My views on some of the things that capital tax will do and some of things it wont.
Things it will do
It will ensure that the government has in a way some vested interest in asset prices rising. Imagine a tax take dependent on capital gains tax, flat asset prices and constrained sales activity will mean less for the government coffers.
It will have some type of lock in affect. Imagine you have an asset worth $100k which over time becomes worth $200k. Now you find that you might be able to better utilise the capital in an asset better suited to your needs. Of course that asset has also increased in price. Once you sell you will have less money to go shopping after paying the tax. Effectively to move your capital from one asset to another will mean that you get punished for using money as an interim value of exchange.
It will give the government more funds to control and spend on their pet projects.
Things it wont do
A capital gains tax won’t rein in house prices – UK, Australia, Ireland, are all countries with a capital gains tax and have had huge house price growth. Asset price growth has more to do with money supply.
A capital gains tax won’t help many hard working NZer’s in their retirement. A lot of our clients have one or two houses. They use investment property to provide for some type of financial security for their family over the long term.
Hamish Patel – mortgage broker. Mobile: 021 625 693, hamish@monline.co.nz
