Posts by Matthew Poole
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Hard News: A Capital Idea?, in reply to recordari,
And what about inflation?
The South Africans just set their CGT rate at 15%, far lower than their income tax rates, and didn't bother with inflation adjustment. Simplifies things, and the lower rate helps compensate for the inflation effect. Or, as Ben suggests, we could follow as and index, but that is rather more complicated.
Exempting all sellers who purchased their property before the CGT comes into effect is a two-edged sword. It really negates the inflation effect, since the really huge inflation of values has already occurred, but it also encourages asset retention for longer than is necessary to maximise the capital gain.
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Hard News: A Capital Idea?, in reply to Nick Kearney,
Repeat after me: trickle-down doesn't work. It might be a core tenet of your religion, but I have yet to see any real evidence that it's not a false idol. But hey, feel free to find me some peer-reviewed academic research that proves trickle-down.
The Government getting $15k*1 doesn't buy much, no, but $15k*thousands buys lots. It buys whole hospitals, or schools, or railway tunnels to help Auckland's traffic issues. How many of those things can you buy with your $15k?
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Hard News: A Capital Idea?, in reply to Rich of Observationz,
They only get a tax loss if they can convince the IRD that they a) went into it intending to make money and b) did it on a serious basis rather than just as a hobby. You can't claim losses incurred in pursuit of a hobby (or deduct expenses).
There is copious case law on the hobby/business distinction, and it's not as simple as declaring that you tried out this business and it lost money. The IRD are not as stupid as you appear to believe.
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Nick, go away and read the series of articles (1, 2, 3) by Chye-Ching Huang and Craig Elliffe discussing some tax ideas for NZ. Craig is definitely not a bleeding heart lefty, having been a partner at KPMG and Chapman Tripp, and as a taxation professor he’s got some academic kudos to boot.
The short version is that the CGT nay-sayers’ predictions largely don’t pan out and the revenue realised is normally much more than projected.
As for your suggestion that the money deducted in tax would be better-off in the hands of the seller, trickle-down is bullshit. It doesn’t work anywhere. Low-income people spend most, or all, of their income, but they’re the ones who don’t have significant capital assets to sell without then putting the proceeds into a replacement asset. High-income people don’t spend all their income, often do have significant surplus capital assets, and therefore have the least need of whatever extra they get from an untaxed capital gain.
But, as you say, on this site you’re never going to win this argument. Because all of us, Craig R included, are quite sure that the only thing that’s trickling down is a steaming yellow stream.
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Hard News: A Capital Idea?, in reply to Rich of Observationz,
Also, I guess losses from such activities are tax deductible. It would be better if the IRD categorised it as a hobby and avoided the tax loss
In which case the gains aren't taxable either. If you want to deduct losses, you have to declare profits. If you don't declare profits, you can't deduct losses. Or expenses. There is no way to "play" at being a day trader and gain while losing money. If you're not doing it as a business, the IRD doesn't care.
In theory one can be a professional gambler - there's case law on the subject - but most people just take a punt for fun -
Hard News: A Capital Idea?, in reply to James Butler,
The authors suggest that although home ownership will become more affordable under a CGT, rents might increase; so at first flush this seems like a win for “middle New Zealand” at the expense of the top and bottom.
Short-term there will probably be rent increases, yes. Medium- and long-term, though, the market will find an equilibrium where rents are stable. I'm not even convinced about the short-term impact, TBH, because landlords who aren't in it for capital gains won't need to increase their rents since they're already charging enough to make a positive return. They may increase because the market is rising, or they may determine that they'll have a better pick of quality tenants if their already-adequate-to-cover-costs rents don't increase. That has a balancing effect on the area's rent market, and acts as a cap on the excesses of landlords who're in it for the gain.
The rent impact is over-stated, IMO. A short-term pain increase for low-income renters can be handled through the social security net, and should not be used to justify doing nothing to address a long-term problem that has very serious negative consequences for the country.
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It probably won’t bring in as much revenue as Labour says it will, but it will make Labour’s other tax policy – the tax-free threshold – much more credible.
It may bring in more, if the evidence from South Africa is to be believed. Depends how broadly the cloth is cut.
One thing that concerns me is that there’s no mention of taxing sales of farms. I have no problem with farmers deducting losses and expenses against income, as is the right of any other business, but the compensation must be tax on the capital gain. Other businesses don’t hold on for years, barely breaking even, to cash in with a big tax-free pay-day when the income-generating assets are sold.
Were I writing the law, I’d invert the current exemption that affects rental properties, namely the sale of income-generating properties, such that the sale of an income-generating property is required to be taxed on any profits. That would exempt the family home, but catch rental and agricultural properties. It’d be a hard one for current tax-payers to avoid, too, because the IRD would have records related to the use of the property for generation of income. Toss in some extra to enforce the current rules for speculators – and make a bright-line test for how long a property must be owned before it’s no longer speculation – and there are very few loopholes and a very easy way of catching people who are using property as a loss-leader before their big capital windfall.
ETA - Quote from the linked article: Studies have concluded that most countries vastly underestimate the revenue generated by such a tax before implementing it.
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Hard News: Perception and reality in the…, in reply to Kumara Republic,
It all reinforces my suspicions of today’s ‘corrections’ policy being less about setting people back on the right path, and more about crypto-segregationist politics.
Let me fix that for you:
It all reinforces my suspicions of today’s ‘corrections’ policy being less about setting people back on the right path, and more about politicians pandering to gut responses in the electorate instead of articulating why "tough on crime" policies actually don't work.If we had some political will to tackle the sources of crime through multi-generational approaches, we'd get somewhere. The comment about about Finland's path to its current state being a multi-decade process shows that there is no quick fix, no matter how much McThicker et al, with the connivance of most of our political "leadership", try to convince us otherwise.
Until there's a change in the message from Wellington, to emphasise that fact and suggest that we need to try something else, we won't see meaningful long-term changes. -
Hard News: Someone has to be accountable…, in reply to Russell Brown,
You’re saying that Rodney Hide was sent back from the future to engineer an IT spend of sufficient scale as to trigger a singularity and eventually bring into being an aware and self-interested computer entity which would become humanity’s master?
Might be time to break out the Vista DVDs.
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I was down there for a couple of days early last month to visit a client, and my main point of contact lives in the Red Zone. He said he's found it hard to sleep, because he's an ex-Londoner and the lack of street noise doesn't sit well with him.