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National Tinkers while Auckland Property Prices Burn

By   /  May 21, 2015  /  36 Comments

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When it comes to tax cuts for the rich; state asset sales; slashing public services; and corporate welfare – National can move at relativistic velocities that Einstein concluded were beyond the realms of physical laws in our Universe.

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snail politics - national government tinkers

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When it comes to tax cuts for the rich;  state asset sales; slashing public services; and corporate welfare – National can move at relativistic velocities that Einstein concluded were beyond the realms of physical  laws in our Universe.

When it comes to social problems like child poverty; increasing greenhouse emissions from agriculture; and a housing crisis in Auckland (denied again, recently, by our esteemed Prime Minister)  – the National government can tinker and prevaricate in ways that would do a two year old, at an early childhood centre, proud.

It has opposed, resisted, condemned, criticised, and generally done everything within it’s power not to implement any form of capital gains tax in this country. Suggesting to National that a CGT could be one tool (of many) to quell housing speculation in Auckland has been like inviting a Vegan to a spit-roast barbecue.

Belatedly, as is usual for this  government, after considerable pressure from multiple political, community, business, and state sectors, Key has decided to move – albeit at a glacial pace, and with a tentative single step – to introduce a limited Capital Gains Tax.

The limited CGT will apply;

Introducing a new bright line test to tax gains from residential property sold within two years of purchase, unless it’s the sellers main home, inherited or transferred in a relationship property settlement.

As Key explained;

“It’s not unreasonable to expect that if you buy an investment property and sell it for a gain within two years, then you should be taxed on that gain.”

Fair enough to. It is not unreasonable, especially when the rest of us have no choice but to pay tax on all our other earnings, whether it be as a wage-slave; self-employed; retailer; contractor, etc, etc, etc, etc, etc…

Even property investors admit it is fair, as NZ Property Investors’ Federation CEO, Andrew King, pointed out;

“As we have been saying for years, people trading property have always had to pay tax on their profits and this move will help to clarify this. This should finally put to rest all the unfounded comments from people who say that property has a tax advantage.”

But – two years is the “bright line”?!

So, property speculators/investors who sell their assets in, oh, say, two years and one day are safe?

I’m sure this has escaped the attention of every property speculator/investor in the country. Plus their accountants. Plus tax specialists. Plus the chap who mows the lawns.

Shhhh! Be vewy, vewy quiet! Don’t tell anyone.

As long as no one knows of the two year “bright line”,  the law is “perfectly workable”…

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flying money pig

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Tinkering – best left to a National government. They are expert at it.

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References

Fairfax media:  No housing crisis in Auckland – John Key

NZCity: Capital gains tax on property announced

NZCity: Capital gains tax – what’s been said

Other blogs

Bowalley Road: The Least They Could Do

Gordon Campbell on the government’s belated moves on property speculation

No Right Turn: Winning the argument on taxing capital gains

Polity: At the end of the day what most New Zealanders ackshully accept is… (Housing edition)

Polity: More-tax-on-capital-gains-but-not-at-all-a-capital-gains-tax

The Dim Post:  Progress

The Standard: CGT – the focus groups made Key do it

The Standard: Capital gains tax to be introduced

The Standard: Herald praises Cunliffe for CGT policy

Previous related blogposts

A Capital Gains Tax?

Our growing housing problem

National spins BS to undermine Labour’s Capital Gains Tax

Why should tradies be prosecuted for doing “cashies” and not paying tax?

Letter to the Editor – A Claytons Capital Gains Tax?

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capital-gains-tax-first-world-problem

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36 Comments

  1. Nick says:

    I think I should pay income tax. Unless, of course, I stay in my job more than two years, in which case I naturally expect it all to be paid back to me.

  2. Z says:

    If the value of the houses fall is it possible they actually claim tax back? After all we are told house prices are overvalued.

  3. Samwise says:

    Well sussed Frank. We should send Key to the Olympics for his amazing talent at flipflops and backflips!

  4. wild katipo says:

    From the man known as the ‘ Double Dipper from Dipton’ who enthusiastically stated……

    ”We should be glad we have a LOW WAGE ECONOMY because that encourages foreign investment ”

    in all honesty ….CAN YOU TRUST THIS MAN ?

    Both the above examples says it all about anything this man has got to say about the welfare of New Zealanders.

    NEVER FORGET WHO WE ARE DEALING WITH WHEN TALKING ABOUT Bill English.

    Then you will know who to vote for come next election.

    • wild katipo says:

      And NEVER FORGET WHO WE ARE DEALING WITH WHEN WE HAVE A PM WHO :

      1) Commits workplace harassment and common assault.

      2) Lies about mass surveillance and the XKEYSCORE program.

      3) Uses the GSCB to enhance his political crony’s chances of getting a position on the World Trade Organisation

      4) Endorses and uses the GSCB to ILLEGALLY SPY on 88 New Zealanders including Mr Kim Dotcom.

      5) Dismisses award winning investigative journalists such as Glen Greenwald as a Left wing conspiracy theorist – despite the constant vindication of the Edward Snowden data.

      And many , many more things you New Zealanders should be alarmed about.

      For a comprehensive list of this corrupt and devious impostor Pm …visit the site : Hackpad : Honest John.

      There you will find and read for yourself how much of a subversive this man really is.

      Do it to get informed.

      Do it to realize how New Zealanders are being systematically chumped into signing away their national sovereignty.

      Do it for your children’s sake . And their children …..your grandchildren.

  5. Korakys says:

    It is notable that National didn’t listen to anyone about the Auckland property bubble until the Reserve Bank spoke. I’m pretty sure I read somewhere that JK even gave that directly as the reason – that the RB spoke up on this issue.

    Which goes to show that for National and this government it doesn’t matter what you say or how convincing your argument is, but rather who is saying it.

  6. CLEANGREEN says:

    Well done Frank, “re-arranging the deck chairs” = budget 2015.

    Pigs will fly as National has told us so.

    Perhaps they can also walk on water?

    In the budget we can see the NatZ are only re-arranging the deck chairs on our Titanic collapsing economy.

    Best we can expect is that Auckland house prices will get a small blip and the Chinese overseas buyers will still be there as always since they need to buy offshore assets from China because their economy is overheated and they apparently according to an economic expert has stated that Chinese investors need to show some of their assets as solid investments and better when offshore.

    Whether he is right or wrong it has been experienced in Vancouver that these Chinese overseas investors have strong influence in these cities so don’t expect solutions from tweaking the taxing of overseas investors as a way to cool the Auckland housing market.

    • Wensleydale says:

      I have it on good authority that FJK can actually turn water into wine. Which he then gifts to waitresses he’s been harassing for months as a sort of, “Sorry, no harm done eh, love?”

  7. cync says:

    A fair and concise blog, with one discrepancy.

    “increasing greenhouse emissions from agriculture;”

    I’m not sure where you got that from, or how it ties in with this article.
    It is very well known that New Zealand’s agricultural emissions have in fact decreased since 1990. Better production techniques and also looking after what we have, in our natural setting has helped to continue New Zealand’s above average, no, above the rests performance to feed the kids, the hungry around the world and to also make some inroads into better diversification here in NZ. There are obviously some pricks that are farmers. We are not all like that and we would appreciate some help in telling the good stories.
    Not at the cost of making the bad stories public, because unfortunately they need to be exposed also.
    But please.
    Don’t tar us all with the same brush.
    Otherwise we will have nothing to aim for.

    • Brigid says:

      “It is very well known that New Zealand’s agricultural emissions have in fact decreased since 1990.”
      No, that’s not very well known. Actually it’s not a fact, well known or not.
      Refer
      http://www.landcareresearch.co.nz/science/greenhouse-gases/agricultural-greenhouse-gases/methane-emissions
      “The inventory of NZ’s greenhouse gas emissions is calculated annually by the Ministry for the Environment and reported internationally. According to this inventory, methane emissions from ruminants have increased by 10 % since 1990.”

      • cync says:

        In 1990 there were 3.441 million dairy cows, 4.593 million non dairy cattle and 57.852 million sheep. If we times these numbers with the enteric fermentation emission factor for each class of animal, which is: 79.8, 59.3 and 12.1 respectively of kg CH4/head/year, we get a combined total of 1.246 billion kg of emissions.
        If we now substitute the livestock numbers for 2012, which are 6.446 million dairy cows, 3.734 million non dairy cows and 31.263 million sheep. Then times by the same emission factors, we get a total of 1.113 billion kg of emissions from ruminant animals. That to me seems like a decrease.
        Where agricultural emissions have increased is in chickens and horses. Not what I thought of as agriculture, so I admit I was wrong about what is categorised as agriculture.
        All information taken from the website you so thoughtfully recommended.

  8. Peter Bradley says:

    Does no-one have the grace to commend Bill English and John Key for delivering a budget that will make a genuine difference to low income earners and beneficiaries. The nearly $900 million in additional welfare spending which will deliver the first significant rise in benefits since 1972.
    I think it demonstrates a socialist streak running through the National caucus and a profound awareness of New Zealanders sense of fairness.
    Some of the comments and blogs on TDB remind me of a scene from Monty Pythons Life of Brian.
    “What has the National government ever done for us?”
    “Well they did raise the minimum wage and introduce free doctors visits.”
    “Ok. Ok. Apart from raising the minimum wage and free doctors visits what has the National government ever done for us?”
    “They did just significantly increase benefit payments and tax credits for low income workers.”
    “Ok. Ok. Apart from raising the minimum wage, free doctors visits, increasing benefits and tax credits for low income workers what has the National government ever done for us?” …

    Some times it makes more sense to acknowledge when someone you disagree with does something good. Rather then trying to come up with more reasons to disagree with them.

    • Wensleydale says:

      Yes, because giving beneficiaries back what they took from them in the early 90s is an act of almost Christ-like generosity.

      And to answer your question, no, no one is sufficiently deluded as to congratulate National on this miserable, back-handed sop they hilariously call a budget.

  9. Andrew says:

    What we have here is a left winger with nothing to talk about. What’s interesting in Frank’s post is what he’s NOT talking about.

    The budget has completely taken the wind out of the Left: All they have to talk about is Auckland property prices. Beneficiaries got more, schools got more and no taxes were cut.

    It was a left-of-centre budget designed to crush what little life there is left in the Labour Party.

    • Andrew – I talked about the two year “bright line” set by National, and how it doesn’t apply if a property is sold two years and one day after purchase.

      Care to address that point?

      Discussing the Budget can be done on a blogpost that actually relates to that issue (https://thedailyblog.co.nz/2015/05/21/more-grudget-than-budget/).

      • Andrew says:

        Certainly!

        It’s more than Helen Clark & Michael Cullen ever did when they had the chance.

        This of course had nothing to do with them being landlords and the owners of several properties … 😉

        Same goes for National closing of the LAQC loophole for tax avoidance when they first got into office. Clearly a morally and fiscally correct thing to do, but something that would have hit both Helen and Michael in the back pocket.

      • dangerousdave says:

        “…how it doesn’t apply if a property is sold two years and one day after purchase.”

        Actually it does. There is a pro-rata application. That said, the ‘brightline’ should be more like 5 years IMHO.

        • Andrew says:

          Yep I think 5 years makes more sense. Maybe once this has been tested, it will be extended

          • Yep I think 5 years makes more sense. Maybe once this has been tested, it will be extended

            Same problem, Andrew.

            A speculator/investor hangs on to the property for five years and one day and escapes the tax.

            No other tax works along this line, and in fact, the longer an owner hangs on to an investment property, the more they stand to make from it.

            Ergo, a tax can only work if applied across the temporal board, regardless how long it has been owned.

            Anything else is tinkering.

            • dangerousdave says:

              You’re right Frank, but the idea of the brightline test is to clarify intent. That’s why English argues that this is not a capital gains tax. His argument is that the brightline simply sets a marker of intent, that if you sell within two years you are more than likely speculating. And that is what makes the profit taxable under current income tax law, rather than being a CGT. My suggestion of 5 years was in that context. Personally I cannot understand the inequity of some income being taxable (eg wages and salaries) and others not (eg speculation).

        • Actually it does. There is a pro-rata application.

          Clarify, please?

          • dangerousdave says:

            My understanding from the analysis I have read is that the brightline test is not a ‘cliff’, so to speak. If you sell a property 2 years and 1 week after purchase, tax will be payable based on a pro-rata formula of the gain made over the period. I’ll try to find a cite, and of course I do stand to be corrected :>

            • Indeed, Dave. And of course, further information will be useful for me as well. Giving a full picture is necessary to understand what it going on and how it impacts/affects us.

              • dangerousdave says:

                My apologies Frank…I can’t find the cite I was looking for. I will keep looking…my wife tells me it was in a EY tax release. FYI Treasury recommended a 10 year ‘bright line’. That makes much more sense that 2 years.

    • wild katipo says:

      Hey idiot….travel up North where your hero’s Key and Joyce got the literal shit kicked out of them.

      Yeah – that’s right …by the guy this phony PM said was too old and didn’t stand a chance.

      Right again , a- hole,….Winston Peters humiliated your hero Key and because of why???

      A rockstar economy???

      Nooooooooooooooooooooooooooooooooo.

      Because Northland is representative of people up and down this country who are being conveniently fobbed off , marginalized and trashed by this ‘hero’ govt you are so sycophantic about.

      And as for you dweeb – try living on a benefit with your family for a month….somehow I cant seeing you speaking of your dirt trash govt and Key being your heroes for long.

      And don’t give us that cornball excuse you’d get a job.

      There’s huge unemployment problems in this country and there’s a reason they’ve coined the term ‘ the working poor’….

      Because lame ass neo liberals like you support a minimum poverty wage that can barely pay for the basics – if at all – let alone get a family out of the poverty trap you ignorant , stupid fool.

      • Andrew says:

        Katipo:

        Mate; One swallow does not a summer make.

        If you’re fool enough to vote for Winston then fine. For the “baubles of office” he’ll do a deal with anyone….apart from the Greens. Which pretty much screws Labour doesn’t it?

        Come the next election, will he still be there? Will he deliver anything for Northland other than rhetoric in the meantime?

        • wild katipo says:

          Sorry to rain on your summer , buddy ….but obviously you fail to be a very observant person.

          Conveniently missing the point behind what I’ve typed and straw man arguing the side issue of Peters….

          You fail completely to recognize that there is a significant groundswell against your globalism , your neo liberalism, your greedy hero’s…

          No ones talking the next election …we are talking what your hero Key is really here for in this country. And it has nothing to do with being PM and everything to do with what George Bush Senior stated after the First Gulf War.

          ” No one shall stand in the way of our New World Order and our thousand points of light ” .

          This is what John Key is all about. Not this country. He is a deconstructor of our sovereign state.

          Groomed by extreme Zionist American Financiers , carrying out initiatives from Washington.

          And for a comprehensive list of this compulsive liar , I would advise you , and your fellow foolish neo liberal travelers to go to :

          ‘Hackpad : Honest John’.

          There you will find a documented and huge list of the deliberate lies ,deceits and doublespeak of this subversive and corrupt individual.

          Let the factual points speak for themselves. Don’t just take my word for it.

          Nothing better than solid fact to prise open the eyes of the willingly blind.

          So as I say…..sorry to piss on your party, buddy , – but there’s a storm coming.

  10. […] blogpost was first published on The Daily Blog on 21 May […]

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