Mitigating the effects of a potential new capital gains tax

[minimoke]

I think there should be a "tall poppy tax". Basically, if you feel that anyone looks like they're doing well, you can call an 0800 hotline (and it can even be if someone buys the nice cut of meat in the supermarket), the hotline folk will then bravely tax the person you're calling about. The tax will be a percentage of their total wealth plus $10k (in case they've got money hidden off shore, because i bet they have!)

And people think it strange when I wear my Pyjamas into The Warehouse. I'll be safe,

[iceman]

Peter Dunne writes an interesting article on the Newsroom website outlining why a CGT is unlikely to be introduced https://www.newsroom.co.nz/2018/09/1...ital-gains-tax

[Bjauck]

I am not sure what “tall poppies” have to do with a CGT. I know successful people who are only too happy to pay taxes back to the society in which they have prospered.

There are plenty of tall poppies who earn big incomes as a result and pay tax. Is it just the tall poppies who get leveraged capital gains who should pay no tax on them? Sometimes this is done by reducing the taxable rent income too.

Many of these gains are from happenstance - by being in the right generation at the right time in a period of falling interest rates. So they are lucky poppies grown from seeds that happened to get blown into the nice fertile soil!

However a comprehensive CGT is a non-starter and the timing of CGT introduction would anyway come too late in this cycle as it would just be an administrative nightmare and would raise minimal income. Other tax reforms may be more appropriate.

[davflaws]

Not to be introduced until " after " Liabour are re-elected was promised.

We know how trustworthy this current lot are.

Do we? Are they any less trustworthy than the former lot?

[janner]

Do we? Are they any less trustworthy than the former lot?

Absolutely not.

However these are more " open and transparent " about it.. Therefore we are made more aware.

[Bjauck]

I wonder how would a capital gains tax apply to foreign investments that are already taxed on unrealised capital gains via the "Fair dividend rate" or the "comparative value" methodology? Will a CGT just mean that capital gains would on such investments end up being taxed twice? Overseas shareholdings could be even less appealing than presently. Investing in the owner occupied home would be the most tax efficient investment bar none (no income tax or CGT liability.)

[blackcap]

I wonder how would a capital gains tax apply to foreign investments that are already taxed on unrealised capital gains via the "Fair dividend rate" or the "comparative value" methodology? Will a CGT just mean that capital gains would on such investments end up being taxed twice? Overseas shareholdings could be even less appealing than presently. Investing in the owner occupied home would be the most tax efficient investment bar none (no income tax or CGT liability.)

Surely there would be a clawback provision similar to the property that was previously depreciated.

Ie I buy $100k investment in FB in 2005. I sell investment in 2015 for $200k.

Taxable profit is 200-100 or $100k.
However during that 10 year period I have paid tax on 10x$4,000 4% every 10 years, so paid tax on $40,000 of "profit"

This portion I can claw back and so instead of paying tax on the $100k, I pay tax on $100k-$40k, or on a final figure of $60k. That would seem to be the sensible way to approach things?

[Bjauck]

Surely there would be a clawback provision similar to the property that was previously depreciated.

Ie I buy $100k investment in FB in 2005. I sell investment in 2015 for $200k.

Taxable profit is 200-100 or $100k.
However during that 10 year period I have paid tax on 10x$4,000 4% every 10 years, so paid tax on $40,000 of "profit"

This portion I can claw back and so instead of paying tax on the $100k, I pay tax on $100k-$40k, or on a final figure of $60k. That would seem to be the sensible way to approach things?

That would be logical.

As the FDR or CV is taxed as (imputed "fair") Income it could be treated as not having been taxed under any CGT regime.

Before the imputation credit regime (nz) company profits also used to be doubly taxed - as company tax and then, when paid as dividend, under shareholder income tax.

[blackcap]

That would be logical.

Before the imputation credit regime (nz) company profits also used to be doubly taxed - as company tax and then, when paid as dividend, under shareholder income tax.

I remember that well. It was a rort and investing in dividend paying companies was detrimental. Yet NZ companies paid high dividends relative to global peers. Still annoys me that we cannot use Australian Franking credits, as most of my Australian dividends are taxed twice too. Luckily Aussie stocks are not so high dividend paying.

[Bjauck]

Yep investment decisions are often made according to the effect of taxation and not always according to whuch companies/investments are the most efficient or effective in the use of capital.