The Government’s Tax Working Group would impose one of the most aggressive Capital Gains Tax regimes in the world on Australasian shares, driving more of our businesses, entrepreneurs and innovators overseas, National’s Finance spokesperson Amy Adams says.
“The proposed CGT would impose new taxes on gains on New Zealand and Australian shares but not shares from anywhere else. Why would an entrepreneur raise money in New Zealand when any shares sold would be taxed at the third-highest marginal rate globally?
“New Zealand’s capital markets are already shallow and some of our best and brightest struggle to get finance for their innovative ventures. This would be another reason to head overseas. A CGT is a tax on growth and enterprise – it would demotivate those we should be encouraging.
“To suggest that this is about taxing the wealthy more is totally misleading. The typical ‘balanced’ KiwiSaver account has 15 per cent of its funds invested in Australasian shares and they’d be taxed annually on their paper gains. That could add up to having to work a full extra year for someone on the average wage to retire with the same Kiwisaver balance.
“Access to capital may not be a priority for this Government but it is the lifeblood of businesses that provide jobs for hardworking Kiwis and drive economic growth.
“If buying NZ shares becomes less attractive, then raising that capital gets harder for NZ businesses. Our NZX covers $130 billion of listings and the stock market operator says a new tax may ‘damage our capital markets’ and scare off investors.
“This is another example of the Government talking up their good intentions but delivering bad outcomes for New Zealand. The CGT would increase foreign ownership of New Zealand companies, discourage our firms from raising equity capital here and make it harder for Kiwis to save by taxing any gains on their retirement nest egg.
“A CGT will also make it more expensive for New Zealand businesses to raise capital. Fund managers were right to say the TWG’s final report should be re-named ‘Taxing our Future’ rather than ‘Future of Tax.’
“It would hit the very businesses that need to be nurtured – high growth, high potential companies that plough any earnings back into the business for growth rather than paying dividends. Accountants and tax lawyers will have a field day looking for loopholes.
“The impact on investments in shares shouldn’t be understated. They’re expected to contribute 60 per cent of the funds raised in the first year of a CGT and contribute a quarter of the tax over time. The Government creates additional complexities if shares in KiwiSaver are exempted but other shares aren’t.”