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Land tax - what it could mean for you
4:00 AM Saturday Jan 30, 2010
Owners of the Auckland's 443,200 homes would have to give the Treasury an extra $443 million if they were subject to a 0.5 per cent levy. Photo / Herald on Sunday
Aucklanders would be hammered by a proposed land tax, with households facing an annual bill running into thousands of dollars.
According to conservative estimates, owners of the region's 443,200 homes alone would have to give the Treasury an extra $443 million if they were subject to a 0.5 per cent levy.
A land tax was one of several in the tax working group's recommendations to the Government this month.
An economist has also given warning that such a move would lead to falls in property values and an increase in rents.
If the value of land was taxed, the rich would pay more, but people on low incomes who have property would be the hardest hit.
Superannuitants living in the wealthiest eastern and northern suburbs of Auckland and others on low incomes would be particularly affected as they would not necessarily benefit from the proposed tradeoff of lower income tax.
Remuera households could be paying $6500 each and those on the North Shore $1300-$4000 a year. Financier Mark Hotchin of Hanover could be paying almost $100,000 a year for his three-section block in Paritai Drive, Orakei, and Prime Minister John Key would be up for much the same on his slice of St Stephens Ave in Parnell.
Southlanders, living on New Zealand's lowest-price housing land, would be paying just $30 a year for the average section.
With Auckland's scarce land supply commanding the country's highest prices, residents would pay comparatively more than other New Zealanders.
Real Estate Institute figures show Auckland's median section price is $227,000, so the proposed 0.5 per cent land tax would draw a new annual $1138 payment.
December's national median section price of $170,000 would draw $850 in land tax a year.
Bryan Thomson, CEO of Harcourts real estate, said such a tax would penalise people who had scrimped and worked hard to get ahead.
Peter Thompson, a director of Barfoot & Thompson, said low-income homeowners in Auckland's poorer suburbs could suffer the most because their house values were low and sections were worth more.
Westpac economist Dominick Stephens said a land tax might cause house prices to drop 4.4 per cent nationally and push up rents only 2.2.
The Victoria University-led tax working group recommended taxing the unimproved value of property - the land, not the house. It said a 0.5 per cent levy would raise $2.3 billion.
Taxing the unimproved value of land could be an effective lever to raise revenue while dampening a resurgence in house prices without creating too many distortions, the group said.
Local councils or Inland Revenue would gather the tax, based on the rating valuations.
"As a base-broadening measure, land tax has a number of merits," the group said. "Because of the size of the land base - valued at approximately $480 billion, prior to any negative impact on land values as a result of the imposition of the tax - a large amount of revenue could be raised at a low rate."
Two-thirds of the $2.3 billion (about $1.52 billion) would come from residential sections. Farms and forests account for about a quarter, and commercial and industrial sites the rest.
Concerns about the effect of the tax on Maori landowners and farmers have been raised since the proposal was floated. The Greens support it, according to co-leader Metiria Turei.
Reserve Bank chairman Arthur Grimes, an economist, has been advocating a tax on all land for some years. He suggested at a tax conference last month that a threshold could be set where land worth less than $50,000 a hectare was exempt - which would include most farm land.
But it would make little difference in the suburbs, where land values per hectare typically run into millions.
BNZ chief economist Tony Alexander is sceptical a land tax will ever be enacted, "given the long list of exemptions which would be needed and the outright opprobrium it would generate".
However, he added that it would be logical to remove tax breaks for landlords, such as depreciation allowances.
TAKING A HIT
AUCKLAND
Manly Section prices: $485,000 Annual 0.5 per cent land tax: $2425
Glenfield Section prices: $260,000 Annual 0.5 per cent land tax: $1300
Mairangi Bay Section prices: $370,000 Annual 0.5 per cent land tax: $1850
Devonport Section prices: $770,000 Annual 0.5 per cent land tax: $3850
Massey Section prices: $230,000 Annual 0.5 per cent land tax: $1150
Pt Chevalier Section prices: $440,000 Annual 0.5 per cent land tax: $2200
Mt Albert Section prices: $350,000 Annual 0.5 per cent land tax: $1750
Epsom Section prices: $800,000 Annual 0.5 per cent land tax: $4000
Onehunga Section prices: $350,000 Annual 0.5 per cent land tax: $1750
Kohimarama Section prices: $780,000 Annual 0.5 per cent land tax: $3900
Remuera Section prices: $1.3m Annual 0.5 per cent land tax: $6500
Pakuranga Section prices: $360,000 Annual 0.5 per cent land tax: $1800
Dannemora Section prices: $580,000 Annual 0.5 per cent land tax: $2900
Papatoetoe Section prices: $325,000 Annual 0.5 per cent land tax: $1625
Manurewa Section prices: $185,000 Annual 0.5 per cent land tax: $925
Clarks Beach Section prices: $335,000 Annual 0.5 per cent land tax: $1675
- Source: Barfoot & Thompson, figures based on a random selection of residential valuations, compiled for The Herald. Land value segmented out from total capital value. Herald tax calculations.
4:00 AM Saturday Jan 30, 2010
Owners of the Auckland's 443,200 homes would have to give the Treasury an extra $443 million if they were subject to a 0.5 per cent levy. Photo / Herald on Sunday
Aucklanders would be hammered by a proposed land tax, with households facing an annual bill running into thousands of dollars.
According to conservative estimates, owners of the region's 443,200 homes alone would have to give the Treasury an extra $443 million if they were subject to a 0.5 per cent levy.
A land tax was one of several in the tax working group's recommendations to the Government this month.
An economist has also given warning that such a move would lead to falls in property values and an increase in rents.
If the value of land was taxed, the rich would pay more, but people on low incomes who have property would be the hardest hit.
Superannuitants living in the wealthiest eastern and northern suburbs of Auckland and others on low incomes would be particularly affected as they would not necessarily benefit from the proposed tradeoff of lower income tax.
Remuera households could be paying $6500 each and those on the North Shore $1300-$4000 a year. Financier Mark Hotchin of Hanover could be paying almost $100,000 a year for his three-section block in Paritai Drive, Orakei, and Prime Minister John Key would be up for much the same on his slice of St Stephens Ave in Parnell.
Southlanders, living on New Zealand's lowest-price housing land, would be paying just $30 a year for the average section.
With Auckland's scarce land supply commanding the country's highest prices, residents would pay comparatively more than other New Zealanders.
Real Estate Institute figures show Auckland's median section price is $227,000, so the proposed 0.5 per cent land tax would draw a new annual $1138 payment.
December's national median section price of $170,000 would draw $850 in land tax a year.
Bryan Thomson, CEO of Harcourts real estate, said such a tax would penalise people who had scrimped and worked hard to get ahead.
Peter Thompson, a director of Barfoot & Thompson, said low-income homeowners in Auckland's poorer suburbs could suffer the most because their house values were low and sections were worth more.
Westpac economist Dominick Stephens said a land tax might cause house prices to drop 4.4 per cent nationally and push up rents only 2.2.
The Victoria University-led tax working group recommended taxing the unimproved value of property - the land, not the house. It said a 0.5 per cent levy would raise $2.3 billion.
Taxing the unimproved value of land could be an effective lever to raise revenue while dampening a resurgence in house prices without creating too many distortions, the group said.
Local councils or Inland Revenue would gather the tax, based on the rating valuations.
"As a base-broadening measure, land tax has a number of merits," the group said. "Because of the size of the land base - valued at approximately $480 billion, prior to any negative impact on land values as a result of the imposition of the tax - a large amount of revenue could be raised at a low rate."
Two-thirds of the $2.3 billion (about $1.52 billion) would come from residential sections. Farms and forests account for about a quarter, and commercial and industrial sites the rest.
Concerns about the effect of the tax on Maori landowners and farmers have been raised since the proposal was floated. The Greens support it, according to co-leader Metiria Turei.
Reserve Bank chairman Arthur Grimes, an economist, has been advocating a tax on all land for some years. He suggested at a tax conference last month that a threshold could be set where land worth less than $50,000 a hectare was exempt - which would include most farm land.
But it would make little difference in the suburbs, where land values per hectare typically run into millions.
BNZ chief economist Tony Alexander is sceptical a land tax will ever be enacted, "given the long list of exemptions which would be needed and the outright opprobrium it would generate".
However, he added that it would be logical to remove tax breaks for landlords, such as depreciation allowances.
TAKING A HIT
AUCKLAND
Manly Section prices: $485,000 Annual 0.5 per cent land tax: $2425
Glenfield Section prices: $260,000 Annual 0.5 per cent land tax: $1300
Mairangi Bay Section prices: $370,000 Annual 0.5 per cent land tax: $1850
Devonport Section prices: $770,000 Annual 0.5 per cent land tax: $3850
Massey Section prices: $230,000 Annual 0.5 per cent land tax: $1150
Pt Chevalier Section prices: $440,000 Annual 0.5 per cent land tax: $2200
Mt Albert Section prices: $350,000 Annual 0.5 per cent land tax: $1750
Epsom Section prices: $800,000 Annual 0.5 per cent land tax: $4000
Onehunga Section prices: $350,000 Annual 0.5 per cent land tax: $1750
Kohimarama Section prices: $780,000 Annual 0.5 per cent land tax: $3900
Remuera Section prices: $1.3m Annual 0.5 per cent land tax: $6500
Pakuranga Section prices: $360,000 Annual 0.5 per cent land tax: $1800
Dannemora Section prices: $580,000 Annual 0.5 per cent land tax: $2900
Papatoetoe Section prices: $325,000 Annual 0.5 per cent land tax: $1625
Manurewa Section prices: $185,000 Annual 0.5 per cent land tax: $925
Clarks Beach Section prices: $335,000 Annual 0.5 per cent land tax: $1675
- Source: Barfoot & Thompson, figures based on a random selection of residential valuations, compiled for The Herald. Land value segmented out from total capital value. Herald tax calculations.
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