Both the IRD and the Treasury have produced previous advice supporting a capital gains tax, including advice about bright line tests – advice that conflicts with John Key’s statement today that National’s about-face on a capital gains tax was due to new advice, the Green Party revealed today.
Documents released to the Green Party under an Official Information Act request show that IRD produced advice for the National Government on a capital gains tax on February 4, 2014 and that the Treasury recommended a ten year “bright line” test for a capital gains tax in 2011. Treasury has consistently supported a capital gains tax saying that it would be a “beneficial reform” for New Zealand.
“John Key is fudging the record to try and justify his Government’s about-face on taxing capital gains,” Green Party Co-leader Dr Russel Norman said.
“The IRD has been advising his Government about the benefits of a capital gains tax since February 2014 while the Treasury recommended a bright line test back in November 2011, maybe even earlier.
“Treasury has consistently supported a tax on capital gains, believing it to be a beneficial reform, and suggested a ‘bright line’ set at 10 years, meaning sales made within ten years of acquisition would be liable to a capital gains tax.
“Treasury also highlight the difficulties a bright line test would create with people incentivised to sell assets just outside the timeframe the capital gains tax applies. A capital gains tax without a time constraint has benefits, as we have proposed.
“National’s proposed two-year bright line test will create more distortions than a longer timeframe like ten years.”
The Treasury and IRD papers also detail the many benefits of a comprehensive capital gains tax: lower house prices, higher savings, lower overseas debt, a more progressive tax system, and a fairer tax system.
“The Green Party is the only party that has consistently supported a capital gains tax (excluding the family home). We welcome National’s about-face, but this baby-step will fail to deliver the full benefits a comprehensive capital gains tax delivers,” said Dr Norman.
“National’s capital gains tax won’t address the significant current distortions businesses have to produce untaxed capital gains rather than revenue, for example.
“National’s plan to address the Auckland housing crisis is still looking like it’s too little and too late.
“Green Party has a more comprehensive plan. We will: introduce a capital gains tax (exempting the family home), place restrictions on housing ownership by non-resident foreigners, embark on a major state house building programme, with a focus on quality, affordability and progressive ownership options, and fast track medium-density housing around public transport corridors.”
Link to Treasury OIA: