If he is regularly realising profit it will be taxed.Quote:
Originally Posted by Aaron
Capital Gains Tax
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11-07-2011, 03:41 PMfungus pudding
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11-07-2011, 04:48 PMAaronTrue 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.Quote:
Originally Posted by fungus pudding
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. -
11-07-2011, 05:20 PMminimokeWhat about abolishing all taxes and just having a Consumption tax payable by everyone at say 25% on all purchases.Quote:
Originally Posted by Aaron
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11-07-2011, 05:38 PMfungus puddingThat 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.Quote:
Originally Posted by Aaron
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11-07-2011, 05:38 PMAaronAgreeing 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.Quote:
Originally Posted by biscuit
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? -
11-07-2011, 07:10 PMPOSSUM THE CAT
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
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11-07-2011, 07:11 PMCJGreat policies but no one will vote for you.Quote:
Originally Posted by biscuit
A CGT wont narrow the tax base but I do agree it wont broaden it much if you exclude the family home.
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.Quote:
Originally Posted by fungus pudding
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11-07-2011, 09:15 PMfungus puddingSo that would mean no CGT tax, but all transactions other than primary residence to be subject to income tax.Quote:
Originally Posted by CJ
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11-07-2011, 09:36 PMAaronI 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.Quote:
Originally Posted by fungus pudding
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. -
11-07-2011, 10:09 PMfungus puddingPrecisely. 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. )Quote:
Originally Posted by Aaron
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12-07-2011, 08:40 AMminimokeIt 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.Quote:
Originally Posted by Aaron
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. -
12-07-2011, 09:34 AMAaron
[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%. -
12-07-2011, 10:03 AMminimoke
[QUOTE=Aaron;350989]
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.Quote:
Originally Posted by minimoke
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. -
12-07-2011, 10:12 AMfungus puddingI'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.Quote:
Originally Posted by minimoke
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12-07-2011, 10:32 AMminimokeIt 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.Quote:
Originally Posted by fungus pudding
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.