Jenee Tibshraeny: NZ Herald Wellington business editor on whether the capital gains tax can work

Labour recently confirmed it aimed to campaign on the introduction of a capital gains tax on commercial and investment residential property.

Leader Chris Hipkins also claimed the money raised would be used to fund the health system, but questions have been raised over whether this proposal can work.

NZ Herald Wellington business editor Jenee Tibshraeny weighed up the idea, and whether Labour can be trusted to spend the money wisely.

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Episode Transcript

Speaker 1 (00:00):
Ever, due to see.

Speaker 2 (00:01):
Alan Chris Hipkins is pushing back at the government and
his own potential coalition partners on the issue of the
capital gains tax. Government hates it, Greens want Labor to
go much further.

Speaker 1 (00:10):
This is the policy that we are campaigning on and
this is the policy that we will implement if we
form government after the next election. Because I'm not a
complete pushover like Christopher Luxen, I don't think the smaller
parties should call all of the shots. I have been
very very clear under a Labor government, I will be
the Prime Minister. Barbara Edmonds will be the Minister of Finance.
That is not up for negotiation.

Speaker 2 (00:29):
Genetive Trainey is The Herald's Wellington Business editor with us Hallo,
Jenay Hi, Heather. Okay, so you have an interesting take
on this, which is you don't have a problem with
the CGT part. You have a problem with the three
free doctors visits part.

Speaker 3 (00:42):
Why, Yeah, exactly. I think if you read some of
the work that Treasury has been putting out there, it's
really worried about the costs associated with our aging population.
You know, these costs are meant to soar and the
tax take is not meant to increase, you know, at
the same rate is the expenses. So Treasury illustrates this

(01:03):
in a recent report it did. It said that if
for the government solely relied on tax to meet the
cost pressures that are ahead, the average tax rate on
labor income would need to rise from twenty one percent
to thirty two percent of GDP. Or if you solely
rely on increasing GST to meet the costs, that would
need to go up from fifteen to thirty two percent.

(01:24):
So the reality is we don't have enough money to
meet the costs. So then you think, well, how do
you you know, how do you meet these costs? Either
you cut services a lot, you increase the age of
super or you increase the tax base. So you just
instead of taxing people who go to work more, you
just diversify who you tax. And a capital gains tax

(01:46):
is a widely recognized way of doing that. You know,
people do, It's done all around the world. A bunch
of business leaders think it's a good idea, IMF so on.
So of all the different options, none of them are great,
but that one doesn't seem like a bad one.

Speaker 2 (02:00):
Yeah, So basically the idea is you need more you
need more revenue, you don't need to go blowing it
on something that people can afford to pay for them.
Many people can afford it, and this is arguably the
same problem with the Future Fund, isn't it. They bring
the money in or they get the money and then
just squander it on something we don't need.

Speaker 3 (02:14):
Well, that's the thing, And you know, I think for
a lot of people, they are smart enough they can
see the future that we're looking at. And I mean
it's not great, but something needs to be done. But
the thing that is galling is when labor proposes to
spend money in an untargeted way. So, of course I'd
like to go to the GP three times a year
for free. But I can afford to go to the GP, thankfully,

(02:36):
and I do go. So actually to spend money on
me going to the GP is a waste of money.
I'd rather that be spent on other people who can't
afford it. What about not getting top of the finances.

Speaker 2 (02:46):
What about if you see this from a different perspective,
which is this is not actually the thing that's supposed
to bring the revenue, and this is the trojan horse, right,
it starts them off. They sell it to the public
with hey, this is what you get for us introducing
a CGT. So it's a nice little bait and switch,
and then after that you can start making it more comprehensive.
Comprehensive and that is how you pay for everything.

Speaker 3 (03:05):
Yeah, now, like I mean, that's a good point. What
they've proposed here by keeping it just on property, cudent
types of property, is that the revenue generation is not
going to be huge. It's not going to save New
Zealand from this doom and gloom that Treasury talks about.
But I don't think we can assume that label would
go further with the taxing. You know at the end

(03:26):
of the day that there would be an uproar and
you can't entirely pull the rug out from beneath people
who invest in property. There's nothing wrong with doing that.
We need landlords and I would hope that it wouldn't
overkill things. And for example, the way it could do
that is if it again stopped allowing investors, prevented them

(03:48):
from deducting interest as an expenseful tax previously.

Speaker 2 (03:52):
Do you know what they're doing there.

Speaker 3 (03:54):
Well, they haven't said, so we asked and and they
sort of kept it open. So, you know, it's pretty
crucial for investors that they can deduct their interest as
an expense. It's a very large expense. It helps with
cash flow.

Speaker 1 (04:10):
You know.

Speaker 3 (04:11):
It's one thing introducing a capital gains tax. I think
that's fine, but removing the ability to deduct interest as
an expense would be a step too far. And I
don't know why they didn't just stamp that out when
they announced the policy. Yeah.

Speaker 2 (04:25):
Interesting. Hey, thanks very much, Jane. As always, Jane tub Cherani,
the Herald's Wellington business editor. Here the labor have a
poverty mindset.

Speaker 1 (04:32):
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