Hard News by Russell Brown

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Hard News: A Capital Idea?

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  • Rich of Observationz, in reply to Deborah,

    In the UK you can claim losses forward in the same way as you can with business losses. It’s mostly ringfenced to other gains (so if you sold a house one year at a $100k loss, then next year sold another at $100k profit, you’d have no tax to pay, but you can’t take capital losses against unrelated income).

    Also, in terms of admin costs, the IRD spends around 75c to collect $100 of tax. Even if CGT were substantially harder to collect, it's hard to see how it would be other than substantially renumerative.

    (The simplest way to collect would be to require that, when selling a house, a tax clearance certificate was produced before the title could be transferred. You'd have to declare if you wanted to claim it as a family home, etc. and meet the tax payment. Charging for the certificates would make the whole thing self funding).

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Jeremy Eade,

    Tax discussion is a real hard twister of a subject, the discussion on tax has been framed in a way that we feel we are hurting someone when we even think about a new tax but never the other way around, that is how could it benefit long term.

    The housing market is a huge infrastructure market. It provides the private investor the opportunity to get in amongst the huge economic activity it produces but private enterprise can't say it invented housing demand.It's an ancient market.

    Housing , or lack of it is a social concern, a vulgar description for a lot of domestic chaos.

    Many of our core economic domestic drivers are based on natural infrastructure activity. These are strong domestic markets full of well paid bosses and owners that feed of our invisible but huge socialist economic drivers. Our combined tax drives so many of our small island activities. Well done to the socialist part of the economy eh, still standing. Worthy of more consideration surely?

    The Infrastructure market needs to be harnessed and understood as the core of all future economic stability, here at least. The providers of infrastructure should understand that these are social markets and not the marketing managers dream of "massively untapped new blue oceans of market share" .

    auckland • Since Mar 2008 • 1112 posts Report Reply

  • BenWilson, in reply to Jeremy Eade,

    Yes, so far as I know, the residential property market dwarfs the stockmarket. This is the case in many countries. That's why the GFC is so serious compared to, say, the 1987 stockmarket crash, or the dotcom correction. It's the biggest cost in most people's lives. It's one of the key differentiators between classes. Controlling the prices is vitally important for every aspect of a functional and fair economy.

    As you say, this has also always been the case. We had housing concerns in the stone age, probably a home and the defense of it was the main survival advantage humans could attain - control and ownership of land is the key battle around which tribes and nations have fought forever.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Paul Campbell, in reply to Rich of Observationz,

    In the UK you can claim losses forward in the same way as you can with business losses. It’s mostly ringfenced to other gains (so if you sold a house one year at a $100k loss, then next year sold another at $100k profit, you’d have no tax to pay, but you can’t take capital losses against unrelated income).

    Same in the US, you can carry forward CG losses and trade them off against CG profits in future years (I think there's a time limit though)

    (The simplest way to collect would be to require that, when selling a house, a tax clearance certificate was produced before the title could be transferred. You'd have to declare if you wanted to claim it as a family home, etc. and meet the tax payment. Charging for the certificates would make the whole thing self funding).

    Something like this happens in the US, I'm not quite sure how (I'd guess it comes from the title transfer company, probably gets spit out by the computer that prints out the final settlement documents) - your job as a tax payer is to file against this showing your basis (what it cost) and the cost of improvements done while you owned it, that's also where you claim your house as a primary home/etc - from memory it's a 1 page form (I got a $40,000 tax refund last time I filled it out - after selling my house and leaving the country)

    Dunedin • Since Nov 2006 • 2623 posts Report Reply

  • andin, in reply to BenWilson,

    We had housing concerns in the stone age, probably a home and the defense of it was the main survival advantage humans could attain – control and ownership of land is the key battle around which tribes and nations have fought forever

    Some of the indigenous American tribes believed you could only own the piece of land you were standing on literally only as far as your shadow reached. And often they battles were largely symbolic sometimes no killing took place just a coup de grace, a tap to the head. And even something they just did in summer when they had the time and energy against traditional foes.
    When it started to get a bit crowded in Europe it got messy, and just got worse.

    raglan • Since Mar 2007 • 1891 posts Report Reply

  • Paul Campbell,

    I bet it was that whole "it's been raining for months and I have no shadow" thing

    Dunedin • Since Nov 2006 • 2623 posts Report Reply

  • BenWilson, in reply to andin,

    Some of the indigenous American tribes believed you could only own the piece of land you were standing on literally only as far as your shadow reached.

    I'm presuming they meant at noon, when you shadow is directly below you, rather than dawn or dusk, when it can cast all the way to the horizon.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Rich Lock, in reply to BenWilson,

    I'm presuming they meant at noon, when you shadow is directly below you, rather than dawn or dusk, when it can cast all the way to the horizon.

    Yeah, you've got to be a little bit careful with those tricksty definitions...

    According to legend, Hiarbas, a king in the area near Carthage, agreed to let Dido buy as much land as she could cover with a bull's hide.

    Dido then cut the hide into tiny strips, and with the strips surrounded a large area of land, which she called Byrsa, naming it from the hide of the bull

    My man Hiarbas needs to get himself a good lawyer up in the place.

    back in the mother countr… • Since Feb 2007 • 2728 posts Report Reply

  • Rich Lock, in reply to DexterX,

    Sub par housing is what people want - There is a real lack of wanting quality - people want cheap crap - that is the primary driver.

    I take your point, even though that first part sounds a little odd - I don't think people actually want sub-par housing.

    As Gio pointed out, it may be a problem of being able to afford anything better than cheap rubbish.

    What I've personally found quite striking in NZ is how often, and across a wide range of areas and disciplines, the urge to cut corners and do things on the cheap appears, even with repeated upfront warnings about simply storing up trouble for yourself downstream.

    It's evident in a lot of areas - leaky homes etc, and it's something I run into repeatedly in my own profession. I find it quite hard to deal with coming from a headspace that values a bit more effort upfront to ensure smooth sailing later on.

    Not saying it doesn't exist elsewhere. It's just been more (admittedly subjectively) evident to me here.

    back in the mother countr… • Since Feb 2007 • 2728 posts Report Reply

  • BenWilson, in reply to Rich Lock,

    What I've personally found quite striking in NZ is how often, and across a wide range of areas and disciplines, the urge to cut corners and do things on the cheap appears, even with repeated upfront warnings about simply storing up trouble for yourself downstream.

    My folks have just spent upwards of $50,000 repairing weatherboards around their house that had been damaged by inadequate guttering. The most embittering irony for them is that my brother warned them about it at the time, that the job being done was cheap and nasty, and Dad didn't listen.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Angus Robertson, in reply to Rich Lock,

    I take your point, even though that first part sounds a little odd - I don't think people actually want sub-par housing.

    I think its a lack of understanding what is and what isn't cheap rubbish.

    Houses aren't regular purchases for most people and when building/buying we don't know what quality is. We rely on the advice of professionals and the standards imposed by council - which we do pay quite a lot for. If council certifies that a building can be built to compliance by contractor A and contractor B - we'll choose the cheaper contract.

    Auckland • Since May 2007 • 984 posts Report Reply

  • news addict, in reply to recordari,

    A home owner in Christchurch cannot do that, because if they have a partially damaged home, nobody wants to go for it until there is a clearance from the assessors for what exact level of damage there is, and the buyer may not get insurance policy transfer depending on the outcome of the assessment, so the owner is lumbered if they want to sell up, they have to sell at a massive loss, and even then nobody will buy the properties. So they try to rent instead. Then they get taxed on a low rental that is beneath the cost of rates and a property manager because they have had to leave town to recover from the chaos and get a job somewhere else for a while. If they rent the family home, they will be taxed because it's a rental. Not all people live in the family home, they rent it and then rent elsewhere for themselves and still are not making ends meet.

    Auckland • Since Jul 2011 • 1 posts Report Reply

  • tussock,

    I’m no tax expert but has there been any discussion on an asset tax?

    Yep, mostly the idea is to tax the unimproved value of land, so that if it becomes in high demand the old folk living on it are encouraged to sell up and move on (and they all hate the shit out of that idea).

    Kinda sucks for anyone hanging onto a bit of native wetland, forest, or rare animal habitat, all that has to end up on a list of recognised reserves for exemption. Discourages long-term investments like forestry for things that provide a constant (if lower overall) return. Pros and cons like all taxes.

    But the guys who own giant productive assets already want to make them profitable, because they're worth millions of dollars and there's an opportunity cost to just letting that investment sit there doing nothing. A tiny tax on that does nothing when they're already chasing 10%+ on it.

    Taxing other sorts of assets is tricky. We do it with rates on GV, because GV is useful for many things and setting it for the biggest assets like land and significant buildings is relatively inexpensive.

    Oh, and rates can already be a cruel thing if some rich folk move in the next road over, the council builds them a lot of nice new services, and you end up in the same tax bracket with nothing to show for it. Worse still if you stick a bigger tax on unimproved value, because your unimproved nothing pays as much as their gold-paved oasis of perfection, just because they've built it down the road a bit from you.

    Since Nov 2006 • 611 posts Report Reply

  • tussock,

    But CGT, well, they've got to do some damn thing about the housing game.

    People have been running multiple houses in little shells at a 10k loss each per year, paying little to no income tax as a result, and making out by flipping on the ups and downs of the market. Sure it's a bit risky, but there's people making millions at a game that drives the housing market mad while acting as a tax haven.

    And yes, they really "do up" a mouldy house with temporary patches just like the TV shows said to do whenever they've got some tax due, then sell the place looking all sparkly, shuffle the shells, pocket the profit, and pay no tax at all again, while leaving some sucker with a timebomb. Hooray for trust law and it saving such criminals from being sued, eh.

    Since Nov 2006 • 611 posts Report Reply

  • andin, in reply to BenWilson,

    when you shadow is directly below you, rather than dawn or dusk, when it can cast all the way to the horizon.

    Well they usually set up camp mid afternoon so probably around then. And Im sure spirit anger would be invoked if someone else's teepee site infringed on yours. Its just one of those oddities of human history the ways we viewed land and possession of it. Hey I'm not idealising it, but we are locked into the property as asset model now for better or worse, depending on your point of view.

    raglan • Since Mar 2007 • 1891 posts Report Reply

  • DexterX, in reply to Rich Lock,

    People just want the silky greasy salesman to tell them it will be all right and not have to deal with the reality of making things right when they go wrong.

    I find it in often in my work - you run into a scenario where there are professional people who own a substantial home, which leaks from a range of issues.

    These people can afford to have the problem solved but often don't even want to understand or acknowledge the problem or a solution - this exists even when they are shown the problem, provided with a web gallery, and drawings of both the problem and the solution.

    Often you can spend days, weeks, months counselling someone on the nature of the problem and how to fix it and at times it finally gets to a stage where they repeatedly suggest their preference for shortcuts or "squirting silicon" on it.

    On occassion I have suggested they save their money and go along to the $2.00 shop and purchase a magic wand.

    Auckland • Since Nov 2006 • 1224 posts Report Reply

  • DexterX, in reply to BenWilson,

    Cognitive misers I presume?

    Auckland • Since Nov 2006 • 1224 posts Report Reply

  • BenWilson, in reply to DexterX,

    It's a brilliant phrase man, it does sum up an attitude that has cost me a lot at times - it was like "I've only got so much brainpower, which I need for my work, so I'll only put a small amount of it into this 'side investment'". Which in the most poignant case I'm referring to ended up costing me $50,000, most of which could have been saved by a little less miserliness on the attention. However, since that experience, I learned not to do it so much. Perhaps that's half the problem, is that until recently, casual property investors just haven't got burned enough.

    As a friend put it to me recently - certainty breeds uncertainty. If something is easy money for long enough, everyone wants a piece, and that means it's no longer easy money. So, despite the tax advantages of property, eventually, people will work out how to fuck it up and make it lose money. Essentially, a lot of people get into it who shouldn't, put money on things that aren't worth that much, and a herd mentality drives the prices up....for a while. Then reality kicks in, people can't meet the payments, the investments crash, the bubble bursts and here we are.

    Auckland • Since Nov 2006 • 10657 posts Report Reply

  • Kumara Republic,

    The southernmost capital … • Since Nov 2006 • 5446 posts Report Reply

  • Sacha,

    The Herald's other John, Mr Armstrong, is a bit confused about 'Goff's' move.

    His decision to campaign on a capital gains tax is probably the biggest "ask" in New Zealand politics since Ruth Richardson and Jim Bolger mistakenly thought middle New Zealand would tolerate such things as means testing state-funded superannuation and user-pays for overnight stays in public hospitals.

    It is too soon to gauge whether middle New Zealand will be equally intolerant of a tax on its hard-earned assets.

    ..

    It also disproportionately hits those on higher incomes, one of its other attractions for Labour.

    ...

    The policy will be pitched in terms of offering voters a clear-cut choice. Goff will hammer the line that a vote for Labour will be a vote to retain full public ownership of the state-owned enterprises that National has singled out for partial privatisation - the price being a capital gains tax that most people will never pay.

    ...

    As it is, National has stressed the tax will not raise much money in the short-term, thus undercutting any argument it might mount in terms of the reach of the tax extending beyond the very wealthy.

    So reading your first statement, who does it affect again, John?

    Labour have to do a damn solid job of explaining that it's only the wealthiest who will have to pay more, not those hard-working middle New Zillunders with one home but who will be offered all manner of scary kool-aid about this between now and November.

    Ak • Since May 2008 • 19745 posts Report Reply

  • giovanni tiso, in reply to Kumara Republic,

    Hell, even John Roughan is in favour.

    But when he talks about Charlie's in the last paragraph he appears to have missed the bit about Labour proposing to extend the tax to the sale of shares and businesses.

    Wellington • Since Jun 2007 • 7473 posts Report Reply

  • Matthew Poole, in reply to Kumara Republic,

    Hell, even John Roughan is in favour.

    So's Matthew Hooten, that well-known socialist sympathiser!

    Looking at the roll-call of rabid right-wing commentators who're weighing in to support a CGT, even if it's Labour who introduce it, I can't help but think that this could be the policy that turns it into a real election campaign. Not that Goff is incapable of thoroughly fucking up on the delivery, of course, but if he manages to not bugger it up we might be watching the end of National's "sleep walk to victory".

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Matthew Poole, in reply to giovanni tiso,

    But when he talks about Charlie’s in the last paragraph he appears to have missed the bit about Labour proposing to extend the tax to the sale of shares and businesses.

    And he ignores the fact that it's yet another Kiwi company that's now sending the profits overseas instead of keeping them local.

    I had to despair when listening to the radio on the way home the other evening, as the DJs enthused about how wonderful it was that Charlie's got bought out by a Japanese company. Strongly emblematic of a much bigger national problem: no grasp of the long-term consequences of selling to foreigners.

    Auckland • Since Mar 2007 • 4097 posts Report Reply

  • Rob Stowell,

    Yep, mostly the idea is to tax the unimproved value of land, so that if it becomes in high demand the old folk living on it are encouraged to sell up and move on (and they all hate the shit out of that idea).

    Kinda sucks for anyone hanging onto a bit of native wetland, forest, or rare animal habitat, all that has to end up on a list of recognised reserves for exemption. Discourages long-term investments like forestry for things that provide a constant (if lower overall) return.

    +1
    Thanks mate. People talk of this as a better idea that CGT, but I emphatically don't think so. CGT you pay at a point where you actually have $ money. This sort of tax insists all ownership must be 'productive' - for some short-term value of productive that's only measured in $.
    <disclaimer> we own a property that already costs us a lot. we've planted thousands of trees. but it's unlikely we'll ever make much money from it- unless we sell. an asset tax- on top of fairly heavy rates- would probably force us to sell.
    we'd make money on that- but we don;t want to. it's more than a property- it's home; turangawaewae.

    Whakaraupo • Since Nov 2006 • 2120 posts Report Reply

  • Rob Stowell,

    Looking at the roll-call of rabid right-wing commentators who’re weighing in to support a CGT

    ... what's the bet JK, after campaigning against it (and winning) becomes a firm supporter by 2013, and promises to bring it in if re-elected? :)

    Whakaraupo • Since Nov 2006 • 2120 posts Report Reply

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