The Government’s Tax Working Group has recommended a Capital Gains Tax that doesn’t adjust for inflation and, based on its own assumptions, would be an effective tax rate of 100 per cent on real gains, National’s Finance spokesperson Amy Adams says.
“The proposed CGT would be one of the most aggressive in the OECD and would hurt the New Zealand economy. The recommended CGT rate of 33 per cent ranks only behind Finland and Denmark and doesn’t include any inflation adjustment or discount.
“The Tax Working Group’s own forecasts assume that the value of all property and shares will grow at 3 per cent a year, which is made up of 2 per cent inflation and just 1 per cent real gains.
“In other words, one-third of the gains are what the taxpayer actually makes and the rest is just keeping up with inflation. That’s an effective tax rate of 100 per cent on the real gains.
“For example, if the value of an asset rises by $100 then based on the Tax Working Group’s own assumptions $67 of those gains would just be keeping up with inflation and $33 would be real gains - and the amount you pay in tax.
“Not inflation adjusting the CGT is yet another example of why it’s an unfair tax. It discourages those who would invest in productive businesses and it puts people off saving, when New Zealand desperately needs more of both.
“A CGT would hurt the New Zealand economy and make it harder for us to compete with other countries to attract investment. It would destroy the incentive Kiwis have to work hard and get ahead. Instead of adding more taxes, the Government should be spending more wisely.
“National believes New Zealanders should keep more of what they earn. We would repeal a Capital Gains Tax and won’t introduce any new taxes in our first term.”