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Aaron
11-04-2011, 01:12 PM
Probably the wrong forum for this statement.
I'll vote for the party that promises a cross the board capital gains tax.Tax wealth instead of income.
No more mucking around with two portfolios no more FIF rules. (these were brought in to capture the capital gains on overseas shares) no more mucking around with depreciation on houses and LTC companies. No more arguements about intention at the time of purchasing a property.
Bring the income tax rates down at the same time though.

CJ
11-04-2011, 03:33 PM
Q - tax capital gains on an accural or realised basis.

The problem with CGT on an accrual basis is there is no cashflow to pay the tax.
The problem with CGT on a realised basis is there is no tax generation for a number of years.

Q - Do you include the family home?

Q - Do you include roll over releif?

If not, if you sell something, you cant afford to buy the same item back again, influencing decisions.

I think there was a good paper by the tax working group. See if you can find it. I am not saying you are wrong, just making sure you are fully informed.
If so, it defers the tax revenue even further

lou
11-04-2011, 05:08 PM
The problem with CGT on a realised basis is there is no tax generation for a number of years.


People end up holding on to assets far longer than normal would just to avoid tax. This creates an inefficient allocation of capital and a deadweight loss to the whole economy.

If you want to get radical on a tax reformation. Lets get rid of all GST, income, and company tax. Put a tax on all land. Land owners pay tax directly and everybody else pays tax indirectly through higher prices.

It might sound extreme but land taxes are the only tax that do not produce a dead weight loss. Just some food for thought.

CJ
11-04-2011, 07:39 PM
It might sound extreme but land taxes are the only tax that do not produce a dead weight loss. Just some food for thought.How would it be applied? Cant be by area or farms wouldn't be viable so it must be by 'ratable value'. Given that is somewhat arbitary it doesn't seem fair. Plus it creates cashflow issues to those that own land with no income.

Why not go to a full consumption tax (ie. GST). You need to buy what you need to buy.

Aaron
11-04-2011, 08:27 PM
Q - tax capital gains on an accural or realised basis.

The problem with CGT on an accrual basis is there is no cashflow to pay the tax.
The problem with CGT on a realised basis is there is no tax generation for a number of years.

Q - Do you include the family home?

Q - Do you include roll over releif?

If not, if you sell something, you cant afford to buy the same item back again, influencing decisions.

I think there was a good paper by the tax working group. See if you can find it. I am not saying you are wrong, just making sure you are fully informed.
If so, it defers the tax revenue even further
You would pay it on a realised basis.
Family home can be exempt.
No roll over relief
Don't sell if you want to buy back straight away.
Also incurred when making gifts of capital assets on a market value basis seeing as gift duty is about to be scrapped it wouuld be a good replacement.
Lou points out that people hold onto assets longer. Long term investors can therefore defer their taxes whereas traders/speculators can't.
We do have a land tax called "rates" farmers end up paying more than their fair share.

No way should we have just a consumption tax. Taxing consumption isn't a bad idea but GST is a regressive tax so 15% is a much as I would like to see.

lou
11-04-2011, 10:22 PM
How would it be applied? Cant be by area or farms wouldn't be viable so it must be by 'ratable value'.

Hypothetically it would be applied based on "ratable value" and zoning. Basically your rates bill on steroids.


Given that is somewhat arbitary it doesn't seem fair.
Taxes aren't fair at the moment. We have a progressive tax system where higher income earns pay proportionately more. A land tax would fair in the sense that it is a proportionate tax, however would be less equitable to lower income earners.

The biggest hurdle or moving to a tax system like this is it will change the land values around the country meaning thousands of people will be either adversely or positively affected for no reason and that would not be fair.


Plus it creates cashflow issues to those that own land with no income.
If they own land that produces no income they are either saving on expenditure (ie living in there own home). Saving on expenditure can be thought of income and should be captured by tax net. Making this new system even more efficient.
Option two they own land with no income. They are not making efficient use of the land. It should be sold so that the most efficient use of the land can be found.




Why not go to a full consumption tax (ie. GST). You need to buy what you need to buy.
I don't have anything against GST. I excluded in my first post as I thought idea of one tax was a more utopian view. I would mean we would not need accountants for compliance work.

lou
11-04-2011, 10:27 PM
We do have a land tax called "rates" farmers end up paying more than their fair share.


Farmers do not pay there fair share of taxes.
1. Farmers have loads of deductions, heaps of cracks to slip personal expenditure into the books.
2. Heaps of potential for income to disappear on to the kitchen table.
3. Then the fact that a farmer will sit on bugger all "taxable income" for his life time. Using the increase in farm technology/efficiency, that increase the value of his land that is leveraged to the hilt. He then retires to Whangamata on huge capital nest egg tax free.
4. The return on assets in the farm industry is lower than the cost of debt. This does not make economic sense why would they be doing it. Unless they doing it for capital income or other kickbacks.

shasta
11-04-2011, 10:28 PM
Probably the wrong forum for this statement.
I'll vote for the party that promises a cross the board capital gains tax.Tax wealth instead of income.
No more mucking around with two portfolios no more FIF rules. (these were brought in to capture the capital gains on overseas shares) no more mucking around with depreciation on houses and LTC companies. No more arguements about intention at the time of purchasing a property.
Bring the income tax rates down at the same time though.

CGT just wont fly in NZ, & we can do better than that.

If people think CGT will hit the greedy property speculators, these are the one leveraged & making losses, or have offsets to other businesses, so its a "looney left" wet dream to think the rich will start paying up.

What would be more beneficial is a flat tax of 20%, to start with.

Drop the company tax rate to 10%, & add in a 10% compulsory super component (thereby matching the 20% flat rate, reducing any need for dodgey accounting)

Bring in some form of a financial transaction tax, not quite sure how this should be set up though.

Perhaps bring back in the Estate Duty/Death Tax, you cant avoid a death tax, so why not clip the ticket on the way out?

If we could somehow outlaw the green party, we could just nationalise a mineral & hydrocarbon company to mine our own resources!

Imagine that, another Maui to provide us with CHEAP POWER & we the taxpayers would own it!

janner
12-04-2011, 09:12 AM
I am with CJ on this one.

No income tax. Low company tax ( if any ). Retain excise taxes ( fags booze etc )

GST with no claw back.. Thus relief from never ending paper work..

What about introducing a Tobin Tax ??

Lizard
12-04-2011, 09:35 PM
One issue with CGT as a form of revenue is that it tends to dry up just when the economy is at its weakest, thereby dealing a double blow to govt accounts and capacity to stimulate.

Aaron
13-04-2011, 09:38 AM
One issue with CGT as a form of revenue is that it tends to dry up just when the economy is at its weakest, thereby dealing a double blow to govt accounts and capacity to stimulate.

The same could be said for GST and income tax. Maybe not losses but much reduced.
Capital gains tax would not be about going after anyone in particular as Shasta suggests above. I just think that an earned dollar of income can sometimes take a lot more effort than a capital gain so why is it that we are happy to tax income but not capital gains.

Lizard
13-04-2011, 11:24 AM
The same could be said for GST and income tax. Maybe not losses but much reduced.
Capital gains tax would not be about going after anyone in particular as Shasta suggests above. I just think that an earned dollar of income can sometimes take a lot more effort than a capital gain so why is it that we are happy to tax income but not capital gains.

GST and income tax reduce in a downturn, but maybe 10% would be extreme. Corporate tax can fall more dramatically along with profits. But CGT seems likely to dry up entirely AND erode income tax when losses are used as offset.

In theory, I actually like the fair dividend rate method used in FIF. FIF is only complicated because it doesn't apply across the board and there are the options for using CV.

To use FDR for all assets would just require a quick totting up of assets at the start of the year and then applying a low-level tax based on that amount. Make interest costs and rates tax-deductable... this should pretty much offset all the FDR on most properties. The great thing about FDR is that those who can achieve a better return on assets get rewarded for it and those who want to tie money up in non-returning assets have to pay the cost. There are very few loopholes and minimal administration. Money goes where it works hardest and should increase asset base and therefore tax-take over time. Of course, I know you are all thinking the obvious - the reality is that finding a fair and accurate way to set value across all assets is not simple, let alone getting people to declare all their assets. However, we seem to put up with the rating system and that can be fairly arbitrary in places.

rpcas
14-04-2011, 09:12 PM
Once you go right back to the basics and think about the purpose of a tax, you start to get a better idea of which taxes are well directed. The purpose of a tax, despite common belief, is NOT to fund government spending, but rather to create demand for the currency and to regulate aggregate demand (restrict inflation). Quite clearly, the government actually believes they must tax or borrow in order to fund spending (this is not the case for a sovereign government that issues its own non convertible currency, with a floating exchange rate), therefore they enact tax policy with the idea that the more tax revenue, the better. This is all misguided.

Since the purpose of the tax is not to raise revenue, how taxes are directed should depend mostly on the side effects of the tax. I believe income taxes discourage additional work, unfairly take away from the people that produce NZ's real output, and do not meet the purpose of a tax (like land taxes and GST do).

EDIT: Oh, and another problem with income taxes.... there are loopholes, and they require a lot of work to keep track of. The sad part of all this is that the income taxes hurt the productive capacity of NZ. How much time is spent keeping track of income taxes that could be spent elsewhere? How many bright students go into tax accounting/law, an industry that adds absolutely nothing to the real standard of living? I have read of one former hedge fund manager and fiscal/monetary operations expert that estimates this loss of productivity from income taxes could be between 10-15% of GDP.


Taxes aren't fair at the moment. We have a progressive tax system where higher income earns pay proportionately more. A land tax would fair in the sense that it is a proportionate tax, however would be less equitable to lower income earners.
I think it would be more equitable for lower income earners. The current system, whereby ordinary workers automatically get dollars deducted from their wages while property speculators and those that can afford tax lawyers/accountants get away free (well, relatively) is not fair.

A land tax would be perfect. Like you said, it could be based on value, and I think it could be perhaps slightly progressive. For example, 4% per annum for the first 500K of the houses value, 5% for 500-1M, 6% for 1M+.


The biggest hurdle or moving to a tax system like this is it will change the land values around the country meaning thousands of people will be either adversely or positively affected for no reason and that would not be fair.
Agreed, though it could be phased in over time (and income taxes phased out) to reduce this effect.


Option two they own land with no income. They are not making efficient use of the land. It should be sold so that the most efficient use of the land can be found.

Agreed.

CJ
15-04-2011, 09:59 AM
Once you go right back to the basics and think about the purpose of a tax, you start to get a better idea of which taxes are well directed. The purpose of a tax, despite common belief, is NOT to fund government spending, but rather to create demand for the currency and to regulate aggregate demand (restrict inflation). Quite clearly, the government actually believes they must tax or borrow in order to fund spending (this is not the case for a sovereign government that issues its own non convertible currency, with a floating exchange rate), therefore they enact tax policy with the idea that the more tax revenue, the better. This is all misguided.interesting. Can I just clarify. Taxes aren't there to fund government spending because the government could just print the money. Therefore taxes are for another purpose????

rpcas
15-04-2011, 02:22 PM
interesting. Can I just clarify. Taxes aren't there to fund government spending because the government could just print the money. Therefore taxes are for another purpose????

Yes, though I prefer not to use the term "money printing", as there is plenty of room for confusion because of its many different informal meanings.

Essentially, every time the government spends they are "money printing", and every time they tax, they are "destroying money". If the government spends $100 today on welfare benefits, all that will happen is the Treasury's account at the RBNZ will be debited by $100, and the recipients commercial bank's reserve account at the RNBZ will be credited $100 (and so will the recipients account at the commercial bank). If the government then decided to tax the beneficiary $100, the exact reverse process would occur.

Looking at this process, it becomes quite obvious that there is no operational limit to the government's (Treasury + RBNZ) ability to credit and debit numbers on a computer - meaning that there is no operational constraint on government spending (There is perhaps a political constraint on government spending though. I am fairly sure that the USA has a law prohibiting the Treasury's account at the Fed from going into overdraft [a stupid law made by misguided politicians]. I do not know for sure if there is a similar law in NZ).It is also important to note that government spending logically must come BEFORE taxes and the issue of securities (contrary to popular belief) - if the government didn't spend before it required taxes to be paid, then citizens could not obtain the dollars necessary to pay their taxes.

Moving on, the purpose of taxes is to create demand for the currency (the obligation to pay the government NZ dollars creates demand for those dollars, essentially enforcing their use), and to regulate aggregate demand (to ensure the private sectors "spending power" does not outstrip the productive capacity of the economy) in order to maintain price stability. Don't get me wrong - taxes are absolutely vital, just not for the commonly thought reason.

Note - I think it is worth mentioning here that the USA, UK, Japan, Australia, and NZ governments are all currency issuers, whereas Germany, France, Greece, Portugal, California, Christchurch City Council etc are all currency users. The differences between currency users and issuers is HUGE, and any comparison of the sort that John Key regularly makes is totally inapplicable.

rpcas
15-04-2011, 03:08 PM
One issue with CGT as a form of revenue is that it tends to dry up just when the economy is at its weakest, thereby dealing a double blow to govt accounts and capacity to stimulate.

Sorry, but that is totally incorrect.

The sovereign government that issues its own non convertible currency never has nor doesn't have dollars, and ALWAYS has the ability to spend/stimulate. Government spending is NOT funded by taxation or the issue of securities, and the extent to which the government collects taxes does not in any way limit the governments capacity to spend (despite politicians and commentators telling you otherwise). Think of it this way - how can the NZ government "run out" of dollars, when they create them out of thin air on a spreadsheet?

The only issues with a capital gains tax are there is normally plenty of loopholes, and other taxes are potentially more efficient.

drew
24-04-2011, 11:15 PM
Sorry, but that is totally incorrect.

The sovereign government that issues its own non convertible currency never has nor doesn't have dollars, and ALWAYS has the ability to spend/stimulate. Government spending is NOT funded by taxation or the issue of securities, and the extent to which the government collects taxes does not in any way limit the governments capacity to spend (despite politicians and commentators telling you otherwise).

That begs the question then why do we pay taxes. The govt does indeed issue securities to raise funds to spend.

The better way to look at it is any type of spending by the govt is taxation. When the govt borrows to spend its just a delayed form of taxation as the taxpayer not the govt has to repay the debt.

I think what you mean is the govt can print money. But I dont think the RBNZ would be too keen on doing that. The end game of that scenario is inflation which is also a form of taxation, the one you dont get to vote for.

fungus pudding
25-04-2011, 07:38 AM
That begs the question then why do we pay taxes.


No it doesn't. It raises the question, but it's a simple, if inaccurate, statement.

drew
25-04-2011, 04:50 PM
No it doesn't. It raises the question, but it's a simple, if inaccurate, statement.

Oh im sorry i didnt realise the internet spelling police were patrolling these forums.

In any case it is not an inaccurate statement. The statement by rpcas was a circular argument saying taxes do not matter the proof being it has no impact on govt spending. Which is a bunch of nonsense.

fungus pudding
25-04-2011, 05:28 PM
Oh im sorry i didnt realise the internet spelling police were patrolling these forums.

In any case it is not an inaccurate statement. The statement by rpcas was a circular argument saying taxes do not matter the proof being it has no impact on govt spending. Which is a bunch of nonsense.

It is rcpas' statement that is inaccurate, which is what I wrote, but there is nothing circular about it. And I'm not sure what any of this has to do with spelling.

rpcas
27-04-2011, 05:08 PM
That begs the question then why do we pay taxes. The govt does indeed issue securities to raise funds to spend.

Why does the government tax?

a) To create demand for New Zealand dollars. Have you ever asked yourself why you accept a paycheck in NZD's, and why shops accept NZD's in exchange for real goods and services? By placing a tax liability on the private sector that is payable in NZD's and nothing else, the private sector instantly demands NZD's. Essentially, a fiat currency is only as good as governments ability to enforce its use (taxes).

b) To regulate aggregate demand (spending power). If consumers have too many net financial assets, aggregate demand may exceed the real productive capacity of the economy, and thus drive up prices (inflation). Taxing drains net financial assets from the private sector (government spending does the reverse - adds net financial assets), and therefore reduces the private sectors spending power.

c) To discourage the use of a certain product/action etc (smoking for example)

Don't get me wrong, taxes are absolutely essential, but just not for the commonly thought reason.



When the govt borrows to spend its just a delayed form of taxation as the taxpayer not the govt has to repay the debt.
No they don't.


I think what you mean is the govt can print money. But I dont think the RBNZ would be too keen on doing that. The end game of that scenario is inflation which is also a form of taxation, the one you dont get to vote for.

A government deficit that is followed by the issue of securities is actually LESS inflationary than a deficit "funded" by "money printing". This is because interest is payable on the securities, which further increases the deficit. If the government choose not to issue Treasury securities (which would most likely be a better alternative to the current risk free welfare that bonds are), then government spending would be less inflationary.

What you don't realize is that government spending occurs the same way (operationally) regardless of whether it's "funded" by taxes, debt or "money printing".

rpcas
27-04-2011, 05:11 PM
It is rcpas' statement that is inaccurate, which is what I wrote.

No it is not.

Quite clearly you don't understand reserve accounting and monetary operations.

Lego_Man
26-05-2011, 02:29 PM
He is correct on his reasons for taxation.

The US Dollar as a Federally-controlled currency only came into being when the US Federal Government levied a nationwide income tax payable only in US Federal Reserve Dollars.

Before that it was commercial banks who issued their own bills of exchange, thus the money supply was not under governmental control.

Te Whetu
31-05-2011, 11:34 PM
I'll also put my 2 cents in. In general I agree with rpcas, though I do disagree with a couple of his conclusions (at least as I read them):

1) The government spends using NZD.

2) This can generally be funded in three ways, i) Issue Debt, ii) Print NZD, or iii) Tax.

3) However even when the government uses the "tax" method, it's the same as printing NZD then destroying other NZD through tax.

4) The broad impacts of each method.

5) Issuing debt: This is the same as destroying dollars but with a promise to print more later... reducing inflation/tax now but increasing inflation/tax later.

6) Printing NZD: This directly increases inflation. All dollars are worth less with inflation and this impacts everyone to the extent they are long/short cash. In theory it does not impact people with real assets; so someone long real assets and short cash benefits and vise versa. Funding government spending through inflation does not seem fair and does not promote the use of the domestic currency.

7) Taxing: Assuming we want a government who spends, and assuming we don't want this to be funded via inflation then we need tax. So it is about making the tax both fair and non-disruptive. Problem is everyone has a different view on fair and fair often does not equal non-disruptive.

8) I agree with Liz here, I really would like the FDR to be broadened across all investment assets. Maybe exclude the family home from the definition of investment assets, this would be done so as to help get the act through, (and because the government sees positive externalities from home ownership and therefore wants to encourage it).

9) Personally I would like the tax on the family home as well, but that's mainly because I like renting and don't particularly like the idea of subsidising land owning families. (Which I would need to do as the FDR tax would be accounted for in the rent I pay).

10) By borrowing to fund the current deficit spending, the government is effectively reducing the inflation its spending would otherwise be causing. Later on this will need to be funded through inflation or taxes.

11) I generally support the governments aim to get into surplus quickly, as the long term inflation/tax impacts of excessive borrowing are harmful to our economy and increase the potential for future inflation/taxes.

Cheers
Te Whetu

rpcas
01-06-2011, 06:24 PM
5) Issuing debt: This is the same as destroying dollars but with a promise to print more later... reducing inflation/tax now but increasing inflation/tax later.
Issuing debt doesn't destroy dollars, but merely exchanges their form. When you buy a Treasury security, you exchange cash for a security - both denominated in NZD's. This does not destroy your financial assets, but rather changes the length of maturity (where cash has an instant maturity, and Treasuries have longer maturities). It's best to think of a Treasury security like a normal term deposit at a bank.



6) Printing NZD: This directly increases inflation. All dollars are worth less with inflation and this impacts everyone to the extent they are long/short cash. In theory it does not impact people with real assets; so someone long real assets and short cash benefits and vise versa. Funding government spending through inflation does not seem fair and does not promote the use of the domestic currency.
Consider this: If I printed myself $10 billion NZD (assume they are identical to legitimate currency) and stored them in my basement, would I be causing inflationary pressure? No.

"Printing money" as such is only inflationary if people use/spend that money. If they choose to de-leverage or save (especially de-leverage), then there won't be inflationary pressure.


10) By borrowing to fund the current deficit spending, the government is effectively reducing the inflation its spending would otherwise be causing. Later on this will need to be funded through inflation or taxes.
That is incorrect sorry, and is a common mistake.

Government deficits that are offset by the issue of government securities are NO LESS inflationary than deficits not offset by anything - or "money printing" if thats what you like to call it. This is a very important point.

Consider this:

Scenario A - Issue of Securities
Private Sector Financial Balance Sheet Before: Deposits 200, Equity 200
- then securities are issued: Deposits 100, Securities 100, Equity 200
- then government deficit spends: Deposits 200, Securities 100, Equity 300

Net result: 100 increase in net financial assets

Scenario B - "Money Printing"
Private Sector Financial Balance Sheet Before: Deposits 200, Equity 200
- then government deficit spends by printing: Deposits 300, Equity 300

Net Result: 100 increase in net financial assets

Difference: In Scenario A, the private sector has 100 additional net financial assets in the form of Treasury securities. In Scenario B, the private sector has 100 additional net financial assets in the form of cash. What's the difference between cash and Treasury securities?

Answer: Treasury securities are the most liquid financial investment on the planet. The owners of Treasury securities are always savers (whether that be banks or pension funds etc), therefore it is not important whether they hold cash or Treasury's. They will be saving either way - not issuing securities and forcing them to hold cash will NOT suddenly make these savers go out and spend. Furthermore, if these savers did want to spend, they could trade their very liquid asset for cash quickly and easily. Therefore the difference between Treasury securities and cash (when considering inflation) is negligible.




I generally support the governments aim to get into surplus quickly, as the long term inflation/tax impacts of excessive borrowing are harmful to our economy and increase the potential for future inflation/taxes.

Thats a bad idea. Our economy is struggling with additional spending (deficits) that are larger than ever. Remove this spending, and the economy goes down the hole.

Te Whetu
01-06-2011, 08:38 PM
Ok, we should switch to M1, M2, and M3 if we want to discuss this properly. For those who have not done economics (ever/recently):

M1 – Cash, on demand deposits etc. (This is money you can go out tomorrow and spend).
M2 – All of M1 and also short term deposits etc. (Effectively cash and other amounts which can be converted to cash within a reasonable time frame).
M3 – All of M2 and also longer term deposits.


Issuing debt doesn't destroy dollars, but merely exchanges their form. When you buy a Treasury security, you exchange cash for a security - both denominated in NZD's. This does not destroy your financial assets, but rather changes the length of maturity (where cash has an instant maturity, and Treasuries have longer maturities). It's best to think of a Treasury security like a normal term deposit at a bank.

You can't look at a treasury security as a normal bank term deposit. A bank term deposit gets on-lent (subject to reserve requirements), so does not reduce the amount of cash available. However a treasury security reduces the cash (M1 and M2) in the economy, but needs to be repaid later.

Yes a treasury is a financial asset, but it is not M1 and is not generally used to purchase goods and services. Thus something which is in M3 and not in M2 will generally be accruing interest and not be used to purchase goods and services.


Consider this: If I printed myself $10 billion NZD (assume they are identical to legitimate currency) and stored them in my basement, would I be causing inflationary pressure? No.

"Printing money" as such is only inflationary if people use/spend that money. If they choose to de-leverage or save (especially de-leverage), then there won't be inflationary pressure.

I feel you are getting way off track and losing the point here. We are talking of the government printing money. This implies they are spending it, sure they could print and keep it at the reserve bank, but this is the same as not printing it at all as it would not enter M1. When I say "printing money" I'm obviously talking about the government printing money and spending it.


That is incorrect sorry, and is a common mistake.

You don't need to apologise. Anyway apologising on a forum as you are arguing the other side of a point just sounds condescending.


Government deficits that are offset by the issue of government securities are NO LESS inflationary than deficits not offset by anything - or "money printing" if thats what you like to call it. This is a very important point.

Consider this:

Scenario A - Issue of Securities
Private Sector Financial Balance Sheet Before: Deposits 200, Equity 200
- then securities are issued: Deposits 100, Securities 100, Equity 200
- then government deficit spends: Deposits 200, Securities 100, Equity 300

Net result: 100 increase in net financial assets

Scenario B - "Money Printing"
Private Sector Financial Balance Sheet Before: Deposits 200, Equity 200
- then government deficit spends by printing: Deposits 300, Equity 300

Net Result: 100 increase in net financial assets

Difference: In Scenario A, the private sector has 100 additional net financial assets in the form of Treasury securities. In Scenario B, the private sector has 100 additional net financial assets in the form of cash. What's the difference between cash and Treasury securities?

Answer: Treasury securities are the most liquid financial investment on the planet. The owners of Treasury securities are always savers (whether that be banks or pension funds etc), therefore it is not important whether they hold cash or Treasury's. They will be saving either way - not issuing securities and forcing them to hold cash will NOT suddenly make these savers go out and spend. Furthermore, if these savers did want to spend, they could trade their very liquid asset for cash quickly and easily. Therefore the difference between Treasury securities and cash (when considering inflation) is negligible.

A agree; in your two examples financial assets do increase by 300. However in one M1/M2 increase by 200 and the other by 300. The long term impact of both is an increase in cash when the debt is repaid but in the short term this is not the case.

Those that buy the treasury securities don't then use them to trade for goods and services. When the government spends by borrowing they still pay in cash, those that get the deposits are the parties who wish to save.

Lets take your Scenario A:

Government sells 100 securities to China, China needs to purchase those treasuries with NZD. To do this China first purchases NZD and then uses these to buy the NZ government securities. The NZD is removed from the economy and both M1 and M2 are reduced.

Note that China doesn't then use those treasuries as pseudo cash to buy stuff. Also note if later on they do need cash then they can sell the securities but this takes the cash out from elsewhere in the economy.

The same would be true if it was an NZ investment fund instead of China purchasing the government securities. Except in this case it would not need to go through the intervening step of purchasing NZD as it would already have local currency.


Thats a bad idea. Our economy is struggling with additional spending (deficits) that are larger than ever. Remove this spending, and the economy goes down the hole.

Remove this spending and you lower the crowding out of private investment. Removing spending means less inflation and lower interest rates. This in turn means people borrow more to invest elsewhere. It also means households have lower interest costs which mean they can return to spending sooner.

Now I’m no Act supporter, I’m not saying we should chop spending and taxes too far or quickly. But what our current government is doing seems both sensible and pragmatic. A low inflation and interest environment is easily the most encouraging of business development and expansion. If we want to grow the economy then this seems like the best way to go about it.

The only thing we need to be careful of is that property prices don’t start ramping up again, which is why I’m quite happy for a tax on property. Now whether this is in the form of FDR or CGT is a fair argument, and it is an argument which needs to be had.

Thanks for reading.
Te Whetu

Te Whetu
01-06-2011, 08:48 PM
Hmm

So sadly a property tax is not something I see our current National government doing of its own volition; these sorts of taxes are generally implemented by left leaning parties. Labour didn't want to implement this sort of tax in its three terms, as many of its middle voters are those that have gone out and heavily invested in property. That said I would not be surprised to see this sort of tax implemented in Labours next term, so likely 4-7 years away.

That's not to say this sort of tax couldn't be implemented by a National government, but it would require pressure from all it's supporting parties. This basically means both the Maori party and Act would need to team-up. An unlikely combination but this sort of tax does seem like the type which each could support, though the Maori party would likely ask that there is a discount for Maori land written into the legislation due to its reduced marketability, (it is very hard to sell as only certain parties can purchase it).

It would also increase the chances of National implementing some sort of tax like this if Labour campaigns on a CGT/FDR tax, which is certainly not out of the realms of possibility.

Cheers
Te Whetu

drew
01-06-2011, 09:33 PM
rpcas im curious where you came up with this stuff? I've heard a lot of economic theories in my time but nothing quite like yours.

Te Whetu is pretty much bang on, treasuries reduce money in circulation being M1 so total money supply will not increase (assuming the securities are not being purchased by govt) and velocity of money remains the same.

Going back to your earlier reply to me about why govt taxes apparently to "create demand for NZD" really does not make any sense. The govt exercises a monopoly over currency in NZ therefore there is no competition. If we had a free banking system where a bank could issue its own currency then govts monopoly over money would be taken away and so its ability to execute monetary policy in the economy. In any case, for what purpose would a govt want to create demand for the currency it exercises a monopoly over?

You seem to be engaging in a fallacy of only looking at currency and not the fact that the currency needs to be exchanged for resources.

As for "regulating aggregate demand" that just sounds like Keynesian nonsense (no offense to Keynes of course :) ). Go back to your Milton Friedman son, "inflation is always and everywhere a monetary phenomenon".

Te Whetu a couple of comments - inflation has very negative impacts on an economy not just poor people but the business environment as it creates a lot of uncertainty. Its not the actual rate of inflation that causes this problem but the rate of change in inflation. If inflation was a constant 10% p/a and we all knew and expected that we could deal with it in wages, contracts, capital purchases etc. Its when it varies that it causes so many problems and people are unprepared.

Also not sure why you think a property tax is a good thing. In my opinion income is the most appropriate thing to tax. And capital as compared to income and consumption is the most sensitive to taxes. Capital can flee an economy if it doesnt like a tax unlike labour and consumption. Obviously land is not the kind of capital that can flee an economy and because of this there is a strong economic argument that taxing land is efficient but there are very strong counter arguments against this when you consider the role of the govt becomes landlord and master of your property and free to levy taxes as they see fit.

Anyway in my opinion property taxes are more likely to drive property prices up not down.

Te Whetu
02-06-2011, 12:22 AM
Te Whetu a couple of comments - inflation has very negative impacts on an economy not just poor people but the business environment as it creates a lot of uncertainty. Its not the actual rate of inflation that causes this problem but the rate of change in inflation. If inflation was a constant 10% p/a and we all knew and expected that we could deal with it in wages, contracts, capital purchases etc. Its when it varies that it causes so many problems and people are unprepared.

That is partly true, a steady 10% is better than wild fluctuations between 2% and 7%. However I can name a several things that high inflation do impact which is not desired, here are a couple:

i) Very high inflation means depreciation becomes worthless for long life projects (significantly reduced tax shield), this discourages investments in longer term projects in favour of shorter term projects even when the longer term project might otherwise be a better use of capital.

ii) High inflation is a nightmare to model out more than a few years. This also disadvantages long term business projects and a high inflation country is disadvantaged vs. one with low inflation due to the degree of confidence that can be provided with scenarios provided to decision makers. High inflation also harms the validity accounting records makng things like ROE or ROA fairly meaningless.

iii) High inflation means that the tax on bank deposits would be greater than real interest. Also in the cases where capital gains are taxed there would either be massive over-taxing OR additional complexity added to the tax system to allow for inflation.

iv) High inflation means where a party pays another party annually (e.g. some taxes are only paid annually based on prior year income). The government would effectively lose out on larger amounts which are from one year ago.

v) High inflation disproportionally hurts the poor, as they are less able to structure their affairs to account for the fact that inflation is high. If they only got one pay rise a year then they will be fine at the start but by half way through the year things are all 5% more expensive and the're another six months away from a pay rise. Giving more frequent pay rises would become a necessity which puts additional strain on businesses. Alternatively you could agree to 2.4% pay rises each quarter... but even that adds more complexity.

vi) Prices need to be updated a lot more. That's fine for larger businesses which have automated systems and possibly also smaller businesses where it's not too large a task. But in some businesses re-pricing is not something which is a cheap exercise and can cause disruption to customers. The tighter the margins in the industry the more often prices need to be changed.

Mainly just wrote these as they came to mind...

EDIT: Basically a lot of these could be adjusted and accounted for, but that in itself would take a lot of resources. So I'd argue high inflation increases the dead-weight loss in a countries economy, even when inflation is correctly forecast to be high.


Also not sure why you think a property tax is a good thing. In my opinion income is the most appropriate thing to tax. And capital as compared to income and consumption is the most sensitive to taxes. Capital can flee an economy if it doesnt like a tax unlike labour and consumption. Obviously land is not the kind of capital that can flee an economy and because of this there is a strong economic argument that taxing land is efficient but there are very strong counter arguments against this when you consider the role of the govt becomes landlord and master of your property and free to levy taxes as they see fit.

What form the property tax takes has different advantages/disadvantages, a CGT is less likely to drive off capital. But it's also harder to implement (and would need to be higher) than a FDR tax. I'm actually rather unconcerned which it is but we should really have I just feel we need something.


Anyway in my opinion property taxes are more likely to drive property prices up not down.

I'd argue this, but not now... and can certainly see some arguments which could be made on your side. What does history show us? I'm sure property taxes have been introduced and the impact recorded in other places in the world. Do you also say that a CGT would increase prices (I'm assuming not)?

rpcas
02-06-2011, 05:39 AM
I feel you are getting way off track and losing the point here. We are talking of the government printing money. This implies they are spending it, sure they could print and keep it at the reserve bank, but this is the same as not printing it at all as it would not enter M1. When I say "printing money" I'm obviously talking about the government printing money and spending it.
Yes, but whether or not that "money printing" results in inflation depends on whether the private sector goes on to spend. If for example the government "prints money" and gives it to beneficiaries who then go on to save it, then inflation won't be a problem.

This is the situation NZ is in now. The private sector is de-leveraging, so big government deficits are not nearly as inflationary as they otherwise would be. Remember inflation of the sort we are talking about is caused by excessive spending.





A agree; in your two examples financial assets do increase by 300. However in one M1/M2 increase by 200 and the other by 300. The long term impact of both is an increase in cash when the debt is repaid but in the short term this is not the case.

Those that buy the treasury securities don't then use them to trade for goods and services. When the government spends by borrowing they still pay in cash, those that get the deposits are the parties who wish to save.
Yes, agreed. However the key point here is that the people that buy the Treasury securities (banks, insurance companies, funds etc) wouldn't be spending anyway. It is ridiculous to say that "Those that buy the treasury securities don't then use them to trade for goods and services" because they wouldn't anyway. Holding Treasuries instead of cash in no way alters these firms/savers propensity to spend, and therefore won't alter inflationary pressure.



Government sells 100 securities to China, China needs to purchase those treasuries with NZD. To do this China first purchases NZD and then uses these to buy the NZ government securities. The NZD is removed from the economy and both M1 and M2 are reduced.

Note that China doesn't then use those treasuries as pseudo cash to buy stuff. Also note if later on they do need cash then they can sell the securities but this takes the cash out from elsewhere in the economy.

The same would be true if it was an NZ investment fund instead of China purchasing the government securities. Except in this case it would not need to go through the intervening step of purchasing NZD as it would already have local currency.

Agreed, but would China Central Bank be spending their dollars if they didn't hold securities? No, they would hold them in their reserve account at the RBNZ. Whether they hold the securities or not (if Treasuries weren't issued), and is not relevant to inflation, despite the differences in M1..



Remove this spending and you lower the crowding out of private investment. Removing spending means less inflation and lower interest rates. This in turn means people borrow more to invest elsewhere. It also means households have lower interest costs which mean they can return to spending sooner.
Government spending only crowds out private investment when the economy is almost or fully employing their resources (in which case more investment will lead to inflation). This is not currently the case in New Zealand, with 6% (?) unemployment and untold underemployment.

On the other side of the spectrum, if the government doesn't net spend enough, then businesses sales won't increase fast enough, and the firms won't bother investing. Firms invest when they face increased sales/believe future prospects are better. If the economy isn't growing, then these firms won't invest.


The only thing we need to be careful of is that property prices don’t start ramping up again, which is why I’m quite happy for a tax on property. Now whether this is in the form of FDR or CGT is a fair argument, and it is an argument which needs to be had.
Agreed.


Thanks for reading.
Te Whetu

Thanks for the discussion!

rpcas
02-06-2011, 05:53 AM
rpcas im curious where you came up with this stuff? I've heard a lot of economic theories in my time but nothing quite like yours.

Well I don't "come up with it" as such :). Much of what I am saying here is based on the accounting identities and true realities of our monetary system. Obviously I learn it from books and online papers. Here are a couple of useful links:

The balance sheet visualizer is accurate, lays everything out nicely and is fun to play around with: http://econviz.com/balance-sheet-visualizer.html
This book is aimed is easy and fun to read, as well as somewhat shocking. It avoids complications and technical terms, but is still a must read: http://moslereconomics.com/2009/12/10/7-deadly-innocent-frauds/

That will get you started!

drew
02-06-2011, 10:05 PM
Te Whetu all you comments i mostly agree with. The point i was simply making is that a constant rate of inflation can be dealt with. If we know its going to be say 5% or 10% then all prices can simply be indexed to the expected inflation rate. It would be a little problematic but Brazil has coped with high inflation for a very long time now. Thats not to say inflation is not harmful but when it fluctuates year on year is when it really makes a mess of things.


What form the property tax takes has different advantages/disadvantages, a CGT is less likely to drive off capital. But it's also harder to implement (and would need to be higher) than a FDR tax. I'm actually rather unconcerned which it is but we should really have I just feel we need something.
The houses and land cant leave the additional capital required to build new houses certainly can leave or not come at all.



I'd argue this, but not now... and can certainly see some arguments which could be made on your side. What does history show us? I'm sure property taxes have been introduced and the impact recorded in other places in the world. Do you also say that a CGT would increase prices (I'm assuming not)?
I think testing empirical evidence against impacts of a CGT on property prices is a very difficult task and studies always need to be discounted due to potential bias.

I think you should base your opinion on basic economic reasoning on what impact a CGT is likely to have. Prices are only signals and are a function of supply and demand. Whenever a govt taxes something it is expected to reduce both demand and supply. Maybe check out duncan macgregors posts in the property section - he correctly points out how regulations, red tape and unreasonable costs being imposed on the building of houses that has caused the high prices in NZ.

The basic problem in the housing market is there are not enough houses. There is no shortage of land in NZ either. During the last 10 years or so prices kept rising in the housing market. We had the most fertile conditions to create an oversupply of houses with low interest rates, rising GDP, general public confidence etc. Instead the only oversupply occurred in central city apartments because that was the only area in which the market could quickly and cost effectively create new housing units in response to price signals.

So a CGT will reduce demand somewhat but people still need to live somewhere so the demand is a bit inelastic. The bigger concern is what a CGT will have on supply. Also it might make it more difficult to sell or rather people will be more reluctant to sell if they cannot pass on all of the cost to a buyer. Either way, supply will be restricted and costs will go up.

I remember over a year ago reading an article by John Whitehead about how house prices were a problem and he blamed everybody from greedy mums and dads, property hoarders, the banks etc. Everyone was to blame except of course the govt. If you want to fix the housing market we need more houses - in that case we should be encouraging the speculators and high prices because thats the only way more houses will be built. If you try to force the prices down then, as is typical in the wonderful world of economics and counter intuitive unexpected consequences, you will end up with even higher prices.

drew
02-06-2011, 10:33 PM
Yes, but whether or not that "money printing" results in inflation depends on whether the private sector goes on to spend. If for example the government "prints money" and gives it to beneficiaries who then go on to save it, then inflation won't be a problem.

This is the situation NZ is in now. The private sector is de-leveraging, so big government deficits are not nearly as inflationary as they otherwise would be. Remember inflation of the sort we are talking about is caused by excessive spending.
Nonsense. If the beneficiary puts the money in a bank then the bank will be paying interest to the beneficiary and will seek to onlend the deposited funds. In a fractional reserve banking system savings will exponentially grow the money supply. Inflation is not caused by spending alone - it is caused by spending of an increased quantity of money that finds its way into an economy.

When the total quantity of money increases people will tend to spend more money. When more money gets spent on the same amount of goods and services being produced, prices will tend to rise. Thats inflation.


Yes, agreed. However the key point here is that the people that buy the Treasury securities (banks, insurance companies, funds etc) wouldn't be spending anyway. It is ridiculous to say that "Those that buy the treasury securities don't then use them to trade for goods and services" because they wouldn't anyway. Holding Treasuries instead of cash in no way alters these firms/savers propensity to spend, and therefore won't alter inflationary pressure.
Wrong again rpcas - treasuries held by a bank will be treated by them as core capital and will allow them to increase their lending and hence the money supply will grow.

If a non-bank institution or business or whatever holds a treasury note they can use that as security to borrow funds against. The treasury will likely end up in the hands of a lending institution and the money supply will most likely increase.


Agreed, but would China Central Bank be spending their dollars if they didn't hold securities? No, they would hold them in their reserve account at the RBNZ. Whether they hold the securities or not (if Treasuries weren't issued), and is not relevant to inflation, despite the differences in M1..
In this example the RBNZ would likely use the funds deposited by a foreign central bank as part of its open market operations which is a more subtle way in carrying out monetary policy than adjusting interest rates and capital ratios. Those funds will very likely find themselves somehow sloshing through the NZ economy.



Government spending only crowds out private investment when the economy is almost or fully employing their resources (in which case more investment will lead to inflation). This is not currently the case in New Zealand, with 6% (?) unemployment and untold underemployment.
No thats not right. Crowding out can occur in a specific sector it depends on what action the govt is going to take. It seems to me you are only looking at things in aggregate when oversupply and undersupply can occur at the same time in different areas of an economy.


On the other side of the spectrum, if the government doesn't net spend enough, then businesses sales won't increase fast enough, and the firms won't bother investing. Firms invest when they face increased sales/believe future prospects are better. If the economy isn't growing, then these firms won't invest.
Well thats debatable. The govt is only able to spend money by taking it from the consumers through taxes. I prefer to look at it from a philosophical perspective - if the people at large want to spend less money in aggregate or in a particular sector (both of which can cause a recession) what right has a govt to take money from them forcibly and spend against their will?

rpcas
03-06-2011, 06:04 AM
Nonsense. If the beneficiary puts the money in a bank then the bank will be paying interest to the beneficiary and will seek to onlend the deposited funds. In a fractional reserve banking system savings will exponentially grow the money supply.
Banks are never reserve constrained - loans create deposits. Banks make loans and find the reserves later if need be (the RBNZ is the lender or last resort, and is obliged to lend). In NZ, there are no reserve ratio's, so there is nothing to stop lending regardless of how many reserves a bank has.

Increased deposits at a bank does not increase their capability to make loans. The only requirement is the maximum equity to loan ratio.



In this example the RBNZ would likely use the funds deposited by a foreign central bank as part of its open market operations which is a more subtle way in carrying out monetary policy than adjusting interest rates and capital ratios. Those funds will very likely find themselves somehow sloshing through the NZ economy.
The Reserve Bank is never ever short of NZD's, and all of its operations involve inputing data on a computer. Open market operations involves the RBNZ debiting or crediting the commercial banks reserve account, and providing or receiving a Treasury security in return. The RBNZ doesn't get the "money" to do this from anywhere. It just types the numbers into a computer.

You seem to have the idea that when a commercial bank or the RBNZ has greater deposits or reserves respectively, they can lend more and "money" will end up "sloshing around". This is categorically false. Greater deposits aren't required for "money to slosh around".


No thats not right. Crowding out can occur in a specific sector it depends on what action the govt is going to take. It seems to me you are only looking at things in aggregate when oversupply and undersupply can occur at the same time in different areas of an economy.
Alright. If the government spends inappropriately, with too much in one area and too little in another, I suppose that could happen.


Well thats debatable. The govt is only able to spend money by taking it from the consumers through taxes. I prefer to look at it from a philosophical perspective - if the people at large want to spend less money in aggregate or in a particular sector (both of which can cause a recession) what right has a govt to take money from them forcibly and spend against their will?

I hope your kidding because that comment proves you don't understand the topic.

CJ
09-07-2011, 10:58 AM
Absolute - good ideas but extremely complicated so wont work.

CGT on everything taxed at marginal rates, but reduce marginal rates (incl company and trust) to 20% (or slowly reduce to 20% as the CGT take increases).

I am a right wing voter, but would vote for a CGT but dont trust Labour to implement it properly or to give the individual tax rates a corresponding cut. If national were to do and make it fiscally neutral (like the GST increase was), then it would be great.

POSSUM THE CAT
09-07-2011, 11:10 AM
CJ they only need to use the Australian system very simple

macduffy
09-07-2011, 11:58 AM
Increased deposits at a bank does not increase their capability to make loans. The only requirement is the maximum equity to loan ratio.


I wouldn't dismiss the capital requirement issue quite so lightly.

The current trend is to tighten these ratios which could well constrain the ability of some banks to increase their lending. Kiwibank would be in this category, IMO, as NZ Post (the govt) wouldn't welcome - or be able to afford? - the call for increased capital to support increased lending, regardless of how easy or difficult it may be to raise the deposits to fund them. I can see the new Heartland bank having the same problem down the track.

All a bit off the subject of a capital gains tax. For what it's worth, I'd like to see a comprehensive tax along the lines of the Aussie one as soon as possible to take some pressure off a system which relies overly much on taxing income from earned income/company profits.

fungus pudding
09-07-2011, 12:15 PM
Absolute - good ideas but extremely complicated so wont work.

CGT on everything taxed at marginal rates, but reduce marginal rates (incl company and trust) to 20% (or slowly reduce to 20% as the CGT take increases).



Then it is not a CGT. That is just income tax. Exactly as it stands now for those dealing in pproperty - or anything else.

fungus pudding
09-07-2011, 12:23 PM
I wouldn't dismiss the capital requirement issue quite so lightly.

The current trend is to tighten these ratios which could well constrain the ability of some banks to increase their lending. Kiwibank would be in this category, IMO, as NZ Post (the govt) wouldn't welcome - or be able to afford? - the call for increased capital to support increased lending, regardless of how easy or difficult it may be to raise the deposits to fund them. I can see the new Heartland bank having the same problem down the track.

All a bit off the subject of a capital gains tax. For what it's worth, I'd like to see a comprehensive tax along the lines of the Aussie one as soon as possible to take some pressure off a system which relies overly much on taxing income from earned income/company profits.

I'd like to see the Aussie self funded retiree scheme introduced here.

fungus pudding
09-07-2011, 12:32 PM
I am with CJ on this one.

No income tax. Low company tax ( if any ). Retain excise taxes ( fags booze etc )

GST with no claw back.. Thus relief from never ending paper work..

What about introducing a Tobin Tax ??

There is very little paperwork with GST. What have you bought, what have you sold. What is the difference, and what is the GST on that amount? It's minutes rather than hours for any businress operating the right system. By clawback I presume you mean no deduction for input. If so it would not work because gthe tax would become cumulative. Some items would be marked up hundreds of % in tax alone. It can only work if it falls to the end user. It's actually a great system whether you agree with consumption tax or not, probably the best in the world. - let's hope nobody ever alters the basic structure of it e.g. introducing exemptions.

POSSUM THE CAT
09-07-2011, 01:00 PM
Fungus Pudding there are and always have been exemptions Read the GST ACT bank fees for one are GST exempt. The reason for very few exemptions has gone with the adoption of computers. That was one of the reasons the increase to 15% was actually possible try working out the 15%GST without A computer for a gst return it is not simple like it is for 10% & 12.5%. It could even be included in the products barcode as to the products GST stutus

fungus pudding
09-07-2011, 01:49 PM
Fungus Pudding there are and always have been exemptions Read the GST ACT bank fees for one are GST exempt. The reason for very few exemptions has gone with the adoption of computers. That was one of the reasons the increase to 15% was actually possible try working out the 15%GST without A computer for a gst return it is not simple like it is for 10% & 12.5%. It could even be included in the products barcode as to the products GST stutus

Yes. Financial transactions, res. rents have always been exempt, which was easy ad necessary. physical - a pure service. There are special reasons why finance never attracts consumption tax in any system and it's all about interest rates. I am not aware of any exempt countries. Consider the likes of fruit and vegetables in a mixed business. Do they go out the door as they same in, or in a salad roll? Over the checkout counter, or through the delicatessen as a salad. As it is it is very hard to fiddle. Incidentally, removing GST from perishables as Labour are on about will not reduce the retail price, just as it could not be added when introduced. Nothing responds as rapidly to supply and demand. It is always priced to sell before it has to be thrown out; that's the only criterion. Supermarkets adjust prices daily or even through the day, and the mark-up range can be massive. They won't bother reducing below what they can safely sell out at. And you certainly do not need a computer to calculate GST whatever the percentage. Anyone that can't do it in their heads can do it on a two dollar calcukator. GST content 1s 3/23rds or 13.04%. No more difficult than it was at 12.5% and content was 1/9 or 11.11 % Every review ever done on GST has commended the fact there are no exemptions. That includes various studies done by the Labour party hypocrites.

CJ
09-07-2011, 01:56 PM
Then it is not a CGT. That is just income tax. Exactly as it stands now for those dealing in pproperty - or anything else.yes. Income tax but on capital gains. Provided you factor in inflation somehow, I dont see why income gains should be taxable but capital gains shouldn't be. Anything that increases wealth.

Halebop
09-07-2011, 02:16 PM
I think some form of capital gains tax would be fair - particularly if it also resulted in lower income taxes* (I think a flat tax across any form of income and because I'm an egalitarian prick would even consider taxing the family home too - albeit political ramifications would almost certainly preclude this). John Key has suggested CG taxes are complex which is partly true but so is the tax system in its entirety so suspect he is pandering here. I don't like the wealth tax approach and think cashflow is too important a consideration in the investment value mix so taxes should be incurred at sale time, nothwithstanding the consequences on how this impacts asset sale decisions.

The question of inflation is complex as many people suggest capital gains should be cupped by the rate of inflation (or even the risk free rate of return). But by the same note, income taxes are often allowed to creep up the progressive scale so are not always effectively indexed against inflation. What happens in one should happen in the other.

* Suspect investors have something to gain from lower income taxes anyway as a share of income increases will find their way into company coffers.

whirly
09-07-2011, 02:48 PM
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.

fungus pudding
09-07-2011, 03:14 PM
yes. Income tax but on capital gains. Provided you factor in inflation somehow, I dont see why income gains should be taxable but capital gains shouldn't be. Anything that increases wealth.

But capital gained is treated as income and taxed already for many property investors. The hoi polloi seem to think that investors can just sell properties and pocket the capital profit. Will be interesting to see if Goff/Cunliffe are suggesting that they should now declare the profit as income and pay a CGT as well. Or are they looking more at areas that are almost always exempt? Mainly these are farms and holiday homes, or perhaps a second home such as an inner city apartment.

fungus pudding
09-07-2011, 05:44 PM
One problem with that is that the increase in value of an asset doesn't necessarily provide cashflow to pay tax. Also, many assets go up in value over time above the rate of inflation because some poor bugger has invested their time and energy into building them up - something you are unlikely to get a tax credit for. Personally, I would be very reluctant to encourage politicians to see assets as a source of Government revenue. Also - we might all be better off if we taxed things that don't "increase wealth"

None of this matters of course. They won't get a sniff at the treasury benches for a few years. By then they will probably give up on this one, and just get back to ****ing on about how unfair it is that some work hard, chuck everything on the line and if lucky, make a few bob. That will lead to more envy levels on income tax - their usual ploy to pacify their sad socialist followers.

Jay
09-07-2011, 06:26 PM
But capital gained is treated as income and taxed already for many property investors. The hoi polloi seem to think that investors can just sell properties and pocket the capital profit.

Agree, however the IRD don't seem to have the resources to track everyone doing that.
I know of a person who bought and sold a "family" home 4 times within about 2 years and each time made at least $100K - supposed to be that they changed their mind on where they wanted to live or decided they did not like the house.
Equally would/should apply to share investors traders as well, IRD do not seem to monitor this area either, but then how far do you go - cars, art, stamp/coin collections etc etc

fungus pudding
10-07-2011, 08:38 AM
Putting a CGT on the increase in value of all assets would probably reduce some tax evasion. But, they will not put CGT on all assets. The most effective way to reduce tax evasion would be if we all handed over all our salaries and assets to the IRD and lived off a small benefit.


Wrong. Adding any new tax increases incentive for evasion and always opens new avenues. I was witness to (not party to - of course) numerous transactions in the days of speculation tax, when a local property investor always had sackfuls of cash. He would contract to buy a property at a certain price, then top it up with an under the counter payment; often as much as 90% of the increased price. There were more conventional and probably less illegal ways around it, but they would spring up again.

CJ
10-07-2011, 09:05 AM
But capital gained is treated as income and taxed already for many property investors. but not all. And most pretend they long term holders rather than traders. elimitate the 'intention' test and that wrought goes away.


Also, many assets go up in value over time above the rate of inflation because some poor bugger has invested their time and energy into building them up - something you are unlikely to get a tax credit for. You are suggested income from labour which was not paid as wages or salary, so no PAYE/tax. increase in wealth from labour should be subject to tax. Currently you can hid as a 'captial gain' and get away with it (hence why builder/ developers/ traders are tainted in respect to land transactions).

fungus pudding
10-07-2011, 09:12 AM
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?

fungus pudding
10-07-2011, 09:53 AM
Why should increase in wealth from entrepreneurship be subject to tax? Personally, I think that is exactly the wrong thing to tax.

Because like it or not - it is income. The American system allows you to sell and as long as you buy an replacement asset within 12 months there is no CGT to pay. Only when you finally cash out (if ever) do you pay CGT. That's pretty hard to argue with.

CJ
10-07-2011, 01:15 PM
Why should increase in wealth from entrepreneurship be subject to tax? Mark Ellis and Stefan apparently turned a $140k investment into $18m each. Why shouldnt that be taxed?

Would they still have done what they did if they had to pay $2.7m in tax. Off course they would (the remaining $15m would do).

fungus pudding
10-07-2011, 01:49 PM
If I take a bare piece of land and develop it so that it now has a motel on it. Well, fair enough, the Government takes a cut from here to eternity of the income that new asset produces. But the new value that has been created, why give a chunk of that to the buggars as well? It is the same as building up any business and creating value and income streams. Society and the Gorvenment benefits and can tax the income stream. But taxing people for creating wealth, I do not get.

And if developing motels is how you make your living ..there is no valid reason why you should be any less liable for tax than a plumber or nurse. The problem with the line drawing rules currently is that as long as you had a bit of income from some other activity you had a good chance of not paying tax on gains from your property activities. One day this will change, but not in the foreseeable future. Labour has now made certain that National wll oppose CGT so it will take a few elections before Nats can introduce it. It will also take a leadership change and a few elections before Labour can stop waffling about what they will do, because they know they won't have to put it into practice. Seems like they've learnt a trick or two from Winston First.

CJ
10-07-2011, 05:30 PM
Who are you to say that?

Once you go down this path, the logical conclusion is that at the end of the year, everyone's wealth should be assessed and a tax bill paid on the increase, regardless of cashflow. Definitely not. I dont agree with any tax that isn't on a realised basis. And I also would prefer roll over relief. I see how that works for property (buy a new property) but not exactly sure with shares.

I also would only vote for it if it was in conjunction with reduction in income tax rates - something I dont trust Labour with.

I dont have all the answers but dont think it should be ruled out.

Note: I will still be vote right.

fungus pudding
11-07-2011, 07:59 AM
This old gem again. A shame its not actually true.

Tax on income of 35,000 = $5,000

Tax on income of 70,000 = $14,000

Tax on income of 140,000 = $37,000

Fairly obvious that higher incomes pay dispropotionately more. Only a flat tax would have them paying proportionately more.

POSSUM THE CAT
11-07-2011, 09:06 AM
Fungus Pudding be careful what you wish for The flat tax could be 100% & the state would give you a living allowance

fungus pudding
11-07-2011, 11:09 AM
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
11-07-2011, 01:41 PM
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.

CJ
11-07-2011, 01:50 PM
Address the specific routes by which people are rorting the system, but leave assets out of the equationSo ignoring the rate of tax (or assuming any change would be fiscally neutral to the government) what changes would you recommend to broaded the tax base.

Or do you think the current balance is right, if properly enforced (John Key seems to be suggesting this).

fungus pudding
11-07-2011, 02:41 PM
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
11-07-2011, 03:48 PM
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
11-07-2011, 04:20 PM
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
11-07-2011, 04:38 PM
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.

Aaron
11-07-2011, 04:38 PM
Well, the fairest way is to work out how much we need, divide it by the number of people living here and send everyone a bill.

Agreeing on what we all need might be a problem and although I don't have any figures to back it up probably over half of NZ won't earn enough to cover their own bill.

Minimoke its hard to believe you openly favour a regressive tax like GST. I think most people would agree that a regressive tax is the least equitable way for a government to tax the people. Although does National raising GST from 12.5% to 15% mean I am wrong?

POSSUM THE CAT
11-07-2011, 06:10 PM
Minimoke would that include purchasing labour IE a 25% tax for employers on wages paid. And remember that without people with the money to become customers all businesses fail. You could use the Australian idea & abolish tax on trusts . The tax liability flows through to the beneficiaries at their marginal tax rate & if they are non income earners the highest personal tax rate applies to counter tax avoidance by paying it to children or other non earners

CJ
11-07-2011, 06:11 PM
Well, firstly, I don't reckon a CGT would really do much to "broaden" the tax base. If you exclude people's homes, the vast majority of people don't own anything worth taxing, do they? A CGT is really simply going to narrow the tax base even further. I think realistically, you cannot squeeze much more out of most NZers, they just don't have enough anyway. You could probably "effectively broaden" the tax base by getting rid of subsidies such as kiwisaver and working for families, interest-free student loans etc. Great policies but no one will vote for you.

A CGT wont narrow the tax base but I do agree it wont broaden it much if you exclude the family home.




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. A gain is either income or capital and would be taxed under the appropriate system. by having teh CGT rate at marginal rates, that distinction becomes academic.

fungus pudding
11-07-2011, 08:15 PM
A gain is either income or capital and would be taxed under the appropriate system. by having teh CGT rate at marginal rates, that distinction becomes academic.

So that would mean no CGT tax, but all transactions other than primary residence to be subject to income tax.

Aaron
11-07-2011, 08:36 PM
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.

I am not quite sure what you mean, for a landlord to be paying income tax on a capital gain currently he would have to be trading property or a developer etc so the capital gain for him is income and all his property is unfortunately tainted by a trader/developer status.
But most landlords currently would not be traders/developers and they would not pay any tax on a capital gain if they sold their property. A CGT would mean these landlords would now have to pay tax on a capital gain. The trader/developers would continue to argue with IRD over their status and would be trying to get any gains treated as capital rather than income so the gains would be taxed at the lower CGT rates rather than the higher income tax rates(they would end up paying some tax one way or another). Whether a gain is considered capital or income depends on what your business is.

fungus pudding
11-07-2011, 09:09 PM
I am not quite sure what you mean, for a landlord to be paying income tax on a capital gain currently he would have to be trading property or a developer etc so the capital gain for him is income and all his property is unfortunately tainted by a trader/developer status.
But most landlords currently would not be traders/developers and they would not pay any tax on a capital gain if they sold their property. A CGT would mean these landlords would now have to pay tax on a capital gain. The trader/developers would continue to argue with IRD over their status and would be trying to get any gains treated as capital rather than income so the gains would be taxed at the lower CGT rates rather than the higher income tax rates(they would end up paying some tax one way or another). Whether a gain is considered capital or income depends on what your business is.

Precisely. The point I was trying to make is that it does not address the 'half arse' intention nonsense as suggested in your earlier post. (I should add that I'm not so sure that most landlords are exempt from income tax on exit. The IRD have recently been instructed by govt. to tighten up on this very point. My view is they will look closely at landlords who have not made a profit because of their gearing. If they purchase without a reasonable chance of a profit from the rental activity, then the reason threy bought is obviously for sale one day at a profit. So regardless of what they say is their intention - the IRD will very likely view a profit as income. When I first became a landlord many moons ago the IRD used to apply that test, but then gave up. )

minimoke
12-07-2011, 07:40 AM
Minimoke its hard to believe you openly favour a regressive tax like GST. I think most people would agree that a regressive tax is the least equitable way for a government to tax the people.
It would be a progressive tax on consumption. Those with more ability to spend would pay more tax. If you don't have the ability to spend you pay no tax.

I'm not a big fan of taxes but they are of course a necessary evil. It goes without saying that if citizens want services from their government then taxes need to be raised to pay for those services.

We might then walk down the path of what services should government pay for against what citizens should pay. And that leads us to the old chestnuts - paying for healthcare, education and the like. If you take the liberterian extreme the government would only pay for defense of the nation/citizens and a few other things. But in reality we are a a country that on the whole tends to be much more socialist than anything else. So government has quite an appetite for tax revenue.

I'm not a fan on taxing income as this creates a disincentive to earn and invest. For those motivated to earn more they expend more energy and cost on devising ways to avoid/evade tax and this isn't productive - unless you are a tax lawyer / accountant of course!.

So if we want the spoils of ones labour to go to the toiler and the rewards of risk to go to the risk takers we need an alternative. That being consumption.

What do we all consume? New and second hand goods and contracted services. We all have choice on what it is that we consume and the price point we are prepared to pay for those goods and services. So a consumption tax is only regressive if those on increasingly larger incomes spend comparably less. A person on a low income may choose to buy a second hand Toyota Corolla whereas a person on a high income might choose a new Prius. A corporation might choose a Hilux. They all pay the same tax thought the amount they actually pay is discretionary based on the purchasing decision.

Rental on property would be taxed as would car and concrete mixer rentals as you are, in one sense, buying a service from an asset owner. I'd be inclined not to tax residential property purchases (but would tax the real estate agent fee) as you aren't buying a services and since property is a long term "asset which is expected to hold or improve its value over time it is more of an investment than a good or service. An investment in property precludes government from having to provide state funded property. MT tax would also cover transactions such as "trade Me" - anyone done the sums on lost GST as consumers obtain goods in this manner?

In answer to PTC's question I probably wouldn't tax labour through an employers wages. An employer will already pays tax on the purchase of accident insurance, training, safety boots tools and equipment. That's probably enough tax to satisfy governmental spend.

Aaron
12-07-2011, 08:34 AM
[QUOTE=minimoke;350980]It would be a progressive tax on consumption. Those with more ability to spend would pay more tax. If you don't have the ability to spend you pay no tax.

But its a regressive tax. For simplicities sake assume it costs $23,000 to afford the basics in life. A guy earning $23,000 is paying GST at 15% currently. Even if a guy earning $115,000 spends twice as much($46,000) and saves $69,000 he is paying twice as much GST as the guy on $23,000 but as a proportion of his income his is paying GST of roughly 7.8%. The more he saves the less GST he pays as a percentage of his income. Assuming everyone needs to spend on the basics such as food etc poor people have less choice as to whether they want to pay GST or not and end up paying GST at a higher proportion to their income.
GST is good as it is simple, it catches drug dealers, cash operators etc and it may discourage excessive consumption to a certain degree but I don't think it should be raised anymore, in fact I don't think it should have gone to 15%.

minimoke
12-07-2011, 09:03 AM
[QUOTE=minimoke;350980]

But its a regressive tax. For simplicities sake assume it costs $23,000 to afford the basics in life.
We might be at odds here. It places a similar burden on the poor as it does the rich. For a start we can't assume what the costs of the basics of life are. At best we have the questionable "poverty line" which could be used as your base except NZ doesn't have an official one. We could then use the "working For Families threshold - but thats an expense which is partly paid for by the consumption tax. Mark Hotchin has said he can't live on $1,000 a week and Alan Hubbard has been given $1,000 week to live on.

I guess you could say its regressive if every one had to buy, say milk at $3.50 a bottle generating $0.70 in tax. But we have choice. A poor person can buy milk at $2.80 a bottle, contributing $0.56 in tax and the rich person can go spend $5.50 on a bottle contributing $1.10. The milk doesn't cost double but the rich person is paying more than twice the tax.

So it would be a very fair tax. Individuals get to choose how much tax they pay through their purchasing decisions.

fungus pudding
12-07-2011, 09:12 AM
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.

minimoke
12-07-2011, 09:32 AM
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.It might have been a valid point 20 years ago when we still had cash. Electronic financial transactions have now got to the point where pundits are suggesting the rare Chequbook will be extinct in 10 years time.

Evasion would be quite hard but obviously not impossible. A person has an identifiable income because this is money going into their bank accounts. Expenditure can be tracked by money going out of those bank accounts. Finding where the money gets spent on investment (shares / property etc) is easy because you'l have a certificate of title. The balance is what you have consumed and the tax is easitly identifiable. The trick is finding a tipping point were the effort going into avoiding tax isn't worth it.

The tax can't get "too high". Its simply a function of government expenditure. The more more teh electorate wants the more government spends the higher the tax needs to be. So rather than focusing on evasion/avoidance we should focus on the productive value of that government expenditure. If its not productive get rid of it. For example if faced with a 30% Consumption Tax would we really want to be paying for a Ministry of Womens Affairs? No, get rid of the Ministry and drop your tax rate.

And thats why the tax gets paid by the citizens - those who are consumers of governement services. Tourists coming into NZ could be tax free (making us really attractive as a tourist destination) providing they don't consume government services. Of course they will to some extent (eg policing) but they could insure against those risks.

fungus pudding
12-07-2011, 09:42 AM
It might have been a valid point 20 years ago when we still had cash. Electronic financial transactions have now got to the point where pundits are suggesting the rare Chequbook will be extinct in 10 years time.



But the black economy will never die. Under an extreme consumption tax, bata would flourish. Not just in goods but services also. 'I'll do your heart transplant if you paint my house' sort of thing. :scared: Or possibly a mechanic fixes a car for an electrician who installs some new power points. It's illegal now to engage in swapped labour schemes, even casual or informal arrangements. which I am sure would suprise many people.

Aaron
12-07-2011, 10:10 AM
[QUOTE=minimoke;350994][QUOTE=Aaron;350989]
We might be at odds here. It places a similar burden on the poor as it does the rich.

I don't think we are at odds, I just don't think you understand what I am saying. That GST is a regressive tax is a fact not an opinion.
The less income you earn the more GST you pay as a percentage of your income.
As far as the basics in life go we could agree that everyone has to eat and drink and wear clothes etc. It doesn't place a similar burden on the rich as it does on the poor. The poor will be spending a greater portion of their income on essentials to survive but the wealthier you are the more discretion you have in regard to your consumption/spending.

minimoke
12-07-2011, 10:54 AM
[QUOTE=minimoke;350994][QUOTE=Aaron;350989]
That GST is a regressive tax is a fact not an opinion.
The less income you earn the more GST you pay as a percentage of your income.
As far as the basics in life go we could agree that everyone has to eat and drink and wear clothes etc. It doesn't place a similar burden on the rich as it does on the poor. The poor will be spending a greater portion of their income on essentials to survive but the wealthier you are the more discretion you have in regard to your consumption/spending.
GST is commonly considered to be a regressive tax - but only where all things are equal. It is arguable that a person paying $2.80 is simply paying for the milk.They aren't buying a service and perhaps they cant afford a service - but they are buying a good. Where as a person paying $5.50 is paying for the milk and a service. The greater a person's income the greater their opportunity to purchase additional services - consequently the greater their share of the tax burdon.

I'd also suggest it isn't regressive because poor people have their income topped up through either government benefits or "working for Families". The "poor" person isn't spending all their income on things that attract tax. They are being subsidised by the government who is funded by the higher income earners who contribute more to the tax take. Consequently the tax burden isn't fully felt by the poor person.

If we look at my milk analogy, lets say a poor person earns $10. Roughly 5.6% of that person income has gone on the tax. Lets say the rich person earns $20 - he's still paying around 5.6% tax. How is that regressive?

(Oh - and I assume we can take it that a "regressive" tax is seen as a very bad thing because it hurts the poor where as a progressive tax is a very good thing because it hits the rich. Ideals I'm not comfortable with!)

Aaron
12-07-2011, 03:02 PM
[QUOTE=Aaron;351001][QUOTE=minimoke;350994]
GST is commonly considered to be a regressive tax - but only where all things are equal. It is arguable that a person paying $2.80 is simply paying for the milk.They aren't buying a service and perhaps they cant afford a service - but they are buying a good. Where as a person paying $5.50 is paying for the milk and a service. The greater a person's income the greater their opportunity to purchase additional services - consequently the greater their share of the tax burdon.

****I agree, people in general tend to spend more the more they earn and I agree that the wealthy will pay a lot more GST than the not so wealthy. What I am saying is that the not so wealthy will pay more GST as a percentage of their income and they have less choice in reducing how much tax they pay.****

I'd also suggest it isn't regressive because poor people have their income topped up through either government benefits or "working for Families". The "poor" person isn't spending all their income on things that attract tax. They are being subsidised by the government who is funded by the higher income earners who contribute more to the tax take. Consequently the tax burden isn't fully felt by the poor person.

****I don't want to debate how the taxes are spent just that GST is regressive and unfair.****

If we look at my milk analogy, lets say a poor person earns $10. Roughly 5.6% of that person income has gone on the tax. Lets say the rich person earns $20 - he's still paying around 5.6% tax. How is that regressive?

****In your example both people spend roughly the same proportion of their income so pay roughly the same proportion of tax compared to their income although the $20 guy has paid almost twice as much GST. From a previous post you didn't want to debate how much the basic necessities of life are but can you agree that if you don't eat you die and if you don't have clothes and shelter hypothermia could be a problem in winter. Assuming you agree with the preceeding statements you can understand that at a very basic level people will need to spend a certain amount to live its not really a choice. ( option (1) buy food and pay GST or (2) die). Spending and consumption over and above that is discretionery. In your example if the basic necessities in life cost $10 then one guy is going to pay $2 GST. The other guy can spend $20 if he wants to and will pay proportionately the same amount of GST but he can also choose to spend $10 and invest the other $10. Tax paid as a portion of income for Mr $10 is 20% for Mr $20 its 10%. Also Mr $20 may benefit on not having income tax or capital gains on his investments.****

(Oh - and I assume we can take it that a "regressive" tax is seen as a very bad thing because it hurts the poor where as a progressive tax is a very good thing because it hits the rich. Ideals I'm not comfortable with!)

Personally I see a tax that expects those least able to pay actually paying a higher proportion of their income as unfair and bad. Its an ideal I am comfortable with. I also don't think progressive taxes are always better. In fact with a flat capital gains tax rate we could flatten the income tax rates as well and try and make things as fair as possible.
Not sure how to break up your quote so my other responses are between the **** within the quote above.

minimoke
12-07-2011, 03:34 PM
[QUOTE=minimoke;351006][QUOTE=Aaron;351001]

[quote]Personally I see a tax that expects those least able to pay actually paying a higher proportion of their income as unfair and bad. Its an ideal I am comfortable with. I also don't think progressive taxes are always better. In fact with a flat capital gains tax rate we could flatten the income tax rates as well and try and make things as fair as possible.
Well Aaron. there are parts of life that aren't fair. Sh#t happens. You either adapt to your environment, you do something to make the most of it or you do something to better it. The choice is the individuals. Now I figure paying taxes to support some lazy benificairy so they can enjoy a life style of sloth and KFC is unfair. I think its unfair I pay taxes so some fat person can get their obesity can be treated in a public hospital. I don't think it fair that my taxes are paying for the sins of our forefathers. But as I say Sh#t happens, time to move on.


What I am saying is that the not so wealthy will pay more GST as a percentage of their income and they have less choice in reducing how much tax they pay. So Moses came down and wrote in stone that person should only pay a certain percentage in GST relative to their income. I don't think so. They do have some choice - but not necessarily a lot. They could buy that cheaper bottle of milk, they could go to the second hand shop for brand new clothes or alternatively they could do something to increase their income and hold their expenditure. I'd hazard a guess the low income earners are disproportionate users of government spending. We know for example that low paid Maori have greater numbers in prison than higher paid Asians. If you are a consumer why shouldn't you pay your fair share.


I don't want to debate how the taxes are spent just that GST is regressive and unfair.
As I have already pointed out a consumption tax is not necessarily regressive. That is your view but again something that isn't set in stone. That they are "unfair is certainly worth debate since that is pure opinion and speculation.

If we look at my milk analogy, lets say a poor person earns $10. Roughly 5.6% of that person income has gone on the tax. Lets say the rich person earns $20 - he's still paying around 5.6% tax. How is that regressive?


In your example both people spend roughly the same proportion of their income so pay roughly the same proportion of tax compared to their income although the $20 guy has paid almost twice as much GST. From a previous post you didn't want to debate how much the basic necessities of life are but can you agree that if you don't eat you die and if you don't have clothes and shelter hypothermia could be a problem in winter. Assuming you agree with the preceeding statements you can understand that at a very basic level people will need to spend a certain amount to live its not really a choice. ( option (1) buy food and pay GST or (2) die).
We are fortunate to have a government that will provide a minimum level of income to families, beneficiaries, superanuitants that prevents them from dying. That seems to be fair to me but I can't figure why a person who is unproductive should have the same net income expectations as a productive person. Nor do I see why productive people should subsidise those who want a life style that their income can't support.

Spending and consumption over and above that is discretionery. In your example if the basic necessities in life cost $10 then one guy is going to pay $2 GST. The other guy can spend $20 if he wants to and will pay proportionately the same amount of GST but he can also choose to spend $10 and invest the other $10. Tax paid as a portion of income for Mr $10 is 20% for Mr $20 its 10%. Also Mr $20 may benefit on not having income tax or capital gains on his investments. The reason being is that Mr$20 has earnt more than Mr $10. Why should he not be entitled to keep the benifits of his labours?

Aaron
12-07-2011, 05:21 PM
That's right this is a thread about capital gains tax.

I guess my arguements about GST won't change Minimoke's view, maybe my logic is flawed but it seems to make sense to me and I don't seem to follow his logic pointing out how GST isn't necessarily regressive so I'll have to give it a rest. I agree whether its fair or unfair is a matter of opinion but there is something on that in the Gareth Morgan Article above.

What is your view on CGT Minimoke? For or Against and why?

westerly
12-07-2011, 06:16 PM
From the days of Regan and Thatcher followed in NZ by Douglas and Richardson there has been a world wide push to sell Govt. assets and lower taxes. Death duties - gone, Gift duties -gone, marginal tax rates lowered always at lower percentages the lower the income. Definitely a politically driven agenda by the far right.
He who has the capital makes the gains. It is very simple really.

Westerly

mr.needs
12-07-2011, 08:07 PM
[QUOTE=minimoke;350994][QUOTE=Aaron;350989]
We might be at odds here. It places a similar burden on the poor as it does the rich.

I don't think we are at odds, I just don't think you understand what I am saying. That GST is a regressive tax is a fact not an opinion.
The less income you earn the more GST you pay as a percentage of your income.
As far as the basics in life go we could agree that everyone has to eat and drink and wear clothes etc. It doesn't place a similar burden on the rich as it does on the poor. The poor will be spending a greater portion of their income on essentials to survive but the wealthier you are the more discretion you have in regard to your consumption/spending.

Except... you forget that savings are really just deferred spending... its all going to catch up with the wealthy eventually. Those savings will be spent on consuming goods and services in the future, and the wealthy will be taxed just like the rest of them.

We don't save money for fun, we save so that we can spend in the future don't we?

The only real discretion that the rich have is the choice to save or spend their discretionary income. But either way that income will be taxed when it is spent; by themselves or by their kids etc it doesn't really matter, it will still be taxed.

Probably be need to be a tax on capital leaving the country to make it work though

STRAT
12-07-2011, 10:57 PM
Just another incentive to spend , spend and spend some more as those in charge of the state coffers loot any last penny from those who try to get their head above water. A state dependent nation of debt laden paupers is in Labours best interest.

minimoke
13-07-2011, 07:47 AM
What is your view on CGT Minimoke? For or Against and why?
I'm against.
There is a traditional view that there are four purposes for having taxation. The first is Revenue - a government needs revenue to provide the services which are an outcome of the policy the citizens have voted for. Generally I have no problem with tax as a revenue gatherer. If the citizens are dumb enough to want a Ministry of Womens Affairs (something I think is a total waste of money) I accept this is as an expense that must be paid for and I quietly, but begrudgingly cough up my taxes for this.

A second concept tied to the first is Representation. We can go back to the boston tea party for the good ole adage "No taxation without representation". This is pretty important because it helps keep government honest with how it spends the revenue. National has shat on this concept in Canterbury by removing our right to elect our representatives to Environment Canterbury yet we still have to pay our taxes. I have a major problem with this - this is something that should be rectified before we introduce another tax.

The third concept is repricing. This is a mechanism government uses to try to change behaviour. Cigarette tax is an example where smokers are gouged. Worst yet is the Carbon Tax where we are all gouged on the pretence that little ole NZ can stop the planet from self destruction. Bull**** I say.

The fourth concept is Redistribuiton which is where the government tries to move wealth from the rich to the poor. I have no difficulty with this if the redistribution is to support the needy. I do have a problem with this where the redistribution is to the lazy. Examples of this is payments to benificiaries who have been unemployed for many years during times of low labour supply and with intergenerational state dependency.

Essentially I am against taxes because the Governement is ****ing with us but its the fourth reason, redistribution which leads me to my primary reason from being against a CGT.

I'm of the view that those who create an income and take the risks by investing in the capital that a society needs should be rewarded for getting off their bum. They should not be penalised and I see a CGT as a penalty. If we look at property, there is already a mechanism for a governement to gather revenue from rental property owners and thats through the enforcement of policy which already provides for the taxation of revenue - and I can see owners have, in many cases, used the sale of their property at a price higher than they paid for it as a revenue stream.

If a CGT is to be "fair" it should apply to all gains on capital. That would include any gain I make on the Sharemarket. Now, why would I take a risk by placing my money in a startup company if I don't get a return on the risk I'm taking. If I buy a company and take a low wage so the cash flow is protected in order to grow the business and pay the employees a decent wage why should I then be taxed on the blood and sweat I have put into the business.

Also to be "fair" if my capital looses value should I not be entitled to a tax rebate?

Before we look at a CGT the government should get its house in order around the four "R's". If they were to do this we may just find we don't need an extra tax like CGT.

minimoke
13-07-2011, 08:06 AM
[QUOTE=Aaron;351001][QUOTE=minimoke;350994]

We don't save money for fun, we save so that we can spend in the future don't we?

My idea of abolishing all taxes and implementing a Consumption tax doesn't seem to be gaining any traction - put your post is getting to the point I'm trying to make. A consumption tax gets everyone either now or at some stage. How much fairer can you get than that!

fungus pudding
13-07-2011, 08:15 AM
The only CGT close to being "fair" would be a CGT on all assets including the family home etc and realised or not. Anything else is simply an attempt to shift the tax burden even further onto a politically insignificant minority.

Then why a separate tax? Just treat all gains as income, and eliminate the silly 'intention' test that we have now, and will remain under a separate CGT. But to tax unrealised gains would be a nightmare and quite unworkable, although it would be popular with valuers..

fungus pudding
13-07-2011, 08:33 AM
Well I am not in favour of a CGT so it doesn't bother me that it would be unworkable!


And I'm not too happy about income tax, but to try and decide when capital gain is income - and when it isn't, based on 'intention' is woolly line drawing. Capital gained is always income - like it or not. It is ridiculous to say it is income if earned by a developer, but not income if gained by an investor.

fungus pudding
13-07-2011, 08:59 AM
I think that logically you are right. But then, unrealised capital gain in the value of a domestic residence is then also logically "income".

Is money owing to a business income, or does it only become taxable once received?

fungus pudding
13-07-2011, 09:46 AM
I don't understand the relevance of that comment. From my point of view, I have several unmortaged properties paying me income. The Government gets a good slice of that and I think they should be satisfied with what they get! If the properties go up in value, I would be pissed off to have to pay tax on unrealised gain. If they only tax realised gain, that is inherently unfair and it produces a distortion that may influence my investment decisions. We all know that there are distortions in the system, but there are better ways to specifically address those issues.

I also have unencumbered properties, that's my sole source of income except for a bunch of LPT shares. and pay heaps of tax. I certainly don't want to pay more, but even so I don't see why I shouldn't. It is money earned. There are definitely people, and plenty of them, who play the game solely for capital gain - to date a lot of them have flicked in and out of properties, never made a trading profit, and never paid tax on realising a profit. Good on them - for that is what the rues allow. However the numbers of them doing just that, writing books, running seminars telling others how to do that - it is only a matter of time that this will change. Still, it will be a good few years yet. Goff's mob will never get in so labour will have a new lineup and new policies by the 2014 election. I reckon National will make gains taxable, but it will never be retrospective, so make the most of it over the next 10 or so years.

fungus pudding
13-07-2011, 11:51 AM
I think that is where we differ. I certainly do see why I shouldn't. Tax is being paid on the rent. If the properties suddenly go up in value, well good for me, and if they suddenly go down in value that's my hard luck. What has that got to do with the Government? People get too obsessed about paying tax on all "income" as though that was some kind of natural physical law. Then they get all tied up defining what is income and what isn't income. Address the specific distortions in the system but don't introduce a a new class of tax that is going to whack people already paying more than their fair share and introduce a whole load of new distortions.

I agree - don't introduce a new tax. That is why I say call it all income and tax it on that basis. There has to be a means of getting around the silly intention rule. At present a hairdresser who owns a block of flats, say, then sells after a few years, pays no tax. A builder doing the same thing does. The only way to avoid the distorions as you call them, is to class all gains as income. Think of the positive side - buying would become a lot less competitive meaning we might return to the days where investment flats, commercial etc, will have to be higher yielding to be attractivre to a buyer. Such things have become so competitive that they just make no sense. Taxing profits would deflate the market - although only a little. Most people still earn money in the full knowledge that there efforts will be taxed. The sad part is - most of them do it through being employed. Yuk! :scared:

Jay
13-07-2011, 11:56 AM
I think it should only ever be on realised gains , otherwise what happens if one period they are up next period the value has reduced, so from fp's point of view he/she has not suddenly got all this extra cash to spend because one of his propeites has incresed by $20K, however if this means he can increase rent then will pay the income tax on the increased earnings.
same would apply to shares/Bonds etc.

fungus pudding
13-07-2011, 12:27 PM
I think it should only ever be on realised gains , otherwise what happens if one period they are up next period the value has reduced, so from fp's point of view he/she has not suddenly got all this extra cash to spend because one of his propeites has incresed by $20K, however if this means he can increase rent then will pay the income tax on the increased earnings.
same would apply to shares/Bonds etc.

It can only be on realised gains, it simply can't work any other way. Better still is the American system where it is only paid on exit. They can sell and as long as the money is reinvested within 12 months there is no tax to pay. This allows businesses to expand premises or farmers to step-up to larger holdings, likewise for investors. What's more it allows tax to be paid on retirement. For genuine investors in most cases this will be at a lower rate. At present under our system it is quite possible to flick over a property and spend every cent on a world trip - tax free. Is that fair? Get into it while you can by all means, but don't expect it to last forever.

lissica
14-07-2011, 07:49 AM
I don't think it's going to be limited to property. Conceptually properties are no different to shares or any other business. They derive an income from providing a service (ie shelter).

From the news this morning, it doesn't look like Labour is applying it only to property- it will include shares.

The main issues for me are:
- Our Govt already makes up close to half the economy, it's an excuse to increase taxes and Govt spending
- It introduces more complexity to shares. How do you account for share slits, rights issues, buying and selling various amounts at different times, inflation indexing etc etc. It is one reason I don't invest in Australian shares personally (I'm an Australian tax resident). I do so with a NZ resident company even though it means I can't claim imputation credits- I really can't be bothered calculating CGT

POSSUM THE CAT
14-07-2011, 09:14 AM
Lissica The australian capital gains tax for shares is very simple. If NZ uses the same system it would be very good

gv1
14-07-2011, 12:59 PM
What system does Aus use?

fungus pudding
14-07-2011, 01:15 PM
What system does Aus use?



http://www.ato.gov.au/content/00208572.htm

Don't forget that they have a self funded retiree scheme which is just great for those who do not like paying tax. It's about the only good thing about the whole country. ;)

Anonymous
14-07-2011, 02:53 PM
Not so much CGT itself but you might find the following table interesting.

44% of households are net tax recipients and 17% of households pay 97% of tax.

Taken from: http://www.kiwiblog.co.nz/2011/07/net_taxpayers.html

minimoke
14-07-2011, 03:39 PM
Well I like it!
in the next few years EQC is going to give christchurch landlords brand spanking new houses and they won't have to pay any CGT on its new value. Thats up to five years worth of capital gain with no tax. I reckon theres at least least 6 1/2 years of capital gain and no tax for Cantabrians. Brilliant.

I also like the first $5,000 of income being tax free. Thats less income for me, more for my whanau less tax I pay. Superb!

No GST on fruit and veg. Great. I like fruit and veg and every week my whanaua get loads of the stuff. More loot to me. I wonder if KFC burgers will come down in price - that bit of fresh lettuce has to be a bit cheaper and Phil wants food to be more available to the poor. Excellent stuff.

Now I'm no art buff but I know what I like. Looks like I'm going to have to become a bit more learned so I can tell the difference between a Hotere and a McCahon. My interest in gold has just waned.

I'm really going to fancy those listed companie that plough profits back into growth rather than dividend yield. Two new classes take my fancy. Any listed companies out there that do valuations? Tasty! Also real Estate companies - they will become much more profitable as their fees now become tax deducible. Nice - we need to do what we can to get all those real estate agents back into work.

Pikers will be happy. PRC last sale price is $0.88. They'll be able to carry their losses forward (except they think there won't be any losses because a knight in shining armour is about to snap the mine up and all will be well. You gotta love those guys who thrill at the drill)

So Mr Goff. Not a bad afternoons work. You have a plan. JK may trump you with his cycle way economic prowess but election time will tell.

fungus pudding
14-07-2011, 03:49 PM
Well I like it!
in the next few years EQC is going to give christchurch landlords brand spanking new houses and they won't have to pay any CGT on its new value. Thats up to five years worth of capital gain with no tax. I reckon theres at least least 6 1/2 years of capital gain and no tax for Cantabrians. Brilliant.

I also like the first $5,000 of income being tax free. Thats less income for me, more for my whanau less tax I pay. Superb!

No GST on fruit and veg. Great. I like fruit and veg and every week my whanaua get loads of the stuff.




I can't believe Goff and his mates really think that Fruit and Veg would be cheaper just cos the GST has gone. Within a week the price would be back where it was. They know that. Supply and demand and nothing else sets the price on perishables. Sad to think they would compromise the simplicity of the current system for their own benefit, and no-one elses. Not only that, it would make a big hole in the tax take that will have to come from elsewhere, plus opening up fiddle-room. This is the silliest thing I have ever heard one of the main political parties announce.

PLYNCH
14-07-2011, 03:51 PM
Under Labour does it mean The FIF tax will be dumped?

minimoke
14-07-2011, 04:34 PM
I can't believe Goff and his mates really think that Fruit and Veg would be cheaper just cos the GST has gone.
I think Goff may be a little lactose intolerant. Why keep GST on that nutritional staple, the bottle of milk. Doesn't he want the poor to stop drinking Coke? While we are at it why not take GST of porridge - nothing like a plate of hot gruel to start the day for the underprivileged.

I'l now be interested in how landlords react. We are desperately short of housing stock and we need private individuals to invest in that market since government only holds around 15% of the total stock. If we see landlords retreat govt will need to spend more on housing which will see the CGT head off to more housing purchases by government. Kinda defeats their purpose since they see investment in housing as unproductive.

fungus pudding
14-07-2011, 04:53 PM
I think Goff may be a little lactose intolerant. Why keep GST on that nutritional staple, the bottle of milk. Doesn't he want the poor to stop drinking Coke? While we are at it why not take GST of porridge - nothing like a plate of hot gruel to start the day for the underprivileged.

I'l now be interested in how landlords react. We are desperately short of housing stock and we need private individuals to invest in that market since government only holds around 15% of the total stock. If we see landlords retreat govt will need to spend more on housing which will see the CGT head off to more housing purchases by government. Kinda defeats their purpose since they see investment in housing as unproductive.

Landlords won't care. Nobody will because Labour will not see the treasury benches while Goff is at the helm and the new broom will rework some of this stuff. But that's two elections away. They haven't got a Goff replacement yet unless Clayton Cosgrove has a fling. Hughes has gone. Shane Jones stuffed his chances. Cunliffe would not appeal to the masses. David Parker just aint got it. National are pretty safe for long enough.

lissica
14-07-2011, 06:15 PM
Lissica The australian capital gains tax for shares is very simple. If NZ uses the same system it would be very good

So you buy 6789 shares of XYZ on a particular date, reinvest in their DRP and acquire another 73 shares on another date at a different price, then subscribe to a rights issue on another date at a different price, some time later you sell 357 shares (at a loss), buy back another 900 shares at another date, then another company takes it over using a mixture of script and cash payment.

Now multiply that by however many shares in your portfolio. Is there an easy way around this or do we have to have to spend all day in front of a spreadsheet?

CJ
14-07-2011, 06:29 PM
So you buy 6789 shares of XYZ on a particular date, reinvest in their DRP and acquire another 73 shares on another date at a different price, then subscribe to a rights issue on another date at a different price, some time later you sell 357 shares (at a loss), buy back another 900 shares at another date, then another company takes it over using a mixture of script and cash payment.

Now multiply that by however many shares in your portfolio. Is there an easy way around this or do we have to have to spend all day in front of a spreadsheet?do you use LIFO, FIFO or weighted average?

Halebop
14-07-2011, 07:25 PM
do you use LIFO, FIFO or weighted average?

Cheeky! :P

Waiuta
15-07-2011, 03:23 PM
Perhaps a Financial Transaction Tax would be a better option than the Labour proposal http://www.makefinancework.org/home-english/financial-transaction-tax/1000-economists-for-a-financial/

fungus pudding
15-07-2011, 03:27 PM
Perhaps a Financial Transaction Tax would be a better option than the Labour proposal http://www.makefinancework.org/home-english/financial-transaction-tax/1000-economists-for-a-financial/

Perhaps stopping the waste of our money would be even better still.

fungus pudding
16-07-2011, 11:21 AM
Well once again Labour has shot itself in the foot.

Instead of making the CGT very simple and with no exceptions, they've suggested
a leftist style load of mumbo-jumbo that seeks to 'balance the tax take' along
social engineering lines. Bollocks.

And no GST on fresh foods? More Bollocks!

And more progressive tax on high income earners who are generally salaried
and struggle to hide from tax unlike business owner. Even more Bollocks.

Why don't politians under the KISS principle? (Seems only R Douglas did that when he introducd GST!).

Because among this sad Labour lot I doubt that there is one of them who has any commercial experience, or any they can remember. They simply do not know how the world works. You are right abour Roger Douglas. He rejected CGT because as he put it 'it stops things happening' and his no exemption GST should never be tampered with. It works, and it's simple and leaves little room for dodgy stuff.

777
17-07-2011, 09:43 PM
Think of all the extra people that will be needed in the IRD. Everyone will have to file tax returns again to ensure they only get the first $5,000 tax free. Up goes the state servants numbers again.

Actually I can live with the CGT but I can't agree with the GST being wiped off fruit and vegetables, and the increase in the top tax rate is just a typical Labour "anti success" tax. The first $5,000 tax free is simply a vote bribe. All political and not fiscal.

skeet
20-07-2011, 10:11 AM
No most likely people will only need a PTS, this involves minimal human intervention if requested online.

Billy Boy
22-07-2011, 03:28 PM
CGT is really a tax on inflation !!!!


Purchase Price 500,000

Average Inflation 3%
CGT Cap Gain P/Cent
Year Inflation Cap Gain 15% After Tax Loss
1 515,000 15,000 2,250 12,750 0.44%
2 530,450 30,450 4,568 25,883 0.86%
3 546,364 46,364 6,955 39,409 1.27%
4 562,754 62,754 9,413 53,341 1.67%
5 579,637 79,637 11,946 67,691 2.06%
6 597,026 97,026 14,554 82,472 2.44%
7 614,937 114,937 17,241 97,696 2.80%
8 633,385 133,385 20,008 113,377 3.16%
9 652,387 152,387 22,858 129,529 3.50%
10 671,958 171,958 25,794 146,164 3.84%
11 692,117 192,117 28,818 163,299 4.16%
12 712,880 212,880 31,932 180,948 4.48%
13 734,267 234,267 35,140 199,127 4.79%
14 756,295 256,295 38,444 217,851 5.08%
15 778,984 278,984 41,848 237,136 5.37%
16 802,353 302,353 45,353 257,000 5.65%
17 826,424 326,424 48,964 277,460 5.92%
18 851,217 351,217 52,682 298,534 6.19%
19 876,753 376,753 56,513 320,240 6.45%
20 903,056 403,056 60,458 342,597 6.69%

Cpoied from a spread sheet, Hope it comes out right

Halebop
22-07-2011, 06:58 PM
CGT is really a tax on inflation !!!!



Not if it includes a base allowance for inflation or the risk free rate of return.

winner69
22-07-2011, 07:20 PM
Cunliffe tried to explain that the 15% they went with instead of tax payers marginal rate was in part 'an allowance for inflation'

777
22-07-2011, 08:11 PM
If they get it in then watch the rate increase a year or down the track. The more they get the more they will waste.

Heke
22-07-2011, 11:19 PM
If they get it in then watch the rate increase a year or down the track. The more they get the more they will waste.

Don’t worry 777, they haven’t got a hope of getting in and trying to get in bed with the Greens makes their chances even more remote.
But!! we must all do our part on voting day and keep the idiots out.

fungus pudding
23-07-2011, 08:01 AM
CGT is really a tax on inflation !!!!



That depends on whether the tax is on the nominal gain, as Goff's scheme intends, or the real gain, as is in many countries. Nominal gain is esay to impose and collect, but quite unfair, whereas the real gain leads to huge costs, both for the victim and the IRD.

Billy Boy
23-07-2011, 11:19 AM
That depends on whether the tax is on the nominal gain, as Goff's scheme intends, or the real gain, as is in many countries. Nominal gain is esay to impose and collect, but quite unfair, whereas the real gain leads to huge costs, both for the victim and the IRD.

Belg..... I dont think so.
Fungus....... Yes heg...zak...ally.....
Q. Are we going to see a CGT on Gold ???
What a can of bloody worms that will open !!!
e.g. some people have been accum'ing for years,
how are they going to prove their purchase prices.
and so on !!
BB
P.S. black markets ???

winner69
23-07-2011, 12:33 PM
Belg..... I dont think so.
Fungus....... Yes heg...zak...ally.....
Q. Are we going to see a CGT on Gold ???
What a can of bloody worms that will open !!!
e.g. some people have been accum'ing for years,
how are they going to prove their purchase prices.
and so on !!
BB
P.S. black markets ???

If they ever get it and do this everything involved will be priced/costed as at a certain date .... so Cunliffe said on TV

fungus pudding
23-07-2011, 01:34 PM
If they ever get it and do this everything involved will be priced/costed as at a certain date .... so Cunliffe said on TV


Cunliffe says a lot of things; he is a real worry that boy. Absolutely no idea of commerce and how the world works. :(

Billy Boy
23-07-2011, 02:56 PM
If they ever get it and do this everything involved will be priced/costed as at a certain date .... so Cunliffe said on TV
There is a CGT on Property now. Not enforced,,,, to hard to administer !!! etc. etc.
if IRD cant administer what's in exinstance now, how can they cope with the xtra
workload. Not doing their cause any good at all.
BB

fungus pudding
23-07-2011, 03:30 PM
There is a CGT on Property now. Not enforced,,,, to hard to administer !!! etc. etc.
if IRD cant administer what's in exinstance now, how can they cope with the xtra
workload. Not doing their cause any good at all.
BB

Not really. We don't have a CGT, but capital gained can be considered income, and taxed as income. National have poured heaps into IRD to chase up and tax gains that are really income, and that's fair enough or hard to argue with.

craic
15-08-2011, 10:46 AM
Enforcement in this country is a nightmare - fraud is simple. UK and most places have field teams in place to counter fraud, particularly among beneficiaries. These people turn up in a van and observe. They turn up unannounced on work sites etc. The policy in NZ is that if benefit fraud is reported and as a probation officer, I was bound to report cases over the years, the standard reply was "Oh well we'll get them in" The fraudster only had to go into the office and deny the allegations and that was the end of it. One "boarder" was quite proud of the fact that he had a separate room fully set up as his room which he never used. He paid a minimal board so not to interfere with his partners DPB while he worked full time in a good job. Any capital gains tax will only go to benefits administered from an office and it is cheaper to pay fraudster rather than employ more staff. I know of others on ACC for years who work just about full time in the cash economy.

minimoke
17-08-2011, 10:34 AM
Enforcement in this country is a nightmare - fraud is simple.
The same can be said for immigration. The only reason takeaways are as cheap as they are is due to the illegal migrants working out the back or staff who are paid well under statutory minimums. IRD misses out on loads of tax due to the cash nature of these businesses.

BIRMANBOY
17-08-2011, 11:22 AM
Historically yes, but now with so much being done by eftpost that is changing year by year. You cant hide an electronic transaction. Good for the state coffers..everybody doing their bit.
The same can be said for immigration. The only reason takeaways are as cheap as they are is due to the illegal migrants working out the back or staff who are paid well under statutory minimums. IRD misses out on loads of tax due to the cash nature of these businesses.

Halebop
17-08-2011, 11:53 AM
The same can be said for immigration. The only reason takeaways are as cheap as they are is due to the illegal migrants working out the back or staff who are paid well under statutory minimums. IRD misses out on loads of tax due to the cash nature of these businesses.

In many cases the employees are legally allowed to work but require the employment as a condition of their pending application for permanent residency. Often their employers take advantage of this. I came across an employer just last week who told two (legal) chinese workers they would now be paid 35 hours for their 45 hour work week because business was bad. As both had pending PR applications, they were too scared to rock the boat and risk losing employment so accepted the pay cut. Two workers who already had residency did not get the pay cut. The employer, also a Chinese national resident in NZ driving expensive cars and owning a nice home, belongs to a family whose net worth is in excess of US$100m. Not the kindest advertisment for capitalism (although I suspect a fair representation of chinese capitalism) and not the sort of concept the endears them to a non capital gains environment. Also (now) not my client.

Almost immediately across the road, a Korean restaurant owner has played similar games with two Korean staff, while Kiwi staff and Korean staff with PR status avoided this treatment.

...and I feel I'm fast running out of establishments where I feel morally comfortable just buying a coffee...

Aaron
07-11-2015, 06:26 PM
Obviously wealth taxes such as a capital gains tax, death duties or inheritance tax still unpopular reading the comments at the end of the article. The funny thing is most of the people who come up with the "wealth creator", "politics of envy" diatribe aren't even in the ten percent. If you want smaller govt and lower taxes then go to a country that has these things. Last time I looked Somalia didn't have much central govt interference and I imagine tax rates are pretty low.
http://www.stuff.co.nz/business/opinion-analysis/73792479/wealth-tax-to-beat-inequality--max-rashbrooke

Although that said no idea who Rashbrooke is but certainly am open to his suggestions. Better ask John Key though, he thinks raising a regressive tax like GST so we can make a progressive income tax regime less progressive is a way to make NZ better. Also Mr Rashbrooke doesn't seem to remember honest John has already explained that a capital gains tax is just to difficult to implement. I can only imagine Honest John thinks the top ten percent are doing it tough and wants to help out he is such a nice guy. Did you see him having a beer with the all blacks, great stuff John look forward to the flag vote as I appreciate what a big difference this will make to the welfare of NZers.

iceman
08-11-2015, 06:16 AM
Only one problem with Rashbrook. Inequality in NZ is not rising so the whole argument falls flat at the start. It's been pretty much flatlining since the early 90s http://www.stats.govt.nz/browse_for_stats/snapshots-of-nz/nz-social-indicators/Home/Standard%20of%20living/income-inequality.aspx

Aaron, you sound a bit like Ron Mark. Anyone that doesn't agree with you or didn't arrive in a waka should leave the country !

Aaron
08-11-2015, 11:08 AM
Only one problem with Rashbrook. Inequality in NZ is not rising so the whole argument falls flat at the start. It's been pretty much flatlining since the early 90s http://www.stats.govt.nz/browse_for_stats/snapshots-of-nz/nz-social-indicators/Home/Standard%20of%20living/income-inequality.aspx

Aaron, you sound a bit like Ron Mark. Anyone that doesn't agree with you or didn't arrive in a waka should leave the country !
You misunderstand me about the Somalia quote. Just saying that if you don't like govt and tax have a look at a country that is probably doing without either and see if it is a better place to bring up your kids. Also with the threat of a flight of capital Somalia is probably a country where you could invest and build whereas a more developed country like NZ you might just be bidding up asset prices rather than adding any real value.

Your proposition that the income equality survey somehow shows NZ being a fairer place> I haven't spent the time to question it but I would note it is an "income inequality" survey. Once you hit $70k income you might as well have the money taxed in the family trust or leave it in the company if you are reinvesting it. I would note for many years farmers have been mortgaged to the hilt taking big risks(or so it seemed until recently when central banks main goal is to protect banks and borrowers) buying another farm instead of paying more tax. The reasons for this are two fold you get capital gain from the land and if you pay enough interest to the bank your income will be reduced enough so that you can get family assistance or maybe your kids can qualify for student allowance. If anything the "income" survey like our tax system ignores wealth and capital gains.

Aaron
15-11-2015, 10:32 AM
Only one problem with Rashbrook. Inequality in NZ is not rising so the whole argument falls flat at the start. It's been pretty much flatlining since the early 90s http://www.stats.govt.nz/browse_for_stats/snapshots-of-nz/nz-social-indicators/Home/Standard%20of%20living/income-inequality.aspx!
I read in the Herald Saturday that a some of the wealthiest people in NZ ONLY HAVE AN INCOME OF $70,000. This would tend to show your argument inequality isn't rising because of an income equality survey is not correct. Income will become even more equal as everyone who is able will cap their income at $70k. Totally ignores wealth though as we ignore wealth taxes and death and inheritance taxes.

Aaron
16-11-2015, 11:08 AM
Just to ram a point home there iceman.
http://www.nbr.co.nz/opinion/who-are-new-zealand-real-rich-results-may-surprise-you

Aaron
20-11-2015, 08:06 AM
Only one problem with Rashbrook. Inequality in NZ is not rising so the whole argument falls flat at the start.!
No reply iceman? Does this mean you've better things to do or that your arguments are bulls**t?
I guess it would be more productive discussing the Sanford result than arguing over this.

GTM 3442
20-11-2015, 07:34 PM
I read in the Herald Saturday that a some of the wealthiest people in NZ ONLY HAVE AN INCOME OF $70,000. This would tend to show your argument inequality isn't rising because of an income equality survey is not correct. Income will become even more equal as everyone who is able will cap their income at $70k. Totally ignores wealth though as we ignore wealth taxes and death and inheritance taxes.


Tax is the price you pay for civilization, but there is also no requirement to structure your affairs so that you pay the most tax possible.

As your income rises, there is a tendency for your wealth to rise also. Once your income/wealth combination reaches or passes a certain point, it becomes an option to structure your affairs so that you minimize your tax obligations.

If, for example, the top tax rate kicks in at $70,000pa income, I would expect there to be a lot of people who can control their taxable income who turn out to have an income of $65-69,999pa.

Personally, as an honest man, I always try to pay the right amount of tax.

GTM 3442
20-11-2015, 07:35 PM
I read in the Herald Saturday that a some of the wealthiest people in NZ ONLY HAVE AN INCOME OF $70,000. This would tend to show your argument inequality isn't rising because of an income equality survey is not correct. Income will become even more equal as everyone who is able will cap their income at $70k. Totally ignores wealth though as we ignore wealth taxes and death and inheritance taxes.


Tax is the price you pay for civilization, but there is also no requirement to structure your affairs so that you pay the most tax possible.

As your income rises, there is a tendency for your wealth to rise also. Once your income/wealth combination reaches or passes a certain point, it becomes an option to structure your affairs so that you minimize your tax obligations.

If, for example, the top tax rate kicks in at $70,000pa income, I would expect there to be a lot of people who can control their taxable income who turn out to have an income of $65-69,999pa.

Personally, as an honest man, I always try to pay the right amount of tax.

Aaron
23-11-2015, 07:28 AM
Tax is the price you pay for civilization, but there is also no requirement to structure your affairs so that you pay the most tax possible.

As your income rises, there is a tendency for your wealth to rise also. Once your income/wealth combination reaches or passes a certain point, it becomes an option to structure your affairs so that you minimize your tax obligations.

If, for example, the top tax rate kicks in at $70,000pa income, I would expect there to be a lot of people who can control their taxable income who turn out to have an income of $65-69,999pa.

Personally, as an honest man, I always try to pay the right amount of tax.
You misunderstand me GTM 3442 all I am saying is that an income equality survey isn't especially helpful in establishing the need/benefit of a capital gains tax and says absolutely nothing about the distribution of wealth in NZ. I have no problem people capping their income, the company still pays tax at 28% or the Trust at 33%.

GTM 3442
26-11-2015, 06:10 PM
You misunderstand me GTM 3442 all I am saying is that an income equality survey isn't especially helpful in establishing the need/benefit of a capital gains tax and says absolutely nothing about the distribution of wealth in NZ. I have no problem people capping their income, the company still pays tax at 28% or the Trust at 33%.

Deciding how much tax to raise, and what form of economic activity to tax are both political decisions.

An income (in)equality survey is one tool for the people making those decisions - if they decide to use it

But once those decisions are made, patterns of economic activity will change to take account of the cost of the (new) tax(es). The history of taxation is liberally bestrewn with unintended and unforseen consequences.

As an aside, companies have more scope than many (most?) individuals to control their taxable income.

Aaron
09-10-2017, 09:22 AM
I like this guy's view on capital gains tax. Maybe I should switch to BNZ.
https://www.stuff.co.nz/business/money/97676478/bnz-ceo-calls-for-capital-gains-tax

No point in bringing in a capital gains tax at what might be the height of the "everything bubble" though. Although everything is probably fairly valued in today's interest rate environment. As I have said before if we get to negative interest rates there is no limit to asset prices anymore. Why with all the talk of populism, increasing wealth inequality etc are people not discussing the whole monetary system and whether 2% rising prices is the perfect solution to all our problems.

winner69
09-10-2017, 09:31 AM
I like this guy's view on capital gains tax. Maybe I should switch to BNZ.
https://www.stuff.co.nz/business/money/97676478/bnz-ceo-calls-for-capital-gains-tax

No point in bringing in a capital gains tax at what might be the height of the "everything bubble" though. Although everything is probably fairly valued in today's interest rate environment. As I have said before if we get to negative interest rates there is no limit to asset prices anymore. Why with all the talk of populism, increasing wealth inequality etc are people not discussing the whole monetary system and whether 2% rising prices is the perfect solution to all our problems.

Healy and banks are the cause of these perceived housing problems

minimoke
09-10-2017, 09:45 AM
I like this guy's view on capital gains tax. Maybe I should switch to BNZ.
https://www.stuff.co.nz/business/money/97676478/bnz-ceo-calls-for-capital-gains-tax
.
Back in May he was talking about joined up solutions. "…. but point is we have a housing affordability crisis so debate on baby boomers vs gen Y doesn't help," Healy wrote on Twitter. "We need joined-up solutions from council, govt, private sector and NFP's”

No mention of CGT then.

Aaron
09-10-2017, 10:20 AM
Healy and banks are the cause of these perceived housing problems

I would have said global central bank policy(low interest rates & easy money & inflation to clear debt) and immigration were the main causes at a guess. Banks seem to be getting a bit tougher re lending.
The expansion of the Chinese banking system from what I read is quite spectacular maybe some of this funny money is buying Auckland property.

Aaron
09-10-2017, 10:28 AM
Back in May he was talking about joined up solutions. "…. but point is we have a housing affordability crisis so debate on baby boomers vs gen Y doesn't help," Healy wrote on Twitter. "We need joined-up solutions from council, govt, private sector and NFP's”

No mention of CGT then.

Not sure I get your point but agree that the boomers vs gen x,y,z,etc shouldn't be a focus on the housing affordability debate. Solutions joined up or disjointed are required. More houses built deals with supply, restrictions on foreign ownership could reduce demand. Cross the board capital gain tax reduces the tax advantages. This also comes back to the central bank policy as well. Policy is for 2% inflation so rents are rising while debt reduction gets 2% easier each year. I guess everyone has cottoned onto this and therefore buying houses even at elevated levels should pay off long term provided central banks(and the financial system) have their backs.

winner69
09-10-2017, 11:23 AM
I would have said global central bank policy(low interest rates & easy money & inflation to clear debt) and immigration were the main causes at a guess. Banks seem to be getting a bit tougher re lending.
The expansion of the Chinese banking system from what I read is quite spectacular maybe some of this funny money is buying Auckland property.

Have you ever wondered why such a large %age of bank lending is in residential mortgages .....and the virtuous cycle that causes.

Aaron
09-10-2017, 03:05 PM
Have you ever wondered why such a large %age of bank lending is in residential mortgages .....and the virtuous cycle that causes.

I had assumed it is because it is easier to value an existing house rather than a start up business with no history for making a profit or for that matter an existing business.
Also houses never go down in value so it is a sure bet.

fungus pudding
09-10-2017, 03:08 PM
CJ they only need to use the Australian system very simple

It's not tht simple, and it has done more harm than good.

GTM 3442
09-10-2017, 06:05 PM
Lots and lots of lovely opinions, all good stuff.

But a CGT changes the basis of taxation. And that deserves a thorough airing, certainly more than "Do we exclude the family home?"

At present, taxation is generally transaction-based. I buy a cellphone, there's GST on the value of the transaction. I have a job, and earn $10,000 a month, There's PAYE on the value of the payment.

Money has changed hands through an easily-identifiable transaction

However CGT may be triggered by a transaction, but the amount of tax payable is not based on the value of the transaction, but on a separate, derived value.

Now, what is going to be the first thing that occurs to the fertile mind? Why it's something like "CGT? Right then, let's not have a transaction that triggers a CGT. Now how can we do that".

Jay
09-10-2017, 07:16 PM
I will sell you this house for what I paid for it, thank you GTM, you are very generous so I will gift you $x :)

Baa_Baa
09-10-2017, 07:48 PM
Lots and lots of lovely opinions, all good stuff.

But a CGT changes the basis of taxation. And that deserves a thorough airing, certainly more than "Do we exclude the family home?"

At present, taxation is generally transaction-based. I buy a cellphone, there's GST on the value of the transaction. I have a job, and earn $10,000 a month, There's PAYE on the value of the payment.

Money has changed hands through an easily-identifiable transaction

However CGT may be triggered by a transaction, but the amount of tax payable is not based on the value of the transaction, but on a separate, derived value.

Now, what is going to be the first thing that occurs to the fertile mind? Why it's something like "CGT? Right then, let's not have a transaction that triggers a CGT. Now how can we do that".


Yes, it's vexed, very complicated and unlikely to be equitable, which is why NZ politicians have avoided it for fear of retribution which will surely follow any form of implementation.

GTM 3442
09-10-2017, 10:02 PM
I will sell you this house for what I paid for it, thank you GTM, you are very generous so I will gift you $x :)

That's very good of you Jay, and I really appreciate the offer, but having a house would cause me all sorts of problems! So thanks, but no thanks.

minimoke
10-10-2017, 05:19 AM
I will sell you this house for what I paid for it, thank you GTM, you are very generous so I will gift you $x :)
Good plan - though your gifting is limited to $6,000 per annum per gifter if you are close to needing residential care.

If not, you will need a house to move into and boy have I got a deal for you. As part of my house sale I am willing to part with my priceless bathroom mirror. While I say priceless I would be prepared to let you have it for $50,000. (Learnt that one off Labours art auctions!)

minimoke
10-10-2017, 05:22 AM
That's very good of you Jay, and I really appreciate the offer, but having a house would cause me all sorts of problems! So thanks, but no thanks.
I'm sure GMT you must have some capital somewhere we can tax so any tax is equitable across all asset classes

Jay
10-10-2017, 07:13 AM
Good plan - though your gifting is limited to $6,000 per annum per gifter if you are close to needing residential care.

If not, you will need a house to move into and boy have I got a deal for you. As part of my house sale I am willing to part with my priceless bathroom mirror. While I say priceless I would be prepared to let you have it for $50,000. (Learnt that one off Labours art auctions!)

Yes there would be holes everywhere that some smart people would find

fungus pudding
10-10-2017, 07:31 AM
Yes, it's vexed, very complicated and unlikely to be equitable, which is why NZ politicians have avoided it for fear of retribution which will surely follow any form of implementation.

It's also quite pointless unless ALL real estate is included. Primary residence et al.

Aaron
10-10-2017, 07:50 AM
It's also quite pointless unless ALL real estate is included. Primary residence et al.

No argument from me on that point.

minimoke
10-10-2017, 07:51 AM
It's also quite pointless unless ALL real estate is included. Primary residence et al.
Arguably it would be quite pointless unless ALL capital is included.

fungus pudding
10-10-2017, 08:45 AM
Arguably it would be quite pointless unless ALL capital is included.

All capital? Do you mean all capital gains?

minimoke
10-10-2017, 09:16 AM
All capital? Do you mean all capital gains?
Any gain on a wealth generating asset

fungus pudding
10-10-2017, 09:33 AM
Any gain on a wealth generating asset

There's got to be a limit. Collectables, wine collections, stamp collections, art, vintage cars, antiques - and there's still that definition game which will plague cgt on real estate. It's a major problem, e'g' does a coin collector/dealer pay income tax on profits - or CGT on gains. (Credits on losses?) or should capital gains simply be treated as income with no special tax rate? There's an endless list where collecting tax would reult in a loss to the taxman. Besides, such things are close to impossible to trace.
NZ's system of intention is not perfect, but overall it's certainly better than any half-baked CGT plan. But if we introduce CGT at all it will be half-baked at best and do little more than appease the envious. To introduce a proper and effective CGT would be political hara-kiri.

Sgt Pepper
10-10-2017, 09:56 AM
Good plan - though your gifting is limited to $6,000 per annum per gifter if you are close to needing residential care.

If not, you will need a house to move into and boy have I got a deal for you. As part of my house sale I am willing to part with my priceless bathroom mirror. While I say priceless I would be prepared to let you have it for $50,000. (Learnt that one off Labours art auctions!)

Are you not a Labour Party voter? Gosh.. I never would have guessed!

minimoke
10-10-2017, 10:17 AM
There's got to be a limit. Agreed - at some point the cost of collection will outweigh tax gained. But with IRD big expensive new IT system the range can be expanded

Collectables, wine collections, stamp collections, art, vintage cars, antiques - and there's still that definition game which will plague cgt on real estate. It's a major problem, e'g' does a coin collector/dealer pay income tax on profits - or CGT on gains. (Credits on losses?) or should capital gains simply be treated as income with no special tax rate? There's an endless list where collecting tax would result in a loss to the taxman. Besides, such things are close to impossible to trace.It will depend on the definitions. But it will be important to over all wealth generating asset classes so people aren't motivated to shift from a CGT class to a none CGT class.

No you wont get a credit for losses - this is about collecting tax off the wealthy, you would not want to disadvantage those that make bad decisions by giving them credits they couldn't use.

A coin collector would pay CGT on any gain as he isn't in the business of trading coins. A coin dealer would pay tax on profits made.

Things are now easier to trace thanks to technology (for example your car - take it for a WOF and the garage knows if it is the registration has been paid). Put something into your asset definition - say "artwork". Its given an asset number registered with IRD. Its scanned on purchase. Scanned on resale. Its accounted for in the annual tax return.

NZ's system of intention is not perfect, but overall it's certainly better than any half-baked CGT plan. But if we introduce CGT at all it will be half-baked at best and do little more than appease the envious. To introduce a proper and effective CGT would be political hara-kiri.

CGT would be guaranteed to make accountants and solicitors wealthier - and isnt that an irony. The clever would remain clever and find ways of avoiding CGT. In the end the risk is cost of implementation greater than tax gained. But that's not the point - we have to get rid of poverty and lessening the gap between the haves and the have nots and if a half baked CGT gives the appearance of achieving that then all is good

minimoke
10-10-2017, 10:22 AM
Are you not a Labour Party voter? Gosh.. I never would have guessed!

I do admire the way they legitimately launder money.

fungus pudding
10-10-2017, 10:34 AM
No you wont get a credit for losses - this is about collecting tax off the wealthy, you would not want to disadvantage those that make bad decisions by giving them credits they couldn't use.

A coin collector would pay CGT on any gain as he isn't in the business of trading coins. A coin dealer would pay tax on profits made.


If CGT was treated simply as income without a separate tax rate, then it wouldn't make any difference. Both the collector and the dealer would pay tax at their marginal rate. That's an important point in designing a workable CGT, and stops the definition argument in its tracks, provided the collector can deduct his losses as the dealer would; and it's ridiculous to tax gains and not credit losses.

minimoke
10-10-2017, 11:02 AM
and it's ridiculous to tax gains and not credit losses. I dont think it likely at all Labour (or anyone) would provide for tax credits on losses. Imagine how we would start accounting for our transactions then! Much simpler to just tax the wealthy on gains made and leave them to wear their own loses. (this approach is consistent with our current PAYE approach - you get taxed solely on income. There are no credits available for costs incurred in making that income)

blackcap
10-10-2017, 11:04 AM
I dont think it likely at all Labour (or anyone) would provide for tax credits on losses. )

If that scenario eventuated then everyone would become a "trader" Ie sell family home, make it you are in the business of buying and selling property and hey presto you can claim all sorts of things. So they would have to credit losses or else there is another thriving industry. CGT is a huge mess either way.

GTM 3442
10-10-2017, 07:12 PM
I'm sure GMT you must have some capital somewhere we can tax so any tax is equitable across all asset classes

Oh, I certainly have capital, but it's the popping it into property that would potentially give me problems.

GTM 3442
10-10-2017, 07:22 PM
If that scenario eventuated then everyone would become a "trader" Ie sell family home, make it you are in the business of buying and selling property and hey presto you can claim all sorts of things. So they would have to credit losses or else there is another thriving industry. CGT is a huge mess either way.

I'm inclined to think that after a few years of the distortions that a CGT would create, it would morph seamlessly into a simple wealth tax. After all, isn't that the aim?

GTM 3442
10-10-2017, 09:55 PM
If that scenario eventuated then everyone would become a "trader" Ie sell family home, make it you are in the business of buying and selling property and hey presto you can claim all sorts of things. So they would have to credit losses or else there is another thriving industry. CGT is a huge mess either way.

No, it would just mean that the proceeds of the sale of some specified types of assets would be taxable on any gain made on cost or book value, after certain allowances.

As to who defines the asset types affected, who defines which allowances, who defines "cost", that's a different story.

Nothing to do with "trading" at all.

blackcap
11-10-2017, 06:46 AM
No, it would just mean that the proceeds of the sale of some specified types of assets would be taxable on any gain made on cost or book value, after certain allowances.

l.

Exactly you would be able to claim costs if you are a trader, which normally you would not be able to do. So losses incurred as a trader would be tax deductible. So a capital gains tax yes, but if you have a capital loss you can use that to offset income.

Ie currently as a share investor I do not pay capital gains tax on my "winners", however I cannot offset my "losers" against income. If I was a trader however I can offset losses against winners. But I chose not to under the current scenario because my winners are greater than my losers. (I can also claim expenses currently against my income from dividends etc). However if a capital gains tax on shares were to be introduced, I would become a "share trader" and thus be able to offset "losers" as well against the "winners" and income.

RGR367
11-10-2017, 02:55 PM
.................................
However if a capital gains tax on shares were to be introduced, I would become a "share trader" and thus be able to offset "losers" as well against the "winners" and income.

I would be joining you as a trader too bc :cool: if it happens.

777
11-10-2017, 04:14 PM
You would be a trader by default anyway.

craic
11-10-2017, 04:37 PM
The main reason that savvy politicians, like John Key, and others avoided capital gains tax is the bottom line - you will get a return from the winners, less all their costs - but you will spend most of it on the losers, who will be experts on how and what to claim. And the cost of multitude of public servants you will need to operate the system will only be offset by the reduction in unemployment ( of public servants). Simple tax systems like GST are far more efficient at taking money from the public to fund the public. Imagine the rise in "cash jobs" if there is capital gains tax. I will have to pay more than two bottles of my Jim Beam to get my driveway restored after a storm. I may have to go to Jack Daniels by four and that costs me $40 to make. It might be cheaper to concrete my driveway but I would have to find a concrete truck driver who will drop his left overs as he passed.

fungus pudding
11-10-2017, 04:44 PM
The main reason that savvy politicians, like John Key, and others avoided capital gains tax is the bottom line - you will get a return from the winners, less all their costs - but you will spend most of it on the losers, who will be experts on how and what to claim. And the cost of multitude of public servants you will need to operate the system will only be offset by the reduction in unemployment ( of public servants). Simple tax systems like GST are far more efficient at taking money from the public to fund the public. Imagine the rise in "cash jobs" if there is capital gains tax. I will have to pay more than two bottles of my Jim Beam to get my driveway restored after a storm. I may have to go to Jack Daniels by four and that costs me $40 to make. It might be cheaper to concrete my driveway but I would have to find a concrete truck driver who will drop his left overs as he passed.

That all depends on the rules that would be adopted. That's an unknown.

Aaron
12-10-2017, 11:07 AM
Can someone update Bill English and all the self-centred, selfish retards who voted National at the last elections.

http://www.msn.com/en-nz/money/news/imf-calls-for-higher-taxes-on-the-wealthy/ar-AAtjovS?li=AA4Zjm&ocid=spartanntp

National will probably propose raising the GST rate again as they seem to prefer regressive taxes to progressive ones.

iceman
12-10-2017, 11:10 AM
Can someone update Bill English and all the self-centred, selfish retards who voted National at the last elections.

http://www.msn.com/en-nz/money/news/imf-calls-for-higher-taxes-on-the-wealthy/ar-AAtjovS?li=AA4Zjm&ocid=spartanntp

National will probably propose raising the GST rate again as they seem to prefer regressive taxes to progressive ones.

That is 46% of NZ voters you are so graciously talking about ! Talk about sore losers.

couta1
12-10-2017, 11:27 AM
Can someone update Bill English and all the self-centred, selfish retards who voted National at the last elections.

http://www.msn.com/en-nz/money/news/imf-calls-for-higher-taxes-on-the-wealthy/ar-AAtjovS?li=AA4Zjm&ocid=spartanntp

National will probably propose raising the GST rate again as they seem to prefer regressive taxes to progressive ones. A lot of those so called retards are the ones that keep this country going by providing jobs for those who want to work, in contrast to a lot of the no hopers who voted for the other side who simply want to suck of the taxes of the hard working via benefits.

fungus pudding
12-10-2017, 11:31 AM
Can someone update Bill English and all the self-centred, selfish retards who voted National at the last elections.

http://www.msn.com/en-nz/money/news/imf-calls-for-higher-taxes-on-the-wealthy/ar-AAtjovS?li=AA4Zjm&ocid=spartanntp

National will probably propose raising the GST rate again as they seem to prefer regressive taxes to progressive ones.

GST is not regressive. It is a flat tax.

minimoke
12-10-2017, 11:45 AM
Can someone update Bill English and all the self-centred, selfish retards who voted National at the last elections.

http://www.msn.com/en-nz/money/news/imf-calls-for-higher-taxes-on-the-wealthy/ar-AAtjovS?li=AA4Zjm&ocid=spartanntp

National will probably propose raising the GST rate again as they seem to prefer regressive taxes to progressive ones.
If I could be bothered updating Bill English I'd be asking him to introduce an Effort Index. That is, an index which shows how much effort people put into their lives and measure their decision making. We could then over lay the Effort Index with the Income Index and get a much clearer picture of Inequality.

Aaron
12-10-2017, 01:25 PM
That is 46% of NZ voters you are so graciously talking about ! Talk about sore losers.

It is what it is we all had our say for the next three years no point getting upset about it. I hope Winston goes with National. If I am right about a financial market collapse in the near future whoever is in power at the time will probably get blamed.

Aaron
12-10-2017, 01:27 PM
If I could be bothered updating Bill English I'd be asking him to introduce an Effort Index. That is, an index which shows how much effort people put into their lives and measure their decision making. We could then over lay the Effort Index with the Income Index and get a much clearer picture of Inequality.

I put a lot of "effort" into my posts on sharetrader but you might have to weigh effort against usefulness, benefit to society or productivity.

Aaron
12-10-2017, 01:31 PM
GST is not regressive. It is a flat tax.
We have been over this and I have explained it to you, that is all I can do unfortunately.

fungus pudding
12-10-2017, 01:36 PM
We have been over this and I have explained it to you, that is all I can do unfortunately.

There is nothing to explain. GST is a flat tax of 15%. That is precisely what the end user pays. Full stop.

Aaron
12-10-2017, 01:38 PM
Inflammatory comments aside nice to see that some smart people think we should look at a capital gains tax. I know I am a dummy so it is good to have smart people consider the issue.

blackcap
12-10-2017, 01:44 PM
We have been over this and I have explained it to you, that is all I can do unfortunately.

Gst probably affects those that earn more and have more disproportionately as well. Most lower income people spend the majority of their income on rent, which has no GST component. Those with more disposable income as a % would spend more GST. So GST is a progressive tax in my humble opinion.

Aaron
12-10-2017, 02:08 PM
Gst probably affects those that earn more and have more disproportionately as well. Most lower income people spend the majority of their income on rent, which has no GST component. Those with more disposable income as a % would spend more GST. So GST is a progressive tax in my humble opinion.

Maybe you could give us an example with actual figures to prove your point.

minimoke
12-10-2017, 02:20 PM
I put a lot of "effort" into my posts on sharetrader but you might have to weigh effort against usefulness, benefit to society or productivity.
Done. I would be happy with a Productivity Index, which can be overlaid with an Income Index

minimoke
12-10-2017, 02:35 PM
We have been over this and I have explained it to you, that is all I can do unfortunately.
I'm going to agree with FP on this one - I dont really see GST as being Regressive. Sure I understand the argument that a regressive tax takes more of a poor persons income that it does a rich person income. And to some extent that can be true - but not in New zealand.

The reasons being is that here the first $14,000 of everyone's income gets taxed at 10.5%. People earning this level pay 15% GST equally. If you are earning $14,000 chances are you will be "poor". Doesn't matter if you are rich or poor you are still paying the same amount of tax out of this income as a rich person.

Income from $14,001 - $48,000 gets taxed at 17.5% and GST stays at 15%. People are now moving out of "poor" to "average" earnings and above the so called "living wage". Again doesn't matter if you are rich or poor or average you are still all paying the same amount of tax.

If you are earning above average wage from $48,000 to $70,000 and no longer poor you will pay 30% of your income in tax. At this point you are no longer paying for the necessities in life like rent or mortgage. you are moving now into more discretionary spending which the poor dont spend. Since they don't spend here their income is no longer disproportionate to their tax. its at this point the average to well off start paying more tax than the poor.

As for those earning over $70,000 they are paying 33% for things the poor will never buy. Paying way more tax than the poor. GST isnt regressive because its not impacting on the poor at this level.

Aaron
12-10-2017, 02:45 PM
I'm going to agree with FP on this one - I dont really see GST as being Regressive. Sure I understand the argument that a regressive tax takes more of a poor persons income that it does a rich person income. And to some extent that can be true - but not in New zealand.

The reasons being is that here the first $14,000 of everyone's income gets taxed at 10.5%. People earning this level pay 15% GST equally. If you are earning $14,000 chances are you will be "poor". Doesn't matter if you are rich or poor you are still paying the same amount of tax out of this income as a rich person.

Income from $14,001 - $48,000 gets taxed at 17.5% and GST stays at 15%. People are now moving out of "poor" to "average" earnings and above the so called "living wage". Again doesn't matter if you are rich or poor or average you are still all paying the same amount of tax.

If you are earning above average wage from $48,000 to $70,000 and no longer poor you will pay 30% of your income in tax. At this point you are no longer paying for the necessities in life like rent or mortgage. you are moving now into more discretionary spending which the poor dont spend. Since they don't spend here their income is no longer disproportionate to their tax. its at this point the average to well off start paying more tax than the poor.

As for those earning over $70,000 they are paying 33% for things the poor will never buy. Paying way more tax than the poor. GST isnt regressive because its not impacting on the poor at this level.

Your example is using income tax. A progressive income tax. No arguments from me in that regard.
Post #72 on this thread if your still unsure.
Blackcap may have a point especially if you add in bank fees and interest on pay day loans. But these specific examples apply in specific cases it doesn't change the fact that GST is regressive. Why have most other countries exempted basic foodstuffs. We will never agree. Re-read post #72 and if you still don't get it too bad.

stoploss
12-10-2017, 02:47 PM
I'm going to agree with FP on this one - I dont really see GST as being Regressive. Sure I understand the argument that a regressive tax takes more of a poor persons income that it does a rich person income. And to some extent that can be true - but not in New zealand.

The reasons being is that here the first $14,000 of everyone's income gets taxed at 10.5%. People earning this level pay 15% GST equally. If you are earning $14,000 chances are you will be "poor". Doesn't matter if you are rich or poor you are still paying the same amount of tax out of this income as a rich person.

Income from $14,001 - $48,000 gets taxed at 17.5% and GST stays at 15%. People are now moving out of "poor" to "average" earnings and above the so called "living wage". Again doesn't matter if you are rich or poor or average you are still all paying the same amount of tax.

If you are earning above average wage from $48,000 to $70,000 and no longer poor you will pay 30% of your income in tax. At this point you are no longer paying for the necessities in life like rent or mortgage. you are moving now into more discretionary spending which the poor dont spend. Since they don't spend here their income is no longer disproportionate to their tax. its at this point the average to well off start paying more tax than the poor.

As for those earning over $70,000 they are paying 33% for things the poor will never buy. Paying way more tax than the poor. GST isnt regressive because its not impacting on the poor at this level.

Not to mention any WFF tax credits as well .......

fungus pudding
12-10-2017, 03:12 PM
Your example is using income tax. A progressive income tax. No arguments from me in that regard.
Post #72 on this thread if your still unsure.
Blackcap may have a point especially if you add in bank fees and interest on pay day loans. But these specific examples apply in specific cases it doesn't change the fact that GST is regressive. Why have most other countries exempted basic foodstuffs. We will never agree. Re-read post #72 and if you still don't get it too bad.

Exempting basic foodstuffs is plain stupid; particularly so with perishables. NZ's GST all inclusive systrem is the envy of tax collectors the world over. Leave GST as is and exempt the first $XXXX of income tax - a much better idea.

minimoke
12-10-2017, 03:16 PM
Why have most other countries exempted basic foodstuffs. We will never agree. Re-read post #72 and if you still don't get it too bad.
If you exempt GST on basic foodstuffs the gap between rich and poor remains. Doesnt change the fact that the first $23,000 (from post #72) of income get taxed and spent on basics the same way.

Thats putting aside the inconvenience that while the rich and poor may save a bit on their basic foodstuffs the overall tax take has declined and the cost of managing taxes has gone up (more bean counters to figure out if rice is basic and if so is sushi, or a bowl of rice at the Indian takeaway?

So what do you do. You have to make up the tax shortfall so you could up the rate of GST to 16% which affect the poor and wealthy equally. Or you put up other taxes. Which will either impact on the poor or incentivise the rich to reclassify their income / assets.

minimoke
12-10-2017, 03:18 PM
Not to mention any WFF tax credits as well .......
(ah - the old benefit where the less you earn the more you get paid)

Aaron
12-10-2017, 03:45 PM
Exempting basic foodstuffs is plain stupid; particularly so with perishables. NZ's GST all inclusive systrem is the envy of tax collectors the world over. Leave GST as is and exempt the first $XXXX of income tax - a much better idea.

I don't disagree. Keep it simple, I was just using the foodstuffs as an example of other countries recognising that GST is a regressive tax and trying to make it less so by exempting basic necessities.
It would seem that legislators around the globe can recognise the regressive nature of GST but posters on this site are unable to. Sometimes when you are self centred it is hard to accept things that don't fit with your beliefs.

minimoke
12-10-2017, 04:05 PM
It would seem that legislators around the globe can recognise the regressive nature of GST but posters on this site are unable to. Sometimes when you are self centred it is hard to accept things that don't fit with your beliefs.
Lets look at your numbers.

Say a person earn $48,000 gross with 2 kids. pretty much the average wage and not in poverty. If they spend $23,000 on necessities that's $66 a week goes to GST. Take the gross $923 a week, less tax plus working for families this person ends up with $849 in the hand. Less than they earned

Say a person earns $23,000 gross and has 2 kids. And If they spend $23,000 on necessities that's $66 a week goes to GST. That's a gross of $364 a week less tax plus working for families this person ends up with $667 in the hand. More than they earned.

So while they both paid the same GST the poor person actually ends up better off. Thus GST is a smaller portion of income for the poor than it is for the average.

fungus pudding
12-10-2017, 04:37 PM
Lets look at your numbers.

Say a person earn $48,000 gross with 2 kids. pretty much the average wage and not in poverty. If they spend $23,000 on necessities that's $66 a week goes to GST. Take the gross $923 a week, less tax plus working for families this person ends up with $849 in the hand. Less than they earned

Say a person earns $23,000 gross and has 2 kids. And If they spend $23,000 on necessities that's $66 a week goes to GST. That's a gross of $364 a week less tax plus working for families this person ends up with $667 in the hand. More than they earned.

So while they both paid the same GST the poor person actually ends up better off. Thus GST is a smaller portion of income for the poor than it is for the average.

It's actually worse than that. Presumably a fair chunk of that $23,000 will go on rent or mortgage interest - that portion is exempt from GST. Whereas diligent hard-workers like myself, who don't bother with renting or having a mortgage, pay GST on every dollar we spend.

Aaron
12-10-2017, 04:48 PM
Lets look at your numbers.

Say a person earn $48,000 gross with 2 kids. pretty much the average wage and not in poverty. If they spend $23,000 on necessities that's $66 a week goes to GST. Take the gross $923 a week, less tax plus working for families this person ends up with $849 in the hand. Less than they earned

Say a person earns $23,000 gross and has 2 kids. And If they spend $23,000 on necessities that's $66 a week goes to GST. That's a gross of $364 a week less tax plus working for families this person ends up with $667 in the hand. More than they earned.

So while they both paid the same GST the poor person actually ends up better off. Thus GST is a smaller portion of income for the poor than it is for the average.

You really make things complicated Minimoke. Now we are discussing working for families. (I would note GST on $23,000 is $3,000.00 or $57.69 per week but that is being pedantic.)

Without going over the figures in any great detail can I assume that you and Blackcap would like me to factor in the housing situation, children, consumption level and marginal income tax rates of every individual in NZ before I can safely say that GST is a regressive tax. I'll get back to you shortly.....

Aaron
12-10-2017, 04:58 PM
It's actually worse than that. Presumably a fair chunk of that $23,000 will go on rent or mortgage interest - that portion is exempt from GST. Whereas diligent hard-workers like myself, who don't bother with renting or having a mortgage, pay GST on every dollar we spend.

Having a mortgage free house rising in value each year, it must be infuriating seeing the less well off and young avoiding paying their fair share of GST by spending all their income on rent. Lucky we can still get them when they buy food so they can contribute like you aye FP.

fungus pudding
12-10-2017, 05:09 PM
Having a mortgage free house rising in value each year, it must be infuriating seeing the less well off and young avoiding paying their fair share of GST by spending all their income on rent. Lucky we can still get them when they buy food so they can contribute like you aye FP.

Not at all. It doesn't infuriate me and neither it should. Yes. I'm absolutely sure I pay more GST than said family who earns $23000 and rents. They should contribute just like I do when they spend of course. Just as their weetbix and underwear, their soap and shoe laces cost the same as mine. You must be terribly disappointed the retailers and manufacturers don't give them a discount.

minimoke
12-10-2017, 06:31 PM
You really make things complicated Minimoke. Now we are discussing working for families. (I would note GST on $23,000 is $3,000.00 or $57.69 per week but that is being pedantic.)

I don't believe I am complicating things. I am more accurately reflecting the story. It is impossible to talk about regressive tax in the context of the rich and poor without accounting for income. Like it or not Working for Families bolsters incomes so it must be taken into account.

WWF is that inconvenient benefit people who spruik poverty consistently do not raise. Do you ever hear the "Living Wage " bleaters mention it. No of course not - because it undermines their position that people don't take much home
after a being exploited by the capitalist employers intent only on exploiting the vulnerable.

And as an aside you wont here the government advocate against Living Wage because it pushes the burdon of income from the tax payer onto the employer.

minimoke
12-10-2017, 06:36 PM
Having a mortgage free house rising in value each year, it must be infuriating seeing the less well off and young avoiding paying their fair share of GST by spending all their income on rent. Lucky we can still get them when they buy food so they can contribute like you aye FP.
You are assuming FP's house does rise in value each year - which is not a safe assumption. Regardless, it is only a paper increase. The house isn't a machine that churns out cash that a home owner can spend. The only way to release the cash is to take a mortgage on which you will pay interest as well as return capital.

The great thing about renting is you dont bear the "loss" when the roof over your head depreciates, or needs repairs

craic
13-10-2017, 09:19 AM
Not entirely so, Minimoke. As an eighty-year-old I could pull two or three hundred g's from my property and go cruising or whatever for the next few years without a worry in the world or I could greatly increase my successful investments. I do not have to worry about my offspring as they are already well ahead of me. But age has made me lazy or maybe just contented and I am happy with a couple of visits to the Club each week and a few drinks and a few bets on slow horses. Nobody has to die rich but a hell of a lot do.

minimoke
13-10-2017, 10:23 AM
Not entirely so, Minimoke. As an eighty-year-old I could pull two or three hundred g's from my property .
I'm not sure how you would do that without a reverse mortgage (or home equity release) loan. (more here: https://www.govt.nz/browse/housing-and-property/borrowing-against-the-value-of-your-home/reverse-mortgages/) And I'm trying not to complicate things with loans from family repayabel in inheritance or other tools that are availabe

777
13-10-2017, 10:58 AM
I'm not sure how you would do that without a reverse mortgage (or home equity release) loan. (more here: https://www.govt.nz/browse/housing-and-property/borrowing-against-the-value-of-your-home/reverse-mortgages/) And I'm trying not to complicate things with loans from family repayabel in inheritance or other tools that are availabe

I think craic was suggesting he could trade down.

janner
14-10-2017, 01:31 AM
Not entirely so, Minimoke. As an eighty-year-old I could pull two or three hundred g's from my property and go cruising or whatever for the next few years without a worry in the world or I could greatly increase my successful investments. I do not have to worry about my offspring as they are already well ahead of me. But age has made me lazy or maybe just contented and I am happy with a couple of visits to the Club each week and a few drinks and a few bets on slow horses. Nobody has to die rich but a hell of a lot do.

As my wise Mother always said.. " There are no pockets in a shroud "..

Aaron
29-05-2018, 07:49 AM
Surprise surprise someone else thinks a capital gains tax is a good idea. I should have checked him out first in case he turns out to be a nutcase.

https://www.stuff.co.nz/business/industries/104262446/capital-gains-tax-sensible-and-fair-for-nz-says-oecd-official


Sensible and fair he suggests. Although the article suggests that "The idea remains unpopular with many New Zealanders, in part because of concerns it could discourage investment in new housing and push up rents, and because of compliance costs." In small part maybe but the main reason must be that they don't want to pay more tax.

fungus pudding
29-05-2018, 07:55 AM
Surprise surprise someone else thinks a capital gains tax is a good idea. I should have checked him out first in case he turns out to be a nutcase.

https://www.stuff.co.nz/business/industries/104262446/capital-gains-tax-sensible-and-fair-for-nz-says-oecd-official


Sensible and fair he suggests. Although the article suggests that "The idea remains unpopular with many New Zealanders, in part because of concerns it could discourage investment in new housing and push up rents, and because of compliance costs." In small part maybe but the main reason must be that they don't want to pay more tax.

He mentions design of the scheme, and that is the key. There are many problems with CGT that need to be understood and taken into account. Properly designed it can be good - but a copy of something like Austalia has is only good for appeasing the envious.

Aaron
29-05-2018, 08:07 AM
but a copy of something like Austalia has is only good for appeasing the envious.


Ahh the politics of envy. Nice one FP

Bjauck
01-06-2018, 02:24 PM
"The Treasury has previously estimated that a broad-based capital gains tax, that excluded gains on owner-occupied housing"
https://www.stuff.co.nz/business/industries/104262446/capital-gains-tax-sensible-and-fair-for-nz-says-oecd-official

Apart from the backlash from entitled home owners (increasingly becoming a wealthier minority), Why should owner-occupied housing be excluded? Excluding it will only continue the shift of investment into residential land,and in the absence of wealth or estate taxes, it will perpetuate the deveopment of a shrinking landowning elite who find it is tax efficient to over-capitalise their homes...


Personal circumstances including singles, childless couples and where people have to shift frequently, may mean home-ownership is not the optimal form of obtaining accommodation. In such cases their equity may well better be deployed in creating businesses or investing in income-generating share investments. Yet if they invest all their capital in such vehicles as opposed to their own homes, they would be liable to capital gains.

Aaron
04-09-2018, 03:48 PM
https://www.stuff.co.nz/business/106811474/properties-give-their-owners-a-taxfree-windfall--is-that-fair


More envious people trying to make the world a better place?

minimoke
05-09-2018, 07:37 AM
https://www.stuff.co.nz/business/106811474/properties-give-their-owners-a-taxfree-windfall--is-that-fair


More envious people trying to make the world a better place?
"Properties give their owners a tax-free windfall - is that fair". "Fair" - isnt that a most interesting word

Bjauck
05-09-2018, 04:24 PM
"Properties give their owners a tax-free windfall - is that fair". "Fair" - isnt that a most interesting word
True "fairness" is subjective and is determined by those in a society who have the power and control. I guess the tipping point will be when what is "fair" increasingly advantages only a shrinking minority (of politically active people) and a new "regime of fairness" will be ushered in. The beauty of a functioning democracy is that regime change occurs peacefully and comparatively gradually.

Benny1
10-09-2018, 08:08 PM
Does anyone know what date the TWG interim report is actually due to be reveled this month?

iceman
11-09-2018, 08:36 PM
Does anyone know what date the TWG interim report is actually due to be reveled this month?

I don´t think there is a fixed date, just "before the end of September". The Government already has the interim report so I assume as soon as they´re comfortable with answering all the questions it´s release will prompt, they will release it !!
Apparently they´re not as enthusiastic about CGT as they were when they started this process !!

Benny1
12-09-2018, 07:27 PM
Well that's one good thing to come out of it ! Tho the devil will no doubt be buried in the detail...

Baa_Baa
12-09-2018, 08:08 PM
Well that's one good thing to come out of it ! Tho the devil will no doubt be buried in the detail...

It'll be about trade-offs and political spin, like:

"Hey Michael, we can't have a CGT in our first term, so if you want to keep sucking the hind tit you'll park that for consideration when we get a second term, but in the meantime I want you to legitimise all the new taxes and tax hikes that we put in place when we said there'd be no new taxes, and find a few more that we hadn't thought about. There's a good lad."

iceman
12-09-2018, 08:21 PM
It'll be about trade-offs and political spin, like:

"Hey Michael, we can't have a CGT in our first term, so if you want to keep sucking the hind tit you'll park that for consideration when we get a second term, but in the meantime I want you to legitimise all the new taxes and tax hikes that we put in place when we said there'd be no new taxes, and find a few more that we hadn't thought about. There's a good lad."

Sadly you´re probably right on the mark there Baa Baa

iceman
16-09-2018, 08:10 AM
This from Sir Michael Cullen today : "We have come out with a more general conclusion that taxation has only a limited effect on the housing market and the [housing] problem remains one of supply."

Grant Robinson could have taken a momentary glance at countries that have CGT to come to this conclusion, rather than this very expensive and waste of time (I suspect) Group.

westerly
16-09-2018, 01:39 PM
This from Sir Michael Cullen today : "We have come out with a more general conclusion that taxation has only a limited effect on the housing market and the [housing] problem remains one of supply."

Grant Robinson could have taken a momentary glance at countries that have CGT to come to this conclusion, rather than this very expensive and waste of time (I suspect) Group.

NZ is one of the few OECD countries without CGT. They must therefore be wrong and we are right. ?
As for housing, the market is always right so how come we have a supply problem?
The old saying the rich get richer and the poor get poorer certainly applies to NZ

westerly

fungus pudding
16-09-2018, 03:24 PM
NZ is one of the few OECD countries without CGT. They must therefore be wrong and we are right. ?
As for housing, the market is always right so how come we have a supply problem?
The old saying the rich get richer and the poor get poorer certainly applies to NZ

westerly

Indeed; it's a tough life.

westerly
16-09-2018, 04:28 PM
Indeed; it's a tough life.

Not for the right

westerly

777
16-09-2018, 04:46 PM
Not for the right

westerly

Once again the ridiculous assumption from the left that all the rich(so called) vote to the right.

iceman
16-09-2018, 07:02 PM
NZ is one of the few OECD countries without CGT. They must therefore be wrong and we are right. ?
As for housing, the market is always right so how come we have a supply problem?
The old saying the rich get richer and the poor get poorer certainly applies to NZ

westerly

The point is that Labour has been selling a half arse form of CGT as a fix for the housing market, or rather high house prices. They are starting to realise that is complete humbug. I have a couple of rentals in a country where there is a 20% CGT and that country has exactly the same problems with housing becoming out of reach for young people, mainly due to Air BNB and lack of supply in the biggest city. Sounds familiar ?

For the record, I am not against a comprehensive CGT if it was part of a restructure of the tax system, but I am against a half arsed attemt that is nothing more than extra tax grab.

iceman
16-09-2018, 07:05 PM
Once again the ridiculous assumption from the left that all the rich(so called) vote to the right.

Sir Michael Cullen says he´s rich (a rich prick no doubt) now as he´s earned a lot more since leaving Parliament, from his multiple and nice Government appointed roles !! Suspect he still votes the Left but one never knows with him !!

Vagabond47
16-09-2018, 07:12 PM
Once again the ridiculous assumption from the left that all the rich(so called) vote to the right.

Doesn't take a genius to look up electoral results for well off areas like Epsom , Tamaki to see that they are decidedly right voting.

http://www.stuff.co.nz/national/politics/10535848/Christchurch-voting-patterns-linked-to-income

Bjauck
19-09-2018, 10:21 AM
Doesn't take a genius to look up electoral results for well off areas like Epsom , Tamaki to see that they are decidedly right voting.

http://www.stuff.co.nz/national/politics/10535848/Christchurch-voting-patterns-linked-to-income

Older voters tend to vote for parties on the right too - so electorates with more oldies tend to lean to the right.

minimoke
20-09-2018, 10:24 AM
Fom MSM reporting of todays announcements

"The TWG's interim recommendation is that if the Government was to widen the taxation of capital gains, it should do so by extending income tax to more forms of capital gains – rather than introducing a new tax as such, he said.Tax could apply either when people sold assets such as investment properties or shares, or a second option was that people could be required to pay tax more regularly on the value of money they had invested – in a similar way to how some investments in foreign shares is currently taxed – he said.
In either case tax would only apply to assets bought after the tax came in, Cullen said, rather than assets they already owned."

iceman
20-09-2018, 10:35 AM
So just hinting at normal income tax for capital gains. Then the question will be what, if anything, will be excluded ? Private homes, inheritance etc etc

blackcap
20-09-2018, 10:40 AM
So just hinting at normal income tax for capital gains. Then the question will be what, if anything, will be excluded ? Private homes, inheritance etc etc

IN the Netherlands you are taxed each year from memory 4% on the value of your assets outside your home on anything over 25k Euro. That is a killer if you want to invest in equities or anything for that matter like a second home. I hope the COL do not get stupid ideas like that.

longy
06-11-2018, 12:16 PM
Does any body has link to how to work out WACC with share trading please?

Bjauck
19-11-2018, 03:06 PM
CGT on shares?
http://www.sharechat.co.nz/article/6e42629b/nzx-and-sia-say-no-capital-gains-tax-on-retail-investment-in-shares.html

I think a CGT on shares (without a CGT on the family home or PIEs) would further reduce NZers share investments in favour of building up the nest eggg of an expensive home. It is not as though share investment is prevalent in NZ in the first place.

The TWG should also address the fact that investors in fixed interest are currently taxed on the inflation aspect of their returns whilst other investments currently have tax free capital gains due to the impact of inflation.

However - realistically - in NZ the interests of individual investors who invest in shares will be given scant attention as there would not be many votes in it. Whereas the treatment of real estate will have greater electoral impact.

huxley
19-11-2018, 08:59 PM
"However - realistically - in NZ the interests of individual investors who invest in shares will be given scant attention as there would not be many votes in it. Whereas the treatment of real estate will have greater electoral impact."

This is very depressing , but also so true :scared:

fungus pudding
22-11-2018, 12:47 AM
Hmmm, Cullen having trouble delivering for Taxcinda & Grunter?

http://www.sharechat.co.nz/article/0fc6dee7/tax-working-group-is-unlikely-to-agree-on-a-capital-gains-tax-regime.html

Oh, they'll find a way. Count on it.

iceman
28-11-2018, 11:42 AM
https://www.stuff.co.nz/business/108919385/tax-working-group-reaches-consensus-on-introducing-capital-gains-tax

Bjauck
28-11-2018, 12:33 PM
https://www.stuff.co.nz/business/108919385/tax-working-group-reaches-consensus-on-introducing-capital-gains-tax

Interesting points. I think Cullen has good points. viz:
Even though most people in NZ support a capital gains tax, it is generally not a burning issue for its supporters. Also, with the ageing population it is likely that support for a capital gains tax will diminish - oldies being more reliant on investments.

777
28-11-2018, 12:50 PM
Interesting points. I think Cullen has good points. viz:
Even though most people in NZ support a capital gains tax, it is generally not a burning issue for its supporters. Also, with the ageing population it is likely that support for a capital gains tax will diminish - oldies being more reliant on investments.

Most people. Hardly.

Aaron
28-11-2018, 01:12 PM
Most people. Hardly.

I think 777 just confirmed Michael Cullen's concern that it might be now or never for a capital gains tax.

Although some of the headlines I've skimmed sounds like the tax working group can only come up with half arsed proposals that are politically palatable.

Don't worry 777 I see Simon Bridges has promised to repeal any capital gains tax.

777
28-11-2018, 01:29 PM
I think 777 just confirmed Michael Cullen's concern that it might be now or never for a capital gains tax.

Although some of the headlines I've skimmed sounds like the tax working group can only come up with half arsed proposals that are politically palatable.

Don't worry 777 I see Simon Bridges has promised to repeal any capital gains tax.

He won't need to as IFRC a capital gains tax won't be enacted this term and they won't get a second unless they get away with less than the 5% bar for the other losers. And then that may even be a struggle. Mind you I don't think Simon will be the one having to make the decision.

Aaron
28-11-2018, 01:53 PM
Mind you I don't think Simon will be the one having to make the decision.
Definitely if he doesn't win the next election. although he is popping up a lot in the media which is always good for a politicians standing. A bit like Judith Collins was popular in the media for a while but she comes across as a nasty bi*ch to me and maybe one of nationals strong links to china and the Chinese voters in nz.

iceman
14-01-2019, 07:51 AM
TWG expected to deliver their recommendations this month https://www.stuff.co.nz/business/109818642/capital-gains-tax--what-we-know-about-how-it-would-work

Lego_Man
21-01-2019, 11:51 AM
Haven't seen much discussion of the most relevant outcome for this forum, which is that CGT will affect all local equity market investors.

It seems like the PIE fund regime will now incorporate a deemed rate of return tax for local equities, much like the FDR regime used for foreign shares.

Meanwhile all shares held on a segregated basis will be subject to a CGT on realised gains.

I guess the implication is you want your growth stocks held in a PIE fund, and dividend stocks held in their own account.

777
21-01-2019, 12:41 PM
Well as nothing definite has come from the TWG then it is all speculation on what could happen.

couta1
21-01-2019, 02:39 PM
Well as nothing definite has come from the TWG then it is all speculation on what could happen. Exactly and a slow boat to China, that's if Labour get returned to power at the next election otherwise CGT is dead duck.

Bjauck
22-01-2019, 10:44 AM
Haven't seen much discussion of the most relevant outcome for this forum, which is that CGT will affect all local equity market investors.

It seems like the PIE fund regime will now incorporate a deemed rate of return tax for local equities, much like the FDR regime used for foreign shares.

Meanwhile all shares held on a segregated basis will be subject to a CGT on realised gains.

I guess the implication is you want your growth stocks held in a PIE fund, and dividend stocks held in their own account. Where did you get that information?

Politically it seems like a CGT will be very unlikely especially given the political and lobbying power of real estate investors.

If a deemed rate of return is applied to NZ equities I am not sure how much more in tax that would raise as many NZ companies have a high dividend yield already. (NZX50 yields about 4.5%)

If tweaks to the tax system or a capital gains tax were introduced which increased tax on share investments (capital gains/ reduced imputation regime/ high deemed rate etc) and investor real estate but exempted owner-occupied main residences, then I think we could expect to see fewer individuals investing in the share market and increased over-capitalisation of owner-occupied real estate. In addition I think we would expect to see the number of listed NZ companies dwindle further....

Brovendell
23-01-2019, 06:55 AM
If tweaks to the tax system or a capital gains tax were introduced which increased tax on share investments (capital gains/ reduced imputation regime/ high deemed rate etc) and investor real estate but exempted owner-occupied main residences, then I think we could expect to see fewer individuals investing in the share market and increased over-capitalisation of owner-occupied real estate. In addition I think we would expect to see the number of listed NZ companies dwindle further....

I agree entirely

Bjauck
23-01-2019, 02:28 PM
https://www.stuff.co.nz/business/110081767/a-low-top-tax-rate-means-the-majority-will-pay-the-maximum-in-capital-gains

Yikes...No word yet of any threshold however Wouldn’t Taxing all capital gains as income at the taxpayers marginal income tax rate see a flight from investment across the board? A government that creates an inflationary environment would have less incentive to reduce inflation as it would be earning taxes gathered merely from the impact of inflation on asset prices. This is in addition to income tax bracket creep as a result of inflation.

I imagine a tax-concessionary investment plan and a boost to KiwiSaver would also have to be introduced to encourage NZ investment into businesses and share investments. Otherwise households would have greater incentive to boost the investment in their own homes (excluded from a tax on capital gains) to the detriment of investment in the share market and businesses.

Lego_Man
25-01-2019, 08:10 AM
Where did you get that information?

Politically it seems like a CGT will be very unlikely especially given the political and lobbying power of real estate investors.

If a deemed rate of return is applied to NZ equities I am not sure how much more in tax that would raise as many NZ companies have a high dividend yield already. (NZX50 yields about 4.5%)

If tweaks to the tax system or a capital gains tax were introduced which increased tax on share investments (capital gains/ reduced imputation regime/ high deemed rate etc) and investor real estate but exempted owner-occupied main residences, then I think we could expect to see fewer individuals investing in the share market and increased over-capitalisation of owner-occupied real estate. In addition I think we would expect to see the number of listed NZ companies dwindle further....

It came out in one of Cullen's "previews".

Probably wouldn't raise much extra money as you say, but it's more a convenience way of including shares in the regime while aligning with existing approaches on foreign shares.

But it looks like all we need to do anyway is put the word "family" in front of something to make it sacred and untaxable. How about the "family share portfolio"??

SBQ
04-02-2019, 09:30 PM
I'm curious how this 'broad-base' CGT would impact share investments that are under the FIF & Fair Dividend Rate rules? CGT is a tax on the gain by a SALE of the asset. The FIF / FDR is a tax paid EVERY YEAR on the GAIN of the assets / shares regardless if the shares have been sold or not.

Surely IRD wouldn't go about having BOTH schemes of taxation for foreign shares? If CGT is brought in, i'm hoping the FIF /FDR will be abolished.

SBQ
04-02-2019, 09:37 PM
Where did you get that information?

Politically it seems like a CGT will be very unlikely especially given the political and lobbying power of real estate investors.

If a deemed rate of return is applied to NZ equities I am not sure how much more in tax that would raise as many NZ companies have a high dividend yield already. (NZX50 yields about 4.5%)

If tweaks to the tax system or a capital gains tax were introduced which increased tax on share investments (capital gains/ reduced imputation regime/ high deemed rate etc) and investor real estate but exempted owner-occupied main residences, then I think we could expect to see fewer individuals investing in the share market and increased over-capitalisation of owner-occupied real estate. In addition I think we would expect to see the number of listed NZ companies dwindle further....

The CGT would be 'broad based' meaning everything from real estate to shares on the stock exchange. Investors resident in NZ have no choice and the issue of CGT has been discussed at the WTG that there's a clear tax (err absence of paying any tax) on the gains of real estate if held long term enough. While a person that holds certain investments in a managed fund / PIE etc will be exposed to tax. (by either the fund paying the tax on the gain or the individual investor holding the shares directly). Anotherwords, it wouldn't matter to the domestic NZ resident where they put their investment because it will be taxed regardless and on a world wide basis.

My concern would be a flight of capital from NZ, that is large $ leaving NZ to more tax friendlier nations like US, Canada, or Australia (all these nations have concessions on their CGT). The proposal in NZ by the WTG is a tax at the highest marginal tax bracket across the board, no consideration of the rate of inflation, no exemption limit like Canada where only half of the gain is income taxable).

Bjauck
07-02-2019, 09:51 AM
...

But it looks like all we need to do anyway is put the word "family" in front of something to make it sacred and untaxable. How about the "family share portfolio"??
A cunning idea but Unfortunately due to the current system there are very few directly owned share portfolios owned by families - but there are many families owning investment real estate.

NZ is already a net importer of business and equity capital. NZ households just tend to invest in NZ real estate (land). With the mooted capital gains regimes NZers may just stuff even more of their capital into their housing and other real estate (perhaps unless KiwiSaver is beefed up and made compulsory).

Aaron
08-02-2019, 11:18 AM
I haven't read the CGT proposal from the tax working group yet but you have to wonder why stuff.co.nz allows this sort of bull**it to be put on their website. Wish washy emotion based opinions not based on anything factual don't help reasoned debate.
https://www.stuff.co.nz/business/110441137/the-reality-of-capital-gains-tax-is-that-the-lions-share-is-paid-by-the-middle

Although it is stuffs senior journalist that refutes Troy's claims
https://www.stuff.co.nz/business/industries/110432452/wealthiest-kiwis-would-pay-vast-majority-of-capital-gains-tax

Possibly stuff.co set Troy Bowker up to look like a total moron.
I guess Troy could argue he meant that a lot more middle income NZers would pay CGT not that they pay more in total, just more middle income people would pay although that doesn't equate with "Lions Share".
Using the figures in the other article the richest 20 per cent of households own 82 per cent of the assets that would be subject to a CGT, while the middle 20 per cent own only 4 per cent. It is hard to know where Troy gets his numbers from if this statistic is even vaguely right.
Taking this one step further the bottom 60% own 14% of the rest. (edit) thinking about this I guess he means the middle 20% splitting the population into bands of 20%. Not sure, I should read the report. but at a guess the bottom 40% would have a bit over 0%.(edit)

I see it is being rushed through and personally believe this could be a bad idea depending on the proposal as bringing in a capital gains tax at what could be the height of the cycle would set up the wealthy for a large tax loss.

SBQ
09-02-2019, 09:24 PM
re Aaron quote:

The articles on Stuff are vague at best and don't tell the whole picture or impact of CGT. The TWG made no recommendation for tax concessions on CGT while most OECD nations that have a CGT do (in the form of inflation adjusted, or half the gain is only income taxable, etc.). The tricky part is if you apply an extreme point of CGT at the high end with no concessions, then you will see a flight of capital in NZ. Don't think $ moves freely out of NZ? Look at what has happened with the NZD / USD in the past year (I highly suspect over the Panama Papers fiasco, IRD has forced NZ "foreign trusts" to comply by having a tax # of the account holder where they reside. NZ banks have already sent notices to non-resident account holders to confirm the account tax status. From what I recall over 2/3rds of these foreign trust accounts did not comply and simply, closed up and sent the $ out of NZ to more tax friendlier nations.

At the business peak cycle or not, I don't think the TWG was aware of what investments are at stake in NZ by foreigners. Capital outflows of currency is a serious issue and in the past few years, we've seen the USD gain strength with mass $ inflows to the US. Conversely, we've seen mass capital outflows of the GBP over the Brexit in the past 2 years.

Aaron
11-02-2019, 07:54 AM
No doubt a CGT would be huge and the effects of introducing one may not be fully appreciated but as long as the reasons behind it are valid I say go for it. The reasons for a CGT would be to broaden the tax base. Reduce tax on labour, hard work and entrepreneurship (except when you sell the business for a capital gain).

Does NZ really want to encourage people with foreign trusts, on the whole they sound like a bunch of rotten, selfish self-centred scumbags should we really be helping them. Let them flee somewhere else.

Foreign capital investing that involves building or improving industry/assets in NZ is no doubt good for the country, not so sure if buying existing businesses and farms and taking the dividend offshore is a good idea or even worse thin capitalisation(see link below).
http://www.stuff.co.nz/business/opinion-analysis/10400785/We-need-to-talk-about-that-red-carpet-rollout

Also came across a bit of history regarding this company while looking for the chalkie article.
http://www.stuff.co.nz/dominion-post/comment/6596585/When-we-sold-off-Wellingtons-power

I don't buy the capital flight threat, worst case scenario income generating assets and land become more affordable to NZers and a declining NZ dollar makes our productive exporters more competitive.

I think you can always put a negative or positive spin on something.