Source: Tax Justice Aotearoa
Tax Justice Aotearoa today released a report Capital Gains Taxation in OECD and Comparable Nations, which shows that Aotearoa New Zealand (NZ) is an international outlier in not having a comprehensive capital gains tax (CGT).
“The lack of a comprehensive CGT, which exempts the family home, raises questions about NZ’s ability to keep pace with the rest of the world in revenue sustainability, the fairness of our tax system, and in incentivising economic behaviour that will help nurture a more productive economy. The minimalist CGT that Labour is reportedly considering won’t adequately address these challenges.” says Glenn Barclay, Tax Justice Aotearoa spokesperson.
Out of 38 OECD members 31 (81.5%) have explicit, comprehensive CGT regimes. This includes countries NZ traditionally compares itself to: Australia, Canada, the UK and Ireland. The Netherlands employs a system that can neither be categorised as being with/without a comprehensive CGT. Amongst the remaining six countries that do not have a comprehensive CGT, NZ currently has the most limited regime for taxing capital gains, primarily through the narrow two-year “bright-line” test for residential property.
“What this report shows is that NZ is really out of step in not having a comprehensive capital gains tax. Bringing in this common sense measure would close a loophole in our current system and ensure we treat income from wages and income from wealth or assets equally,” says Glenn Barclay..
“IRD research from 2023 demonstrated that the wealthiest pay proportionately less tax than middle New Zealand, mainly because we don’t tax capital gains. We believe most New Zealanders would think that is unfair. A comprehensive CGT would be an important step towards fixing this.”
“A comprehensive CGT would have other benefits too. It would help keep house prices in check by disincentivising property speculation, making housing more affordable for our whānau, and encourage more productive investment,” says Barclay.
“Such a measure also has the capacity to generate much needed revenue to fund our hospitals and schools, to invest in infrastructure and responses to climate change and poverty, now and into the future.”
“But we know that capital gains taxes take some time to generate all their potential revenue. That’s why it is important that all parties embrace this measure, so that it has time to bed in and deliver on that potential. And that’s why a CGT needs to be accompanied by other tax changes that will generate more revenue from those who can most afford it,” says Barclay.
“This report shows that a comprehensive CGT is a routine measure in most OECD countries, and it’s about time New Zealand caught up with the rest of the world.”
The full report is available here: https://drive.google.com/file/d/1DV_bfKmyUVIIhwO0ot8QgRm9EdG1H6AW/view
