Tax time
At last, a political party in New Zealand has been brave enough to include a capital gains tax in its policy platform.
Peter Nicholl
The United Kingdom has had one since 1965, Canada since 1971, Australia since 1985 – and that bastion of free enterprise, the United States, since 1913.
I have never understood why our politicians have for so long regarded capital gains taxation as a no-go area. When around 130 countries have some form of it. We are one about 30 that don’t – and most of the others are very small.
In international policy jargon, having some form of capital gains tax is regarded as ‘best international practice’ for taxation systems both for fairness and for revenue-raising reasons. Internatioinal organisations like the IMF and the OECD have been telling our politicians this for many years. Out politicians seem to love saying what they are doing is ‘best international practice’ in other areas. But until Labour’s recent announcement they have not only refused to follow this ‘best international practice’, they have also refused to even talk about it.
They seemed to fear that voters would penalise any political party that had the nerve to propose a capital gains tax – or to even talk about it as a possibility. But there have been a number of opinion polls over the last few years in whch a majority of respondents supported the introduction of some form of capital gains tax. In the recent political opinion poll that came out after the Labour Party’s announcement on their capital gains tax proposal, their share of the vote increased rather than decreasd.
I think our politicians have misread the views of the country on this issue. I have been writing this fortnightly column since 2022 and have written about capital gains taxes on at least five occasions during that time.
One of the main points I have made in my previous columns is that the introduction of a capital gains tax here is inevitable. I think many others have reached the same conclusion. They can see the state of our fiscal accounts. They can see the huge demands for expenditure the country has in areas like health and roading. They can see that with an ageing population, there is only one direction in which superannuation payments can go.
What are the alternatives to a capital gains tax? We could continue to let our infrastructure run down. We could increase tax rates on labour income, profits or GST. We could markedly raise the age of entitlement to superannuation or introduce means testing into superannuation entitlements. The one option we don’t have as a country is to do nothing. The staus quo is not a viable option.
At present all we have is a proposal. But the issue is no longer hidden in the political ‘too-hard’ drawer. It is now out in the open and part of the New Zealand political debate. That is progress. It will be interesting to see how the debate develops.
Capital gains tax. Photo: pexels.com
