Brad Olsen: Infometrics Principal Economist on Labour announcing a capital gains tax

It's unclear how much the Labour government will raise, from its just announced new capital gains tax.

The targeted tax would apply to profit made from selling commercial or residential property, to raise funds for universal free doctors visitors.

The family home, farms, KiwiSaver, shares, business assets, inheritances, and personal items will be exempt.

Infometrics Principal Economist Brad Olsen told Ryan Bridge the announcement doesn't specify how much the tax is likely to raise.

He says it's hard to assess based on the information whether the tax would raise millions, hundreds of millions, or billions of dollars of revenue over any time period.

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Episode Transcript

Speaker 1 (00:00):
So you're just joining us this morning neighbors announced it's
a narrow capital gains tax. You have you have to say,
doesn't apply to businesses yet, doesn't apply to farms yet,
doesn't apply to key we saver yet, shares yet inheritance yet.
What it does apply to is commercial property and residential
property outside the family home sold after the first of
July twenty twenty seven. This court, of course, is all

(00:21):
on the proviso that they get back in the government.
Brad Olfson infametrics with me this morning. Brad, good morning,
good morning. Yeah, they're taking the narrow option.

Speaker 2 (00:29):
Yes, I mean a very narrow option, as you say,
focused on residential and commercial property. I think, I mean
that's really because of the politics of this all. But
at the same time, as an economist, it does make
you wonder why they didn't go broader given this, Well,
looking at the likes of the housing market and similar
at the moment, there's not a huge amount of gains
happening in there, so the ability to produce revenue is

(00:52):
a lot different from when we had the capital gains
tax a while ago. But realistically, again it seems like
you got this sort of very very narrow definition. If
it's not wide and broad based, it does sort of
be the question, why we're bothering with something so so specific?

Speaker 1 (01:08):
How much would it raise? Do you reckon?

Speaker 2 (01:10):
Well, that's sort of that the question I've been asking
myself the last sort of ten to fifteen minutes since
getting the releases. I don't know. There's no costings that
are outlined in the release around what might be brought
in or what the expectations might be. Now, as an
economic forecast, I get that putting out numbers can be difficult,
but it's hard to sort of assess if we're talking

(01:30):
ten million, one hundred million, or a billion dollars worth
of revenue over any sort of time period. I think,
given the limitations, and given how narrow of a capital
gains text expansion is being talked about here, I wouldn't
expect it to be a huge money spinner. But again,
it's sort of hard to evaluate given there's just no
details that I can see.

Speaker 1 (01:48):
There's more blank space on this release than the art words. Brad,
what about the issue if you were an elderly person
listening to this radio show this morning, and you have
purchased a commercial property or a couple of rental properties
to your retirement and you were planning on selling them
in the next few years. This is going to be
a real kick in the guts.

Speaker 2 (02:07):
Well, it might seem like that to start with. I
think we do have to take a little bit of
a breath before we get sort of too much into
all of that, because my expectation, again without having read
absolutely every new sort of legal piece has come out
on this in the last fifteen is that it will
likely only apply to those gains after the start of
the period. So if you bought something five years ago
and it's made one hundred K, it's not going to

(02:29):
get taxed until you start to make a gain after,
say twenty twenty seven. So I think we do have
to hold our breath a little bit on that because
people often say, well, I bought something thirty years ago
and now it's going to get taxed to all kingdom. Come. No,
that's not actually the case, but there is, I guess
a question over again how people might spend their money
or invest in the future. Question of course also of

(02:49):
politics and how this plays out, what the vote does,
and everything else.

Speaker 1 (02:53):
Appreciate your time, Brad brad Olson infor metrics.

Speaker 2 (02:56):
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