Govt's tax tinkering a job creation scheme for tax accountants and lawyers

The National Government's tinkering with the rules around investment properties is a job creation scheme for tax accountants and lawyers but it doesn't address the underlying problem of the tax system's preference for investment property, Green Party Co-leader Dr Russel Norman said today.

"Bill English has created a tangle of new rules around investment properties in an attempt to fix the tax-incentives for housing speculation. But it won't work as well as comprehensive tax on capital gains. In fact, it's likely to create jobs for tax professionals to get around more complex rules," said Dr Norman.

"Introducing a tax on capital gains (excluding the family home) is a much simpler solution than adding more complexity. And overseas experience shows it actually works."

New Zealand investors currently face a tax incentive to invest for tax-free capital gains, rather than investing in areas where their money is going to be the most productive, as elsewhere throughout the OECD.

"A capital gains tax is a critical component of rebalancing our economy that no amount of tinkering by Bill English will fix. It would help shift investment out of property speculation and into the productive sector," said Dr Norman.

"A capital gains tax would restore the right incentives for investment in our economy. That's why the OECD, Treasury, the IMF, and the Government's own Savings Working Group support a tax on capital gains.

"Nearly every other country in the OECD has a capital gains tax. South Africa successfully adopted one in 2001 disproving many of the criticisms currently being raised by the Key Government.

"By defending the status quo, John Key and Bill English are looking increasingly out-of touch. They are playing politics with what should be a serious national policy issue.

"Rod Donald called for a capital gains tax in 2003 and it's heartening now to see Labour adopt good economic policy that will boost our productive economy."

Link to the Tax Working Group's revenue estimations from a CGT [pp46-47]:
http://www.victoria.ac.nz/sacl/cagtr/twg/Publications/3-taxation-of-capital-gains-ird_treasury.pdf

Link to Rod Donald's press release calling for a tax on capital gains:
http://www.greens.org.nz/press-releases/greens-urge-dr-cullen-act-dollar