Statements

Closing Tax Loopholes and the housing crisis in New Zealand- TOP

It is not very often that you get agreement among three such disparate groups as unions, banks, and academics, but that is what is happening as all three call for a tax on property.

 

ANZ senior economist Phil Borkin lamented on Morning Report this morning that the recent budget had not done enough to encourage domestic savings rates. The Reserve Bank’s financial stability report out yesterday acknowledged that domestic deposits are not high enough to meet demand for credit, and therefore banks face higher costs of borrowing from overseas to meet the shortfall. This will place upward pressure on mortgage rates. The Reserve Bank analysis showed that increases in interests rates on savings account would not make enough of a difference to close the shortfall. Mr Borkin stated that a tax on property was needed to be more proactive at raising savings rates: “when you look at the perceived advantages of housing over other forms of investment that’s certainly something that we think will have to be looked at more closely.”

Over the weekend Council of Trade Unions economist Bill Rosenberg called for the introduction of a wealth tax on The Nation, saying: “We also think we could raise some funds from taxing wealth in some ways, such as a capital gains tax or some form of asset tax.”

Earlier last week the PSA union hosted a forum of experts to discuss the future of tax policy in New Zealand. Many of those panellists identified the lack of a wealth tax as a serious problem in the New Zealand tax system.

At the end of the panel, the expert guests were asked what their number one priority was for changes to the New Zealand tax system. Max Rashbrooke, a research associate at the Institute for Governance and Policy Studies said: “Some kind of tax on wealth, any kind of tax on wealth.” Senior Lecturer on tax at Victoria University Dr Lisa Marriott called for a “tax on wealth with the aim of addressing inequality.”

It is interesting to note that discussing a tax on property is so taboo in New Zealand that ANZ senior economist Phil Borkin didn’t even say the words aloud, instead skirting around the issue and merely implying the change.

At The Opportunities Party (TOP) we are not afraid to discuss the issue head on. We need a tax on property in New Zealand. We have the largest tax loophole around property of any OECD country. We also have the worst housing crisis in any OECD country. These two things are not a coincidence.

Introducing a new tax always makes people nervous. Our plan is to follow the process used in introducing GST during the 1980s where income tax rates were cut prior to GST being introduced. This eased the impact of the transition. All revenue raised from taxing property wealth would be returned via a reduction in income tax rates. This means that while the family home will be included in the capital tax, 80% of Kiwis will end up better off.

TOP’s Fair Tax Solution will improve household savings rates which will reduce the risks to our banking sector from overseas shocks and ease upward pressure on mortgage rates. It will redistribute the tax burden from our low-wage earners to wealthy property owners reducing the inequality that threatens the fabric of our democracy. It will ease the housing crisis as demand to own property purely as a tax haven declines. It will encourage more houses to be built as land bankers are forced to develop due to the increased costs of owning empty land.

The many different ways that TOP’s Fair Tax Solution will benefit New Zealand explains why such diverse groups are on board with our proposals.

For more on our Fair Tax Solution please go to www.top.org.nz/top1.

For further comment please contact:

Dr Jenny Condie, [email protected], 021 0269 7818

Tax Spokesperson for The Opportunities Party

 

 

Showing 36 reactions

  • zak
    commented 2017-06-09 22:26:34 +1200
    We need to be able to edit our comments.
  • zak
    commented 2017-06-09 22:13:11 +1200
    This policy is badly thought through. Its hard enough for people to purchase their own home and it takes decades to pay off, why would any sane person try to tax them each year on top of that. Its a simple supply and demand problem that we have. The only problem with property right now is massive shortage, which has pushed the price through the roof.

    Simple Problems and solutions
    1) Shortage of property available, which means the price has been driven up.
    Solution – New Zealand is not short of land. Lets make enough property available (only to Kiwis) so everyone can easily afford their own home. If this means releasing a million plots lets do that. One home per person or you are taxed at 3% per year on your second property, 6% on your third property and 10% on your fourth property each year etc, to make sure it is not viable to own more than one or two properties. If people want to live in two locations they can rent their second property.
    2) For some unknown reason we are allowing foreigners to buy New Zealand property. Solution – make it illegal for non NZ residents to purchase New Zealand property. We could consider allowing them to rent?
    3) Too many economic migrants means more people chasing fewer homes. This just makes the first two problems (see above) worse. The solutions are the same. Massive increase in available plots (lets flood the market so there’s a surplus), incrementally higher taxation on anything more than one property and stop non residents from buying New Zealand property.

    These are simple solutions.
  • Alistair Newbould
    commented 2017-06-05 10:18:44 +1200
    Traction! Feels good eh!
  • Oliver Krollmann
    followed this page 2017-06-03 07:06:07 +1200
  • Rhys Goodwin
    commented 2017-06-02 22:27:05 +1200
    @Martine, very little equity would mean very little property tax. We’re talking about ~1.5% of yourequity and since your income tax rate will be lower you’ll either have the same amount of $ or more at the end of the day. It took me a bit to get my head around but I think it really makes sense.

    @Stuart, the richest 20% would pay more. The poorest 80% would be better off. Have a good read of the policy it makes a lot of sense :)
  • Martine Bouillir
    commented 2017-06-02 21:52:45 +1200
    Look I think a property tax is vital – and for those who have the money I guess taxing the family home is not too bad but why not just leave the family home out of it so that people like me who have been paying off a large mortgage forever with still heaps to go and very little equity and no other assets don’t suffer? It’s a great idea other than that. What’s the reasoning? And why can’t we do it that way?