Chorus for Capital Gains Tax Grows
This comes as over 81,200 New Zealand citizens left the country in the year to August – a ~40% increase on the previous year.
Clarification: Total tax take is around $120B, total revenue is $167B. NZ Super costs $23B.
How many successful CEOs can manager Christopher Luxon snark at after running a government airline with a near monopoly on the domestic market?
After taking a crack at ANZ Boss Antonia Watson for her support of Capital Gains Tax last month, a new line of CEOs is forming to support the idea of more taxes.
Can someone please break it to PM Luxon that Capital Gains tax goes to the government and not the banks?
Sam Stubbs, Simplicity Founder and MD wrote for The Post:
Rarely do I agree with the CEO of the ANZ. But on capital gains taxes, I find myself in violent agreement. It’s time.
Why?
Look at the recent sale of an apartment in Wellington by the Prime Minister. The capital gains he made on it are taxed less than other investments, including KiwiSaver.
And in buying investment properties, the Prime Minister was doing a rational thing. That’s because tax is a very important factor in any investment decision. No one should fault him for investing to make the highest after tax gains.
And buying and flipping investment properties is the great Kiwi tradition. For generations it has been the most reliable way to get rich. And I bet that most KiwiSaver managers – who should know these things – have most of their personal wealth in property.
Antonia Watson, ANZ NZ CEO, caused a stink saying she supported a CGT.
Yet all those tax advantaged profits from investment properties haven’t provided more housing.
In theory, the rising prices of investment properties should have incentivised developers to build more. And with a tax incentive like we have, we should be swimming in houses.
But here’s the rub. We aren’t swimming in houses. Actually, we’re drowning in housing unaffordability. We simply don’t have nearly enough homes to live in, in spite of offering massive tax incentives to build.
ASB’s boss Vittoria Shortt also spoke up for taxes:
ASB chief executive Vittoria Shortt says New Zealand has to collect more tax to invest in the infrastructure the country so desperately needs.
“I think New Zealand has to really lean into taxes,” Shortt told The Post in a wide-ranging interview.
“We've got to invest in this country. It's a pretty simple equation,” she said.
“Can anybody sit back and say today that we’ve got everything we need in the country?
“We probably do need to pay more tax….I paid more in Australia.”
And last month, 77% of the 100 surveyed business leaders in NZ “told the Government it was time to wake up and smell the capital gains tax.”
None of this is rocket science or even beneficient behaviour.
It’s merely drive by awareness and facts - it’s a necessary issue to resolve for the country.
As Treasury has been advising throughout the year, even going publicly to do so, New Zealand faces significant financial headwinds.
Put simply, revenues will struggle to meet costs - and chopping down trees now for a quick fire is only temporary, and reduces the ability to meet future needs.
i.e. cost cutting is not the way out and can actually make things much worse by reducing the govt’s tax take [although that’s also a way to force in privatisation by claiming ‘our hands are tied’]
When the government cuts people and investments - as it is doing in Health and our infrastructure programs - it merely defers those expenses to a later, much, much more expensive time.
To wit, when National said 3 Waters was a “lifeline” investment in 2017, 3 Waters was costed at under ~$80bn.
Today that bill has risen to $180bn - almost half of our entire GDP.
The Auckland Harbour bridge cost £8.1 million pounds in 1958-59. That’s 7.5% of Auckland's annual regional GDP, and equivalent to the city spending $7.7 billion dollars today.1
The point is this - despite all their rhetoric pre-election, I can’t see this government doing anything to genuinely improve productivity or economic performance over the medium and long term.
Their whole strategy appears to be to privatise and corporatise, take debt off government books to look better to their supporters, and introduce a scenario like we see in the energy industry - where Kiwis get fleeced and our basics threatened.
David Williams for Newsroom showed us that our ‘gentailers’ failed to invest in renewable technology over the years because the capitalist model favours short term returns and dividends.
Edward Miller, a researcher at the Centre for International Corporate Tax and Accountability Research, says the figures show companies’ dividends skyrocketed while the rate of capital investment into new generation collapsed.
“It is the same pot of money. The same dollars paid to invest in more renewable capacity are being paid as shareholder dividends to make investors happy. These are intentional choices made by the management of these companies.”
Now Kiwis will pay for this with skyrocketing energy costs and failed businesses.
And that’s not just on National this time.
It’s based on successive government that try to appeal to the lowest denominator and a fundamental lack of education and awareness i.e. most people in NZ appear to only understand short term thinking and like one of my personal friends, only cares for their wallet size - not the future betterment of the country.
There is a reason Luxon, Seymour and Willis have already started parroting lines about “you can’t tax your way to prosperity”. No you can’t, and you can’t cut or privatise your way there either.
There’s a reason why even the nation’s business leaders are echoing the sentiment.
Someone far smarter can do the ins and outs of why privatisation is bad for NZ but the quick line is this:
Private companies don’t need to account for public welfare, and what’s best for Kiwis over the short or long term.
They are solely driven by the capitalist profit mode of thinking - and they will seek a return on investment i.e. profit off of Kiwis.
Everything they do and think is based on that concept.
In the UK, the privatisation of water by Thatcher in 1989 led to debacles such as Thames Water.
UK taxpayers are now on the hook to salvage and potentially nationalise the utility after failure piled on failure - all to the detriment of British citizens.
Thames Water is struggling under a 15 billion pound (NZD $32 billion) debt pile and a worsening environmental record. It wants the regulator to allow it to raise customers' bills by 40% to fund investment.
The group is racing to secure more funding to avoid being put into special administration and ultimately nationalisation.
I’ve spoken at length before about the government’s economics so won’t belabour the point.
But for a tax take of ~$120bn or so, Total revenue is $167bn, NZ Super costs $23bn and growing each year, an aging population, significant brain drain as young and mobile Kiwis flee in droves, climate costs climbing, lagging technology and infrastructure investment, most money tied up in property, lagging productivity etc. - it doesn’t take Einstein to know that outgoing Treasury boss Dr Caralee McLiesh wasn’t wrong.
Yes, we can absolutely borrow, but that has to be for infrastructure, generative sectors, new and upcoming technologies - not reverting us to the imaginary heyday of men in black coal mines and burning the very fossil fuels that exacerbate climate related costs.
Nature is stronger than us all.
This government’s strategy is a head in sand ideology.
It may make them look good to some voters in the next 3 years, but cutting costs, delaying investments, privatising NZ is a cheap cheat’s hand book to government. And a trick that is damaging to our country, and our children’s children.
I hope we get a serious lot in soon and find a well educated, and long term thinking voter base behind it.
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It astounds me that people felt disenfranchised enough with Jacinda to vote for the COC clowns. The brain drain is also a tax. Kids overseas may never come back and that will have a lasting negative impact on the country.
I firmly believe that the sheer unapologetic arrogance of Luxon's "I'm rich, so I'm sorted' is the best possible reason for both a CGT and a wealth tax. The inequality that is so prevalent in NZ because of the greed of these rich people is breathtaking. Personally, I don't give a fig how rich they are, just so long as they pay their taxes, the same as ordinary folk. My pension is taxed, my every dollar spent in the supermarket is taxed. Fuel for the car is taxed. I go out for an evening, an increasingly rare thing in itself, is taxed.
But these greedy, self-entitled rich do not pay their tax!