Taxing capital gains will help make homes affordable

A tax on capital gains (excluding the family home) will enable more people to own their own homes, Green Party Co-leader Dr Russel Norman said today.

The Government appointed Savings Working Group found in January 2011 that house prices rose by an additional 50 percent from 2001 to 2007 due to the preferential tax treatment of housing including the absence of a capital gains tax on housing.

"The lack of a comprehensive tax on capital gains is keeping the dream of home ownership out of reach for many New Zealanders, especially first home buyers who struggle to get a foot on the home ownership ladder" said Dr Norman.

"The same can be said for young New Zealand farmers who are being priced out of owning their own farm due to tax-free speculation in rural property.

"The absence of a comprehensive tax on capital gains (excluding the family home) makes our tax system hugely regressive and unfair."

Prime Minister John Key continued to defend the status quo saying that a capital gains tax would be 'inefficient' and 'difficult to apply', yet New Zealand remains an outlier by not having a comprehensive tax on capital gains.

"After the Savings Working Group came out in favour of a capital gains tax, the OECD followed suit in April, calling for the removal of favourable tax treatment for property here," Dr Norman said.

"The absence of a capital gains tax, the OECD found, had significantly affected home affordability, widening inequalities in wealth, and leading to disproportionate levels of investment into housing — a relatively unproductive sector of our economy.

"John Key continues to defend a tax shelter that has disastrous downstream impacts on our people and our economy for purely political reasons. He should put party politics aside for a moment to work for the greater good of New Zealand.

"A capital gains tax which excluded the family home would benefit the vast majority of New Zealanders through more affordable housing and jobs as investors take money out of housing and invest in the manufacturing and export sectors."

Link to the Savings Working Group report:

www.treasury.govt.nz/publications/reviews-consultation/savingsworkinggroup

Link to the OECD Country Report on New Zealand (summary):

http://www.oecd.org/dataoecd/9/25/47616615.pdf