Yes there would be holes everywhere that some smart people would find
Printable View
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.
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
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.
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
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.
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)
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.