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  1. #131
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    FIF regime would go and be replaced by what ever CGT system dreamed up is my guess.

  2. #132
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    Just makes the climb out of poverty even harder. Cgt will dissuade all forms of investment. If the family house is exempt , watch all the supermansions develop. Certainly doesn't help ethical investments on down the lane either.

  3. #133
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    I suspect that one of the factors determining the final form of a CGT will be the capacity of IRD to implement it. This tends to suggest that any CGT will have to be both simple enough for IRD to cope with, or similar enough to some form of tax which already exists, and which can be readily expanded.

    A system where, in as large a part as possible, the compliance burden can be shifted to third parties. As it has been with interest payments, where the banks, for example, act as tax collection agents at the point of payment.

    IRD currently have the FIF system, which they have administered for years, and which they understand.

    So I'm inclined to think that any CGT will be a derivative of the existing FIF regime. Not an exact copy, but similar enough to make it readily extensible to minimize the compliance burden for IRD.

    And b*gger how much work it is for anyone else. . . .

  4. #134
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    A drawback of the FIF scheme is that taxpayers can be liable to pay income tax on unrealised capital gains. So it could result in the necessity to sell the asset to pay the tax - or raising borrowings to pay the tax. This could mean the sale of the whole asset if it is not able to be partially sold. It could be said that it is a method that would discourage investment into assets that increase in capital value in particular if regular income is not assured.

    For the FIF scheme to fit into a CGT scheme may mean major change of the unrealised gains liability aspect?
    Last edited by Bjauck; 16-10-2018 at 09:04 AM.

  5. #135
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    Someone will come up with a CFD type product ..Unless there is one already that i don't know about??

  6. #136
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    Quote Originally Posted by Bjauck View Post
    A drawback of the FIF scheme is that taxpayers can be liable to pay income tax on unrealised capital gains. So it could result in the necessity to sell the asset to pay the tax - or raising borrowings to pay the tax. This could mean the sale of the whole asset if it is not able to be partially sold.
    Is that not already the case where income tax might be payable on a capital gain?

    And it could be readily sold to an innumerate electorate as affecting only the "rich pricks"

  7. #137
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    Quote Originally Posted by GTM 3442 View Post
    Is that not already the case where income tax might be payable on a capital gain?
    I think what Bjauck is meaning is that if asset value goes up from $100k to $200k in tax year, you are liable for tax on the $100k value increase. But where are you going to get the $33,000 from (tax on the $100k) because you have not yet sold the asset. Some people would really be struggling to pay the tax when the value of their houses go up for example.
    Its easier with stocks for instance to sell a portion of shares if you have to pay a bill, but for some larger capital assets this is very difficult, especially if these assets are not really liquid.

  8. #138
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    Except that under FIF rules the amount you pay tax on is 5% of the $100K starting price. So $5000*33c is $1,650.

    FIF has been the best thing for having offshore unit trusts.

  9. #139
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    Quote Originally Posted by 777 View Post
    Except that under FIF rules the amount you pay tax on is 5% of the $100K starting price. So $5000*33c is $1,650.

    FIF has been the best thing for having offshore unit trusts.
    I thought we were talking about a Capital Gains tax on unrealised gains?

    Either way, a tax on profits yet to be realised (like FIF) can be difficult if the asset is major, illiquid (most peoples homes fall under these two) and the only asset held.

  10. #140
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    Quote Originally Posted by GTM 3442 View Post
    Is that not already the case where income tax might be payable on a capital gain?
    FIF also calculates liability on unrealised gains (when the assets have not been sold.) So it is a type of wealth tax when no income has actually been derived and no asset actually sold or disposed.

    CGT calculates liability when the asset has been realised. For example income tax may apply to realised capital gains under the brightline test.
    Last edited by Bjauck; 16-10-2018 at 07:17 PM.

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