Nelsonians need to know how they will be impacted by the Government’s Capital Gains Tax (CGT) now Labour’s former Finance Minister Michael Cullen’s detailed proposal is out.
It will start in April 2021, and will cost families and businesses in Nelson and Tasman $130m a year when fully implemented. The CGT will be applied to any increase in value of any asset like property, business, farm, shares or retirement investment. It does not apply to personal cars, boats, art, jewellery or wine collections.
The rate of the CGT is the person’s highest rate of income tax which for most people will be 30c/$ if they earn over $48,000 p.a or 33c/$ if they earn over $70,000 p.a. This is double Labour’s previously proposed CGT of 15c/$. It makes no allowance for inflation. This makes it one of the most onerous capital tax regimes in the world.
Many Nelson families will be hard hit by the detail of the CGT. It hits Nelsonian’s 50,000 Kiwisaver accounts. It applies to the family bach. It applies to the family home if one has flatmates and can apply if one has boarders, a home office, a home business or if the home is used for AirBnB. The CGT also applies to lifestyle blocks over 0.45ha of which there are hundreds in Nelson and Tasman.
This CGT is particularly tough on Nelson’s 4,000 small businesses. Every business will need to be valued including goodwill costing an estimated $20million. Any gain in value from that will now be taxed. It will be a boom for accountants, lawyers and valuers. Businesses are going to be more focussed on tax management and less on growing the region’s wealth.
My first objection is that it will hurt the overall economy, costing jobs and investment. It discourages enterprise and productivity.
My second objection is that New Zealand does not need a new tax or higher taxes. The Government is awash with cash from the huge surpluses and low debt left by National. The top 10% of earners already pay 70% of total income tax.
My third objection is compliance cost and complexity. Members of the Government’s own tax working group say it’s a lot of cost for not much gain.
My fourth objection is fairness. This CGT does not apply to the millionaire’s mansion, super yacht or art collection, but hits hard the average kiwi family if they own a bach, lifestyle block, modest rental property, or run a small business.
My fifth objection is that the CGT will push up rents. Landlords will pass the extra costs on and it will discourage investment in new rental housing. Far from encouraging more productive investment, this CGT tells people to put more of their money into owner-occupied housing.
Labour’s Capital Gains Tax is driven by envy and ideology. It punishes people who work hard and take risks to get ahead. Join our campaign to stop this new tax at National Party HQ this Friday at 5pm.