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  1. #76
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    Quote Originally Posted by 777 View Post
    I thunk losses would only be carried forward to apply against future gains.
    Again the recommendation was "that capital losses (other than those described in recommendations (k - listed shares not used for trading) and (l - privately held land) be treated in the same way as other tax losses and taxpayers should generally be able to offset losses arising from the disposal of capital assets against ordinary taxable income."

  2. #77
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    Quote Originally Posted by minimoke View Post
    Again the recommendation was "that capital losses (other than those described in recommendations (k - listed shares not used for trading) and (l - privately held land) be treated in the same way as other tax losses and taxpayers should generally be able to offset losses arising from the disposal of capital assets against ordinary taxable income."
    That's a complicated mix when mixing capital losses with taxable income (ie. business income and or person income by wages or salary). Now i'm speaking from a Cdn perspective but the complex tax laws in Canada separate carry over losses by definition. You only match say Capital Losses (such as from shares or real estate) with Capital Gains ; like for like. So in the NZ realm of things, i'm quite sure the Labour Party didn't know what they were getting into about introducing capital gains tax; how COMPLEX the NZ tax code would be to the point that it defies all relevancy to the 4.5M people living in NZ.

  3. #78
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    Quote Originally Posted by SBQ View Post
    That's a complicated mix when mixing capital losses with taxable income (ie. business income and or person income by wages or salary). Now i'm speaking from a Cdn perspective but the complex tax laws in Canada separate carry over losses by definition. You only match say Capital Losses (such as from shares or real estate) with Capital Gains ; like for like. So in the NZ realm of things, i'm quite sure the Labour Party didn't know what they were getting into about introducing capital gains tax; how COMPLEX the NZ tax code would be to the point that it defies all relevancy to the 4.5M people living in NZ.
    I would have thought it would have been less complicated to treat both capital gains and income gains under the one tax. It is a political non-starter currently but nevertheless I would have thought it would have been easier to administer.

    Treating capital losses as deductible against income in the year they are realised may have had the advantage of providing more immediate tax relief for those who have made a loss on their investment. That could have meant failing businesses or shareholdings would have been sold more rapidly with the proceeds reinvested into new businesses with better prospects.

    As for the 4.5m NZers, a majority would probably have seen their taxes drop, as the introduction of a CGT was to be revenue neutral. The largest capital gains, especially for those who leverage their investments, tend to be made by a minority of taxpayers. So the abandonment of the introduction of a CGT is very relevant.

  4. #79
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    [QUOTE]I would have thought it would have been less complicated to treat both capital gains and income gains under the one tax. It is a political non-starter currently but nevertheless I would have thought it would have been easier to administer.
    [QUOTE]

    But a nightmare from a national budgeting point of view in a deflationary situation if capital losses offset income taxes.


  5. #80
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    The mixing of gains/losses from difference sources has been worked out in Canada long ago. What happens is when the majority of the population has their wealth tied up in a certain asset class, the gov't risks all tax revenue for eg. Say if most people had their savings and investments in the stock market, when a major recession and stock crash happens, you'll find the gov't won't have any tax revenue or in most cases, negative losses that can be applied to future years. So in the case of NZ where the majority of wealth is tied up in real estate, you really don't want the gov't to allow people to offset their work income with a capital loss that can easily be realized in a major recession or crisis (= a double wammy for the gov't fiscal policy).

    While the opposite situation can be said in a bullish market and hyperactive economy, gov'ts are horrible at managing budgets. Gross surpluses usually leads to trouble later on when those surpluses change to gross deficits.

    Don't forget, a whole lot of creative accounting can arise from capital losses. The behaviour where investors looks to sell for loss, which is easily achievable before year end. This is why the FIF FDR rules for foreign share holdings does not recognize years of paper loss. Under that rule, IRD is only concerned about the paper gains year after year.

  6. #81
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    Quote Originally Posted by macduffy View Post

    But a nightmare from a national budgeting point of view in a deflationary situation if capital losses offset income taxes.

    More difficult true, as it would require tax surpluses to pay off debt in periods of asset price growth. Some governments would be tempted to cut taxes during those periods to get votes.

    The FDR regime applied to all investments not just FIF would be better. Although that too would require strict budgeting.
    Last edited by Bjauck; 11-05-2019 at 05:07 PM.

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