dollars. I don't mind paying for a lot of what the government spends our tax dollars on e.g.hospitals, schools, police, national super etc. But surely there are areas where spending can be cut to reduce the deficit instead of increasing taxes. I guess we will all vote for whatever is in our own best interest but I hope we aren't all knowingly being bribed by the politicians leaving our kids to pay the bill later.

[fungus pudding]

I think that is the issue. Belgarion's friend is making very little income due I assume to borrowing to invest. If he invests well any gains will be tax free. Good on him to for taking the risks and getting the returns.

If he is regularly realising profit it will be taxed.

[Aaron]

If he is regularly realising profit it will be taxed.

True but he also has the choice if he wants to hold long term and not pay tax. Also in the case of investment property he has some leeway regarding intention at time of purchase and with shares some leeway regarding changing investment strategy and portfolio reweighting rather than being taxed on speculation and trading.
If he is realising investments every two or three years is that trading? Rather than have the half arse system we have now trying to identify when a capital gain is income/revenue just have a CGT. It does also catch the long term investors but again what is so bad about taxing wealth. Why is taxing income and consumption OK but taxing wealth somehow is worse. All taxes are horrible but if we agree they are essential to maintain a soceity like the one we live in, what is the fairest most equitable way to get those tax dollars.

[minimoke]

All taxes are horrible but if we agree they are essential to maintain a soceity like the one we live in, what is the fairest most equitable way to get those tax dollars.

What about abolishing all taxes and just having a Consumption tax payable by everyone at say 25% on all purchases.

[fungus pudding]

What about abolishing all taxes and just having a Consumption tax payable by everyone at say 25% on all purchases.

I'd be a starter and suggested to Roger Douglas raising GST to the point of eliminating income tax when GST was introduced. His objection was if it got too high it would lead to evasion and avoidance. It is a valid point. Therefore he favoured a higher GST and a flat tax of 22%. He would have got there if it weren't for Lange losing the plot, and calling for a cup of tea break, which has cost this country dearly ever since.

[fungus pudding]

True but he also has the choice if he wants to hold long term and not pay tax. Also in the case of investment property he has some leeway regarding intention at time of purchase and with shares some leeway regarding changing investment strategy and portfolio reweighting rather than being taxed on speculation and trading.
If he is realising investments every two or three years is that trading? Rather than have the half arse system we have now trying to identify when a capital gain is income/revenue just have a CGT.

That doesn't solve the problem. Is a landlord who now pays income tax on capital gain also to pay the CGT? Or are some only going to pay CGT without income tax? At what stage does a property investor become a trader? Are developers to pay both? No matter how you lookn at it, it's still a line drawing execrcise. The only way to simplify it is to call all capital gained income. Primary residence and repatriated funds should be exempt.