Today is an excellent day for property investors, farmers, and business owners as New Zealand’s Prime Minster Jacinda Ardern say no to a Capital Gains Tax. The TWG (Tax Working Group) spent months working on recommendations and presented their report to Government in February.
Feedback from business leaders, accounting professionals not just in New Zealand, but also from Australia, and property investors, who were set to be hit the hardest, was overwhelming, and harmful.
Prime minister, Jacinda Ardern said in interviews, recently, that she was surprised by the lack of appetite for the new tax. Really? ?
The New Zealand Government is a three-way coalition and partner NZ First was against such a tax from the get-go and vetoed it.
What are the mainstream news sites saying?
All parties in the Government entered into this debate with different perspectives and, after significant discussion, we have ultimately been unable to find a consensus. As a result, we will not be introducing a capital gains tax.
On Stuff Ms Arden went on to say:
While I have believed in a CGT, it’s clear many New Zealanders do not. That is why I am also ruling out a capital gains tax under my leadership in the future.
The NZ First leader said the decision was not made until the “last few hours” But there was not sufficient support in the country for a capital gains tax. Peters said too much demand and a lack of supply was the issue in the housing market.
A severe shortage in the supply of housing, particularly in New Zealand’s main city, Auckland, always has and will always be the major cause of the housing crisis.
A capital gains tax on a rental property may have acerbated the housing crisis further, and that worried more than just property investors. A likely outcome would have been the quick sell down of rentals leaving beneficiaries with nowhere to live.
Build More Homes
The Labour-led Government are already using motels for emergency housing and clearly this is not their long term solution. It’s a quick fix until more homes can be made available, ideally with new mixed housing property developments, but their Kiwibuild solution is not doing so well.
Labour’s target was 100,000 new homes within a decade, and 1000 homes by 1 July ’19. They are on track to reach just 300 homes they have a lot to fix. It’s the building of homes that has the support of voting New Zealanders, and if they can get it right, it is likely to see them return to power in 2020.
The ‘no CGT’ news did not please all.
On RadioNZ the AAAP (Auckland Action Against Poverty) said:
Wealthy landlords held the debate hostage by threatening to increase rents if their obscene profit margins from speculative gains were threatened.
Because of this decision, housing in New Zealand would continue to be seen as an “investment to make a profit” out of instead of a fundamental human right.
The housing debate will continue for years to come in New Zealand, and also in other countries.
The housing crisis is being felt globally due to migration, and other economic and environmental challenges.
Governments are responding however, as we reported in this article: Tough new rentals rules make landlording harder.