Capital gains tax: Jacinda Ardern notes 'vast majority' would be better off

2019-02-26 00:05:44

Prime Minister Jacinda Ardern has delivered a defence of the proposed capital gains tax plan, noting the vast majority of Kiwis would be better off.

She also said the concerns of farmers and small business-owners were "top of mind".

This is despite her Government not officially endorsing the plan as anything more than a starting point for policy.

The statement at post-cabinet press conference came as attacks on the plan were being mounted by business groups and National, whose leader Simon Bridges has described it as an "assault on the Kiwi way of life".

Ardern and Labour has promoted a CGT in the past but coalition partner NZ First has been against it. The Government is not expected to officially respond to the group until April, meaning ministers have thus far not been particularly defensive.

The tax working group, chaired by former Labour finance minister Sir Michael Cullen, recommended the Government introduce a new broad-based CGT on rental properties, land, businesses, and shares, paid at the income tax rate. The family home would be excluded.

This would raise roughly $8.3 billion over the next five years, but that could be ploughed back into the hands of taxpayers through a suggested income tax cut, and another tax break for KiwiSaver accounts. This would deliver a tax cut between $420 and $595 a year for almost all taxpayers.

Ardern said that because of this tax switch most Kiwis would come out financially ahead.

"The vast majority of New Zealanders would be better off. I think New Zealanders know this too: they are not ​looking at the proposals individually but as a potential package where they could receive income tax cuts or a boost to their KiwiSavers."

"In Australia only 4.7 per cent of taxpayers paid capital gains tax in 2015. Over 95 per cent of Australians pay no capital gains tax in any given year," Ardern said.

The working group's calculations show the top 20 per cent of the population own 78 per cent of the taxable assets, and would pay almost all of the tax. The small amount that wage earners without serious investments or rental properties might have to pay on their gains was expected to be more than offset by KiwiSaver tax breaks and the income tax cut.

Ardern also sought to downplay the impact of the tax in general, saying it would only affect four per cent of the tax base when fully implemented in 10 years.

"It is far from an attack on the Kiwi way of life," Ardern said.

She said the purpose of her statement was to make sure that the debate was based on facts, and declined again to endorse the actual plan.

Ardern noted that gains would only be taxed on realisation and would not be backwards looking - only gains from the date of enactment would be counted.

Bridges has said he would appeal a CGT if elected and warned the tax would "kill off aspiration".

"This won't actually get the wealthy. They can always restructure their affairs with tax advisors and accountants. It's the squeezed middle who cop it in the guts," Bridges said.

"This is unfair. It's hugely onerous. It's a monster tax grab. And it's at a time when the economy already faces huge uncertainty, this has the danger of stalling it."

"All Kiwis regardless of income aspire, and they actually want to get a nest egg together. I worry about those who earn $50,000, $60,000, $70,000 or $80,000 a year."

NZ First leader Winston Peters, who has long opposed a CGT, is expected to be pushing for exemptions for small business and farms behind the scenes.

A minority group within the working group itself recommended that the CGT not go ahead, although they could see the case for a tax aimed solely at rental properties.

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