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A recent bold statement from current National Party leader, Simon Bridges, declared his intentions should a capital gains tax (CGT) be enacted;
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“…No ifs, no buts, no caveats, I will repeal this CGT as Prime Minister of New Zealand ” – a statement so categorical that it made John Key’s 2008 commitment never to raise GST, look timid;
“National is not going to be raising GST.
National wants to cut taxes not raise taxes.”
Except, he did. In October 2010, Key’s National government increased GST from 12.5% to 15%.
Nine years later, Simon Bridges has made a similar, solemn, hand-on-heart, promise: “No ifs, no buts, no caveats, I will repeal this CGT as Prime Minister of New Zealand“.
Except, he can’t.
On at least several levels, his commitment to repeal a capital gains tax will fail.
Labour’s Grant Robertson, made it crystal clear that any proposed CGT will not be implemented until after the 2020 general election;
“We know it is important to get this right, so we will balance the need for certainty and urgency by ensuring that any potential changes will not come into effect until the 2021 tax year. This gives multiple opportunities for public input, and a general election before any new tax would come into effect.”
The process would be straight-forward: whatever the Coalition government decides would be put into legislation that would not ‘activate’ until after the next election. It would take a repeal of that legislation to stop CGT from ‘kicking in’.
The difficulty with this is two-fold.
Firstly, Simon Bridges and the National Party would have to achieve a simple little thing: win the next election.
The chances of that happening – with current polling – is marginal, to say the least.
For starters, National has been trailing Labour in the last two political polls.
Secondly, National has no ‘mates’. ACT is consistently in the zero-to-1% band and the faux-Bluegreen Party is nowhere to be seen.
That leaves two parties: the Greens and NZ First.
The Green Party membership would rather machine gun the last remaining Hector’s Dolphins than entertain a “teal” coalition with the Nats. Bridges’ promise to reinstate offshore exploratory drilling for oil and gas would make any potential National-Green coalition toxic and as likely as a flying saucer landing on the White House lawn.
Which leaves NZ First. It is unclear as to what benefit – if any – a coalition deal with the Nats would offer to NZ First. As well as having been the “kiss of death” to other small parties, National has tried to destroy Winston Peters in the past. Peters is unlikely to have forgotten the leaking of his superannuation over-payment and the strong probability that it was engineered by a senior National government minister who shall remain nameless.
Moreover, if this current Coalition Government passes legislation for a capital gains tax to take effect in 2021, that would mean all three parties – Labour, Greens, and NZ First – voting to pass said necessary legislation.
For a National-NZ First Coalition to repeal that legislation would mean NZ First voting against a law that they themselves helped enact.
The fallout with the public would be massive, echoing NZ First’s disastrous decision to form a coalition with National back in 1996. Public support for NZ First would rapidly evaporate.
There would be simply no possible political gain for NZ First to travel down that road.
So unless Simon Bridges can find a new political party to ally with; or, unless National can win 50% outright of the Party Vote in 2020 – both unlikely scenarios – his promise to “repeal this CGT as Prime Minister of New Zealand” cannot be taken seriously.
Indeed, the comments following Bridges’ ‘tweet’ on 6 March reflected the disbelief of such an unlikely event happening.
And more than one social media commentor asked some pertinent questions;
“Does that include the Brightline Test your government introduced?”
And;
“Will you get rid of tax on wages and if not, why not?”
Considering that National introduced a limited capital gains tax – the two year ‘brightline’ test – in 2015, Bridges would have to make some hard decisions and explanations to the public.
Would the ‘Brightline’ test remain in place if he had an opportunity the scrap the Coalition’s more comprehensive CGT?
Would he return the ‘Brightline’ test to two years or keep it at five?
How would he justify retaining a ‘Brightline’ test – whether at two or five years – when scrapping a more comprehensive, and justifiably fairer, capital gains tax? Why is one form of CGT acceptable to National, but not the other?
And as more than one person demanded to know, why is National promising to get rid of one tax (Capital gains) which would benefit property speculators – but not income tax, which would benefit every wage and salary earner in the country (and put a permanent smile on David Seymour’s face that would never be erased)?
Bridges would be facing these questions and more in 2020 if he decided to make capital gains taxation an election issue next year.
All of which is unsurprising: at around 5% in the polls, Bridges faced the ignominy of approaching the margin of error – depressing symbolism to be viewed as an ‘error’ – and over-taken by one of his National MPs, Judith Collins. This has made him that most desperate of beasts; a politician at risk of becoming irrelevant.
No party can hope to win the governing benches with a Leader who is seen as uninspiring and lacking support from even National Party voters.
If Bridges cannot succeed in campaigning to defeat capital gains, his tenure as National’s leader will come to an abrupt end. To be followed in rapid succession by his political career.
A further point has probably not escaped the attention of the National Party: if the Coalition government wins the next election and remains intact, that would signify not just the implementation of the capital gains tax – but it’s bedding-in for three years. That would make it much harder to repeal.
Especially if all the fear-mongering, gloomy predictions failed to materialise and the world (or at least the bit at the bottom where New Zealand sat) failed to end in Mayan Calendar 2012-style. Like GST, National would have to ‘bite the bullet’ and accept the new tax. They simply could not find any justification to repeal it without perpetuating their ‘other’ reputation as being a party of, and for, “rich pricks”.
If Labour, the Greens, and NZ First hold their nerve and don’t blink in the face of right-wing hysteria and bluster, the political gain from implementing CGT could be greater than they anticipate.
In fact, everything to gain, and National to lose.
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Postscript
Response to National MP, Scott Simpson, engaging in fear-mongering over CGT:
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References
Twitter: Simon Bridges – no ifs no buts no caveats – 6 March 2019
Otago Daily Times: Key ruled out GST increase in 2008
NZ Herald: GST rise – The hole in your pocket
Interest.co.nz: Labour releases document setting out tax plan, says no Working Group taxes would come into effect until after 2020 election
Mediaworks/Newshub: National plunges to worst result in over a decade – Newshub poll
NZ Herald: National will reverse Govt’s offshore oil exploration ban if in power in 2020 – Bridges
Radio NZ: Peters’ legal action against National party continuing – lawyer
Beehive: Bright-line test targets gains on property sales
Mediaworks/Newshub: NZ prefers Judith Collins to Simon Bridges as Prime Minister – Newshub poll
Twitter: Frank Macskasy – Scott Simpson – capital gains tax
Other Blogs
The Standard: Why New Zealand needs a capital gains tax
Previous related blogposts
A Capital Gains Tax? (14 July 2011)
ACT intending a “serious assault”? (17 July 2011)
National spins BS to undermine Labour’s Capital Gains Tax (31 May 2014)
A Claytons Capital Gains Tax? (13 September 2014)
Simon Bridges – out of touch with Kiwi Battlers (2 March 2019)
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This is also about property investors both foreign and domestic buying for cash for years but chinese purchases are massively down in Australia and New Zealand overall. One of the reasons the market is collapsing and also because of mortgage origination falling off a cliff. Australia’s a different story to buying online.
Of course Developers see them coming a mile away and slot them at prices 100% above the resale value by guaranteeing them 6% yields for 3 years, then they just give them 6% of their own money back for 3 yrs keeping rent themselves, then they’re left holding a lemon for 15 yrs. As happens all over the world, they artificially print the top end per square foot valuation which drags up the average and encourages more and more borrowing from the middle class to chase the market. So foreign property speculators may be a small percent but the impact is large.
+100 mike he’s a selfish b
When John Key was asked why he had increased GST after saying that he wouldn’t, his response was that he could. How smug and arrogant is that?
Every once in a while, the “Jovial John the beersies and BBQs guy!” mask would slip, and you’d see Key for the person he really is. And then you’d desperately want him to put the mask back on because the underlying horror was simply too grim to stomach for any length of time.
Low income earners spend most or all of their money each week to live so after being taxed on their income once, then all of that income attracts tax a second time when they spend to live. Low income earners rarely have a tax adviser or access to systems of reducing ( avoiding ) their taxation.
john F’key increased the tax on the poor by raising GST from 12.5% to 15%, and increase of 20% of their GST so slashing their after income tax spending power used to meet daily needs by 2.5%. This draconian stealing from the poor is indicative of NACT’s agenda.
Meanwhile the uber rich spend little of their income on daily needs so the GST increase has little direct effect on their budget BUT as NACT had lowered the taxation rate on corporate and high earners, who both used tax avoidance schemes anyway, then stealing from the poor to feed the rich is a simple description of swine key’s mandate. The GST increase funded the corporate tax reduction.
It was a move by stealth as the two tax changes were not announced together.
I don’t think Simon Bridges will be around long enough to ever make Prime Minister of New Zealand.
Every time he speaks I cringe. He is too much of an embarrassment. No-one wants a representative of the people who makes promises he has absolutely no intention on keeping. We NZers had enough of that behaviour from John Key.
Lets be assured of one thing that whilst Bridges claims to do away with the CGT then what existing taxes would him and his cronies increase to make up the difference???!!!!!
Also the National MPs abhorrence of the CGT seriously gives me the impression they are hiding something. Have they paid little or no taxes over the years on their various property investments and hence their attitude now to the CG???!!!!!
Out of all this we all know we cannot trust a National MP because they are only interested in Number One i.e themselves.
In 1988 when the then-American Presidential candidate G H W Bush was on his campaign trail he said these words: “Read my lips: no new taxes”. The words later came back to haunt Bush as it turned out to be a broken promise. Existing taxes were increased whilst he was president.
It does look like that 31 years on Simon Bridges is parroting the same words as G H W Bush. But then it’s common practice for National Party politicians to parrot the words of their beloved America eg Reagen’s “Trickle down effect”.
Bridges may claim no new taxes if we by some misfortune end up with a National government but we can be well assured that existing taxes will experience an increase eg GST going up to say 17%.
It still bothers me alot that National are so against a CGT. Their OCD(as I have said earlier)is concerning. I am sure they have spent more money on the CGT matter and their misleading information than they would spend on more important matters.
So how much tax evasion/avoidance have National MPs gotten away with over the past so many years? It’s time they(National)MPs opened their books and be totally honest and upfront with NZers instead of spreading their perpetual lies and bullocks.
Bridges also needs to confirm there will be NO INCREASE in existing taxes if there is a National government ever again. But we the voters will probably be treated with arrogance and contempt by whomever is the National Party Leader with the excuse of “Because I can(increase existing taxes)” like John Key said despite his pre-election ‘promise’ in 2008.
The most important thing for Bridges to do is give the impression to intelligent people that he can actually spell CGT. It doesn’t matter about his rabid supporters, they can’t spell it anyway so they don’t care, but the stupidity, the sheer vacuousness of his comments on most things are handicaps to overcome if he wants to make any positive impression on those who need to be moved.
But the one tax that affects everyone, sooner than later – still rumbles on.
Who’s got the decency to lower GST – back to 10%, if we must have such a gouging tax?
And how about no GST on rates?
Or are we all too numb to the groping fingers in our teeny moneybags that we simply sigh and suck it up?
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