Will the government impose a wealth tax to raise capital?

[SBQ]

Probably correct on all points. On past form rental properties will be first cabs off the rank. I wonder if they will first check out the costs and benefits. Housing in general is a complex beast with many levers including rather importantly individuals with assets acting in their own interests.

Wonder if anyone has ever developed a NZ econometric model. Like assessing impacts if any of the levers change.

I'm just curious, every other OECD nation that has CGT always targets housing as the key primary motive to discourage speculation in this asset class. Why is it in past gov't in NZ, they have avoided this issue? Housing is not complex - you realise it's probably the most reliable, easy method to impose CGT because all land title transfers are recorded. Rates valuations are recorded. Who and how the property is owned is also recorded. The computer system at IRD can easier do checks and impose CGT as soon as the property changes hands. The beauty thing about CGT is 'a gain is a gain'. The seller can't dispute how much they sold the property at and they also can't dispute the purchase price.

[fungus pudding]

I'm just curious, every other OECD nation that has CGT always targets housing as the key primary motive to discourage speculation in this asset class. Why is it in past gov't in NZ, they have avoided this issue? Housing is not complex - you realise it's probably the most reliable, easy method to impose CGT because all land title transfers are recorded. Rates valuations are recorded. Who and how the property is owned is also recorded. The computer system at IRD can easier do checks and impose CGT as soon as the property changes hands. The beauty thing about CGT is 'a gain is a gain'. The seller can't dispute how much they sold the property at and they also can't dispute the purchase price.

It's also a useless tax if private residential properties are excluded. And political parties who favour CGT know that unless applied as an envy tax, i.e. excluding owner occupied dwellings, they will get booted out.

[GTM 3442]

I'm just curious, every other OECD nation that has CGT always targets housing as the key primary motive to discourage speculation in this asset class. Why is it in past gov't in NZ, they have avoided this issue? Housing is not complex - you realise it's probably the most reliable, easy method to impose CGT because all land title transfers are recorded. Rates valuations are recorded. Who and how the property is owned is also recorded. The computer system at IRD can easier do checks and impose CGT as soon as the property changes hands. The beauty thing about CGT is 'a gain is a gain'. The seller can't dispute how much they sold the property at and they also can't dispute the purchase price.

Assuming of course that the property is not owned by a company, and the company changes ownership while the property does not.

[GTM 3442]

deleted. Pushed "save" twice or some other dumb mistake

[SBQ]

Assuming of course that the property is not owned by a company, and the company changes ownership while the property does not.

?? From the view of the tax dept. it makes no difference what entity owns the property. The longer the corporation or trust that holds the property, the more tax they will collect when the time comes, that the property changes hands.

In fact, the shareholder of a corporate is disadvantaged from a tax point of view as the entity pays corporate tax on earnings. When dividends are issues, the shareholder is stung with RWT (unless partially imputed tax credited - which in most cases is not). In the case of large publicly traded corporations, the shareholders have absolutely no bearing if the hard assets (such as buildings) are sold off for a major capital gain (ie because they're moving locations? etc.).

[Bjauck]

It's also a useless tax if private residential properties are excluded. And political parties who favour CGT know that unless applied as an envy tax, i.e. excluding owner occupied dwellings, they will get booted out.

Of course excluding net capital gains whilst taxing ALL net income is arbitrary favouritism. Introducing a CGT would be an attempt to redress that even if the benefit of occupation and the capital gains from owner-occupied equity in the primary residence remained untaxed.

if you like a flat tax, then there is no logical consistency to tax all net financial gains from human capital (wages from Labour and toil) whilst leaving out net financial gains from non-human capital. All gains should be taxed for consistency. It comes down to political power and influence. In NZ, The owners of non-human capital have greater influence and clout, hence this inconsistency continues.

[GTM 3442]

?? From the view of the tax dept. it makes no difference what entity owns the property. The longer the corporation or trust that holds the property, the more tax they will collect when the time comes, that the property changes hands.

In fact, the shareholder of a corporate is disadvantaged from a tax point of view as the entity pays corporate tax on earnings. When dividends are issues, the shareholder is stung with RWT (unless partially imputed tax credited - which in most cases is not). In the case of large publicly traded corporations, the shareholders have absolutely no bearing if the hard assets (such as buildings) are sold off for a major capital gain (ie because they're moving locations? etc.).

That was in response to your point that "The computer system at IRD can easier do checks and impose CGT as soon as the property changes hands."

If the property does not change hands, there is no transfer registered at LINZ, and thus nothing for the IRD system to "find". In this scenario, there is no need for the property to ever change hands, and thus no tax liability.

There may have been a change in beneficial ownership, but this is not captured by the Title Registration system.

As far as dividends go, there is an interesting scenario in the U.K. At the moment. Small companies wher the owners pay themselves by dividends are not able to access various forms of government support. In the U.K., dividends are taxed at a lower rate than wage or salary income, so there is a tax incentive for the owners to pay themselves by dividends.

Interesting, eh?

[SBQ]

That was in response to your point that "The computer system at IRD can easier do checks and impose CGT as soon as the property changes hands."

If the property does not change hands, there is no transfer registered at LINZ, and thus nothing for the IRD system to "find". In this scenario, there is no need for the property to ever change hands, and thus no tax liability.

There may have been a change in beneficial ownership, but this is not captured by the Title Registration system.

As far as dividends go, there is an interesting scenario in the U.K. At the moment. Small companies wher the owners pay themselves by dividends are not able to access various forms of government support. In the U.K., dividends are taxed at a lower rate than wage or salary income, so there is a tax incentive for the owners to pay themselves by dividends.

Interesting, eh?

Show me a piece of property (of value) that does NOT change hands (describe what scenario)? Even in a family trust there's a vesting period of 80 years. Deemed disposition will always apply when an individual dies, or a company is wound up - why? Because people don't live forever and sooner or later, the stakeholders will want some sort of change in the 'possession' of the asset. I'm beginning to sound like a broken record player where no one is hitting my question dead on. Why is it in previous NZ gov'ts, they have not addressed the taxing of residential properties? A poll way back when the Labour Party was winning the votes showed majority of people in NZ wanting some sort of taxation on those owning multiple residential properties & or those that are in the business of making a profit; but still walk away without paying a dime on CGT when they sell the houses? To do such a thing in say Canada would be like murder according to the tax dept. Even changing the use of your principal resident house attracts tax issues (ie. renting out the basement which may be 1/2 the size of a 2 story house = only HALF of the capital gain is tax free, the rented out portion attracts CGT). Anyways, i'm not buying weak excuses in NZ ; even the TWG advised of some form of CGT.

So instead, they pick on issues like ; how about a wealth tax? or don't stop raising GST from 10% to 12.5% to 15% - let's go all the way by putting in a 'consumption' tax GST at 20%. Not many places around the world have such a tax on consumption in the +20% range.

Again, the different tax treatment on dividend income is nothing new. Canada & the US so happens to treat dividend income at a lower marginal tax rate. Hardly unique (but the impression I seem to hear in NZ is locals find it 'unusual'). Our tax prof back in Canada when I studied taxation at uni said the key reason for having a lower tax treatment on dividend income? - well, it's simply to address double taxation. Just so the individual that owns a Llt corporate company they've setup, is not taxed twice (1 by corporate tax) & (2 when the company issues a dividend). There's nothing wrong with this scenario. But in NZ, we seem to have a corporate tax that is excessively high at 28% - then the shareholders have to wonder if the NZ company has some form of 'imputation tax credit or not or a partial or a weebee.. etc'. I'm quite certain the overall tax load is much higher than what a Cdn or US corporation would pay + the dividends they issue.

[GTM 3442]

Oh, OK.

"Why is it in previous NZ gov'ts, they have not addressed the taxing of residential properties"

Because, as the furore during the first Arden demonstrated, it's not a popular policy. And politicians place greater emphasis on being in office than they place on the design of the tax system.

[GTM 3442]

Oh, OK.

"Show me a piece of property (of value) that does NOT change hands (describe what scenario)"

The scenario I described.