I think craic was suggesting he could trade down.
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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/ind...-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.
"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.
https://www.stuff.co.nz/business/106...--is-that-fair
More envious people trying to make the world a better place?
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.
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 !!
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."
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
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.
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/poli...nked-to-income
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."
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.
Does any body has link to how to work out WACC with share trading please?
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.
"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:
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.
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.
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.
TWG expected to deliver their recommendations this month https://www.stuff.co.nz/business/109...-it-would-work
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.
Well as nothing definite has come from the TWG then it is all speculation on what could happen.
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....
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.
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"??
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.
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).
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).
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/110...-by-the-middle
Although it is stuffs senior journalist that refutes Troy's claims
https://www.stuff.co.nz/business/ind...ital-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.
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.
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/opin...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...lingtons-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.
I haven't read the recommendations of the TWG so probably shouldn't be debating it until I do but, most other countries made concessions when they brought in goods and services tax to alleviate the regressive nature of the tax. NZ didn't which in my view makes it more unfair but this is outweighed by its simplicity which is great. I was disappointed to hear about proposals for exemptions for fresh veges, don't dick around complicating things, it may not be fair (what is?) but at least it is easy to understand. Just make sure it doesn't rise above 15%.
Make a capital gains tax as simple as possible too that way people will no where they stand and there is less wiggle room for the people wanting to avoid paying it.
What rubbish. When GST was introduced, probably before you were born, most(if not all) the sales taxes that used to apply were removed. On top of that the marginal income tax rates decreased substantially. The top rate down to 33c/$. At some later stage that top rate was raised to 39c/$ before being once again reduced to 33c/$ when GST was increased.
Quite right. The sales taxes that were removed were the most higgeldy-piggeldy bunch of varying rates, inclusions and exclusions imaginable. All replaced with the simple and effective no exclusion GST system we have in NZ. Possibly the most sensible thing Labour has ever done.
read my post again.
I think what you and 777 would like to say is that you don't think GST is a regressive tax. We have been over this before and will agree to disagree. What about capital gains tax. Would this be a progressive tax? Personally I believe it would be.
"most other countries made concessions when they brought in goods and services tax to alleviate the regressive nature of the tax NZ didn't which in my view makes it more unfair "
Just as you typed.
Do I have to spell it out then. Read the whole of the re quote of your post I copied in post #256. Simple comprehension exercise. You stated NZ didn't make any concessions when GST was introduced and in fact they did as explained in my original reply and confirmed by FP.
I don't have a problem with CGT in NZ. But I do have a problem when CGT erodes and discourages investment in NZ. Without investments, you lose jobs, it's that simple. If you disadvantage those that have the $, then you will have what many other nations experience, a 'flight of capital' (Brexit is a good example)
We're not trying to encourage foreign trusts in NZ. What we don't want is to signal the global investments community that NZ is anti-investment and pro-tax. Every OCED nation has foreign trusts laws and it was about time NZ tax laws had aligned to their level. But to talk of a CGT that is not aligned to how other nations treat CGT?Quote:
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/opin...carpet-rollout
Also you have to stop thinking NZ is a major player in the global scheme. It has no real currency controls so $ can flow freely in and out. When you have something like a CGT that thwarts investment in NZ by foreigners, then it will impact everything. Your Kiwi Saver, your economy, jobs, nothing will escape, and sadly it translates to a lower standard of living. Anotherwords, do you understand how dependent NZ is on foreign trade and investment? Just because farmers can sell more product at lower exchange rates (makes them more competitive), on the other hand you have to import goods that NZ doesn't produce AT THE higher cost (as most trade is based in USD). Also how do you produce an income generating asset in NZ when locals alone don't have the funding? You realise that when the NZ gov't privatised it's assets, a lot of it went to foreign ownership. Ever questioned why?
Again IMO, a very weak NZD is a drop of standard of living in NZ. Again quite simply because NZ is a very small country and is more dependent on international trade than what large nations can simply produce their own products. NZ will never be in that position.Quote:
Also came across a bit of history regarding this company while looking for the chalkie article.
http://www.stuff.co.nz/dominion-post...lingtons-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.
As I said before, tax concessions are nothing new and almost every OCED nation has it. I do not believe it's an excuse that NZ needs to have a simplified tax roll for the sake that "the avg NZ person can't understand what concessions are and who don't believe accountants know what they're doing". It's a poor excuse. Not trying to be anti-CGT. It's just that the world has become a small place and if NZ sends the wrong message, the general population as a whole will suffer.
I do not see how a tax when your purchase goods or services from your net income is any more justifiable than a tax when you sell an asset for a profit.
To keep it simple, CGT should not have an exemption for the “family home.” By creating such a major exemption, household capital investment decisions will be further distorted. Of course a CGT on the family home would mean tax cuts in other areas to maintain the neutrality on the amount of revenue raising. IMO It would be better not to introduce a CGT than to introduce one with such a major exemption.
The absence of stamp duty, capital and capital gains taxes with a resulting concentration on GST and Income tax is regressive in effect.
Its all a bit hard until we see the detail. I spent the weeknd putting in a couple of hundy worth of new irrigation lines and a hundy on a bucket of fence paint. I'd be expecting to put this onto the capital value of my home (plus the value of my labour) before getting taxed on any increase in value I might get when selling the home.
Great fun! Every home owner keeping receipts and books (might as well hire an accountant) for everything they do on their own home to satisfy the CTG police. As to how much you apportion to your labour, maybe the IRD can publish "labour rates" every years as they do for car mileage :)
I agree Every tax involves compliance issues.
Imputed wages (deductibility and PAYE etc.) for the home-owner and the work she does on her own home would be great for Cullen to get his teeth into!
I am not sure about irrigation but Wouldn’t a lot of maintenance costs be expensed against income not capital? Which in relation to owner-occupation is not taxable as imputed rent in NZ is not taxable and imputed rent is an area that as far as I know has not been touched on by the tax review.
I don't disagree with all that you say, a lower dollar increases competitiveness and as you point out NZ is more dependent on international trade. A lower dollar is a drop in your standard of living and an increase in the price of imports. I have read economic textbooks that say this. How big a drop might be hard to measure.
I don't think NZ is a major player globally in anything (other than maybe rugby and sailing).
I just don't buy the argument that a CGT will cause capital flight and cause the ruination of our society. If the well-off are threatening the rest of society because their wealth is so great they can destroy a country pandering to them and letting them become even more powerful won't make society any better.
Did you read the example of the wellington electricity lines company above? Do you believe Asian investment in Auckland's housing market has been beneficial to anyone other than those selling up? How much went into new houses compared to existing. I don't know myself but don't see foreign investment as the be all and end all. I may be proven wrong but you will probably be gone long before you get a chance to say I told you so.
The key to exempting CGT on the personal residence is the fact people need to have a roof over their head. It goes along the lines why Australia and Canada have exempt GST on fresh foods because these taxes are punitive to the low income families. Clearly not an issue about tax equalisation or for efficiency but rather, more to tax those that have $ FOR investments. We have 'Income" taxes. Why can't we have taxes for those that have "Capital Gain" ????
When you have a country where the top 5% owns like 80% of the wealth of the country, you can be sure they won't be stupid with their $. Brexit is a clear example. Yes NZ won't be destroyed but when you look across the seas how other nations have prospered, i'm in no doubt people in NZ don't have the same living standard as my friends that left to the USA or stayed in Canada or moved to Australia. I know there are exceptions but when I can see my friend that dropped out of highschool (growing up in Canada), moved to the US, he's amassed more wealth and lives in a far better house, driving the latest Tesla Model S P100, (and his wife an anesthetic RN at a hospital in Cali - she also dropped out of highschool) than any of my highly educated cousins that grew up in NZ with all the degrees. But you don't even have to look at the academic aspect, I look at how much timber costs to buy in NZ to build a house vs to buy at Home Depot in Canada or in the US ? It's very clear these differences in price are due to difference in standard of living. What we pay in taxation for social gov't health care is comparable to the Cadillac health care plans my friends pay in the US. Anyways i'm mumbling off topic.Quote:
aaron: I just don't buy the argument that a CGT will cause capital flight and cause the ruination of our society. If the well-off are threatening the rest of society because their wealth is so great they can destroy a country pandering to them and letting them become even more powerful won't make society any better.
re minimoke: any improvements like your irrigation and landscaping can be valued independently if you feel the CCC GV doesn't fully reflect your home property value. There's no need to keep receipts of how much hoses and pipework costs. But why let the accountants be busy? Exempt the family home and that's 1 easy way to say you've earned it. As for those that venture to owning several houses for rental properies, slap the CGT on them in every way.
The Asian investment in Auckland's market is nothing unique. I'm very well aware of it and being quite familiar with the Vancouver housing market in BC, Canada, I do feel the NZ Labour gov't is going a bit too aggressive but simply banning non-residents. When Trudeau was elected PM in Canada, one of the things he did was tacking the house prices in Vancouver and it's worked (not by banning them.. but by simply taxing the hell out of them). By no surprise, a lot of $ from China went into the real estate market ($ from questionable sources - laundering, etc). So rather than the Cdn gov't trying to enforce anti-laundering laws, they attacked these wealthy migrants parking their 'black' money into the real estate by using the "residency clause" in the Cdn ITA. You could say Canada is being half hearted when it comes to anti-laundering laws but IMO, I see no harm in the gov't taking that $ - ?? Why couldn't the NZ gov't do the same? Just send out investigations on these real estate investors from abroad and slam them tax on the gain or CGT. Because in Canada, what these rich migrants were doing is buying the house and claiming the house as their "personal residence" to be tax free, while their high income overseas was not taxed in Canada (like NZ residents are taxed on a world wide basis). Furthermore Vancouver slapped on a "Vacancy Tax" aiming at foreigners buying houses and leaving them empty (as vacation homes for the rich). Can you believe in the 1st year of introduction of that tax, the municipal gov't raked in over $30 MILLION !!!! That's not chump change and the NZ gov't could of done something similar. After all Winston Peters did visit Vancouver shortly after winning the coalition election in NZ so he should of learned some ideas.
People do need accommodation but we live in a dynamic society these days, where home ownership is not necessarily the best way to secure accommodation for every person. People have to move for work; there is not the same social inevitability of marriage and having children.
For example,some single people may wish to invest in their own businesses and shareholdings rather than having their own home. So why should they pay tax on capital gains as opposed to the single people who invested and earned capital gains on their capital invested in their own home instead, helping to beat up the price of land so that some families are priced out of the market?
One (maybe small part) of why lots of things are cheaper in other countries like the US, Canada etc is population, what we may buy in 6 months of say timber is boughr every other week - somethiong along those lines
So a little less margin maybe all along the chain to the retailer???
Not a silly idea about taxing foreign investments as you mention sbq especially homes that are vacant for a certain period
I get that not everyone needs to own a home. That's why there are 1 bedroom apartments for rent in major cities. I also understand it may not be fair for the single person renting, to pay CGT or other taxes on their shareholdings or investments. The reason for such exemptions or concessions of CGT is because not ALL asset classes are the same. The person that owns a home as a primary residence shouldn't be owning to make a profit. This is the distinction I learned in NZ where if a person wants a better house, they sell their existing and buy a newer one vs spending $ to IMPROVE the house they live in. Then there's the other issue of mortgaging. The person wanting to buy their 1st home can get a mortgage and typically, their goal is to pay it off. The person that chooses to rent and invest their earnings CAN NOT simply leverage into their shareholdings ; and it's difficult for self employed small business owners to borrow from the banks if the risks are high. Typically real estate has a much lower risk than all other investments. Don't believe me? Go to the bank and ask them why mortgages are easy to obtain vs borrowing for corporate ventures, building projects, etc.
[QUOTE Jay: One (maybe small part) of why lots of things are cheaper in other countries like the US, Canada etc is population, what we may buy in 6 months of say timber is boughr every other week - somethiong along those lines
So a little less margin maybe all along the chain to the retailer??? [/QUOTE]
Not particularly. I had some friends visit from Singapore to do a short tour around NZ. they could not believe how expensive things are here and the biggest shocker was paying $10 for a Starbucks coffee. He simply could not believe it. In Singapore with a population of 1M more than NZ, food is quite affordable and they have to import most of everything. Why is this so? Yes car ownership is more expensive in Sg but that's a given considering how small the country is. But public transport is so good in Sg you really don't need to drive.
A more probable reason why everything is so expensive in NZ is their marketing approach. Stuff like at Briscoes and Katmandu where the retail price tag is marked up x 10 times. Then they have a big 50% or 70% sale discount and they're STILL making a profit on the item. That kind of model just doesn't work forever as people have fled to online buying from overseas ; but in usual fashion the NZ gov't put on GST at a much lower threshold as to discourage online buying and support local retailers. A big difference to say Costco in N. America that work on a consignment + 5 or 10% markup approach.
I agree that not all asset classes are the same. The fact that it is relatively more secure and easier to raise finance makes home ownership so appealing even for those whose circumstances would otherwise not make home ownership the optimal way of securing accommodation. Exempting it from a CGT would make it even more appealing and reduce the appeal of investment in business and shares.
In NZ Home ownership has often been the default investment or pension scheme. The aim being to leverage capital profit, to trade up so that on retirement there is the ability to trade down to release retirement capital. For most NZ home owner-occupiers capital profit is an important if not the overriding goal of home ownership. It should not be given further preferential tax treatment from other investments unless you want to further encourage people into investing their capital into their housing and away from businesses and financial investments.
As home ownership rates continue to fall, CGT exemption would be a tax break for those on higher incomes and the wealthier - Unlike the example of GST exemption on some foods
I reckon that anyone buying Starbucks coffee, let alone paying $10 for it, deserves to be fleeced!Quote:
Not particularly. I had some friends visit from Singapore to do a short tour around NZ. they could not believe how expensive things are here and the biggest shocker was paying $10 for a Starbucks coffee
;)
(Sorry, nothing to do with the argument for or against a CGT.)
Haha! well, not if that's the only place for coffee in a, high traffic, tourist riddled place :)
Let's not forget, minimum wage is on the rise so it won't be long that $10 coffees will be the norm. Plenty of ristos and food eateries closing up in downtown Christchurch because they can't make ends meet (fault of high regulation -> high building costs + higher wages). Bring on the inflation!!
Yep accommodation costs gobble up so much after tax income.
Minimum wage may be on the rise but accommodation costs have risen so much more quickly owing to the fact that residential building has not kept up with the population increase.
In addition development profits have been made by catering for investors (who seek leveraged capital gains) by building upper quartile big houses on small sections. So the market for accommodation for those who earn minimum or near minimum wage has not been catered for and the low-paid rely on government subsidies. These subsidies (from tax revenues) are not paid for by those property investors whose leveraged returns have been from untaxed capital gains.
I guess the very well off will go where ever they get the best deal.
https://www.msn.com/en-nz/news/world...cid=spartandhp
It's not just the UK. The world is full of places where the rich can choose to reside.
This is what I mean about a slow exodus of capital flight. The gov'ts don't understand the benefit rich people have to their economy.
Look what's happening in NY. Fortunately the US has plenty of other states. In NZ, our NZ1st/Labour coalition needs to understand what motivates the rich to leave?
https://www.marketwatch.com/story/ch...hq2-2019-02-15
The video of Munger says it all. “They’re old. They keep your hospitals busy. They don’t burden your schools, the police department, your prisons. They give a lot. Who wouldn’t want rich people?”
Yet somehow in NZ, if you own a lot of houses or some asset, you're frowned upon and the gov't is just trying to find ways to take that wealth away citing "it's not fair!!!".
However If you bend over backwards to try to appeal to the globalised rich business people, who are prepared to travel from country to country, you may well end up with a backlash from the general population - and Brexit and Trump situations.
There are far fewer eateries and restaurants in downtown Chch today than pre-earthquake era. Far fewer businesses in the downtown core too = less workers = less meal plates and coffees to dish out.
I know this may be a bit off topic but what is exactly the cause of Brexit? From what I recall it's the mass invasion of migrants destabilizing the general population? Perhaps UK wanted to avoid the issues that Greece, Spain, & Italy experienced? In Trump's case, as Munger mentioned you have pro-democrat states in the US that have failed by turning their backs against wealthy businesses that create jobs. I mean you don't need a lot of common sense to see who generates the employment? or perhaps would the economy (and country) be in a more healthy state if the only jobs available was from the gov't?Quote:
However If you bend over backwards to try to appeal to the globalised rich business people, who are prepared to travel from country to country, you may well end up with a backlash from the general population - and Brexit and Trump situations.
‘Mass invasion?”....’destabilisation” only if you believe the screaming tabloid headlines. Lots of causes and there are separate threads for those topics. Briefly many of the poorer people and communities who had been promised ‘Trickle down’” benefits from giving tax breaks to the wealthy, were left further behind by government policies. Many consequently were encouraged by populist politicians who urged the disaffected to vote for them with beguiling slogans such as “make America great again” and “bring back control”.
First homes in Auckland only for wealthy buyers or from wealthy families who can contribute toward deposits?
Would exempting the family home from a CGT amount to a tax break for the wealthier?
Why not boost income tax thresholds, KiwiSaver tax breaks or introduce a tax break for those who earn up to a certain level of fixed interest?
https://www.nzherald.co.nz/business/...ectid=12205655
Fixed interest, as a class of income, does tend to be the investment income that is earned by a broader cross-section of people.
However I do agree with you that all investment income and capital gains should be treated the same. If the family home is exempt from a CGT (and income tax as currently) then why shouldn’t there be tax free thresholds for business and investment income and capital gains - especially for those who do not want to own their own home.
For those who do not own (or cannot own) a family home, then they should have an exemption for their investments (up to a certain threshold?) For those that have a low value family home, then they should be given a CGT and Income tax allowance for other investments. Family home exemption (without a value limit) from a CGT could lead to a mansion effect in NZ.
Perhaps one way to replace the family home exemption from a CGT would be to give all adult taxpayers an annual CGT exemption allowance equivalent to say 5% of the average house price at the start of the year. This could accumulate if unused in a particular year. The exemption could then off-set taxable realised capital gains whether they be from the family home, investment real estate or other investments.
Winston has now told farmers that they should be exempted as CGT is only to stop short term speculation. This is getting better by the day !!
Might be time to sell the shares and buy the second family home.
Will a licence to occupy be subject to a CGT? If not, and hard to see if it will, expect the retirement village sector to explode as homeowners sell up sooner rather than later.
I wouldn't expect it to as it isn't "capital" its just a right to live somewhere. You might be right - with a flight to retirement villages. The thing there is to, if you buy into them you know you are going to sell at a loss. So that loss would be a tax benefit to your estate. So lock in capital gain prior to V Day and reap a tax benefit later.
You're missing the MAJOR distinction between taxing of necessities vs taxing of large size wealth. After all, pretty much EVERY OECD nation treats CGT differently to income tax rates. Why? Show me a country that applies CGT exemption limits each year? How would that be particularly useful to the person that owns no assets? Therefore, I don't see your argument that the principal resident should not be exempt as it would be the single source of asset a person can hold, and more importantly, not having to worry about selling for a capital LOSS (consider those that move from place to place every 5 or 10 years?) and then pay another round of CGT when the market rebounds.
I also do not buy into the argument about those choosing NOT to buy a house and instead, invest their savings elsewhere (ie managed funds). The fact is simple, those that can't afford to buy a house simply do NOT have the $ to save ; what % of those on minimum wage actually contribute to Kiwi Saver? Very few because that 3% they lose off their total annual income would be better spent in putting food on the table. The approach of CGT by other wealthy nations is aimed none other than the wealthy ; the NZ top 5% of the population that has parked their $ in real estate, banking it without having to worry about paying tax on the gain.
I've mentioned before in the case of real estate, all properties have a "rates valuation" by the local city council. If you feel the assessment is not accurate (because of some fancy irrigation or building accessory installed), you can always get an independent valuation and the city will reflect that on your rates bill.
By the way, i've been working on my Mini Moke today re-adjusting the carburetor (needle jet air/fuel mixture). Next job is to readjust the valve tappet clearances. :)
One good thing about a CGT against the real estate market is it will reduce the demand of houses. I mean does NZ really need 10,000 houses to be built 'right away' ? Also the idea of retirement villages does not sound appealing to me. But many choose to do reverse mortgages on their home.
There in lies the problem. There is a huge difference between a "rating" valuation and capital valuation. Eg when I renovated Council stuffed up. My rates valuation went up a smidge but not near the $300k of actual value. Needless to say I've kept quiet on that one. Then there's my Insurance Valuation. Somewhere in there will be a market value which is when the witch doctors come in and stir the ashes to value land and the improvements.
Pretty weird that in a "fair" scheme they exclude family home - that's where so much capital is tied up and used for other money making purposes.
Isnt it great having a car you can actually work on. Sadly I open my bonnet now and haven't a clue where to start.