Govt advised to implement Capital gain Tax

The Tax Working Group has recommended in no unclear terms to implement a capital gains tax on New Zealanders.
The Group Chair Sir Michael Cullen -former Labour Party Finance Minister - said there is a clear weakness caused by our inconsistent treatment of capital gains.
“New Zealanders earning just salary and wages are taxed on their full income but we have several situations where you can earn income from gains on assets and not be taxed at all,” Sir Cullen said.
All members of the Group agreed that more income from capital gains should be taxed from the sale of residential rental properties.
The majority in the Group, by a margin of 8-3, supports going further and broadening that approach to include all land and buildings, business assets, intangible property and shares
The Group recommends that a tax on capital gains would kick in when an asset is sold or changes hands and would be applied with no discounted tax rate and no allowance for inflation. Gains would be calculated from when any new law comes into force.
Three members prefer for this to apply only to residential rental property.
The Group expects that the Capital Gains Tax would raise roughly $8 billion over the first five years with figures ramping up in successive years.
The recommendations obviously are non-binding on the government with the Group offering the government with choices and options rather than a rigid blueprint.
As a quid-pro offer, the Group is offering the government to use to money raised through Capital Gains tax to lower the personal income tax rates.
Lowering personal income tax
The Group has investigated a range of reductions in personal income tax. Its preferred approach is allowing New Zealanders to earn more at the lowest tax rate of 10.5%. This would reduce income inequality, benefit all full-time workers, and support those transitioning into work.
Encourage savings
The Group has identified a range of measures to encourage saving, targeting those at lower- and middle-income levels. These include refunding the Employer Superannuation Contribution Tax (ESCT) for KiwiSaver members earning less than $48,000 a year and cutting the KiwiSaver tax rates for low- and middle-income savers.
These reductions would mean that this group would pay less tax overall on their KiwiSaver, even if the income from capital gains on their accounts is taxed.
Govt to take a measured response in April
The Coalition Government will take a measured response to the final report of the Tax Working Group (TWG), Finance Minister Grant Robertson and Revenue Minister Stuart Nash said today.
“The independent report finds that overall our tax system is clear and simple but there is room for improvement. There is some unfairness that we need to address. We will work through ways to do this to make the system fairer and more balanced,” says Mr Robertson.
As the Working Group has said, the Government is not bound to accept all the recommendations it put forward. There are options to accept some, and/or to phase or sequence aspects of the packages proposed by the Group.
We will seek technical advice on addressing the unfair and unbalanced elements identified by the TWG and make further announcements in April on any measures to enhance the fairness and integrity of the tax system,” Mr Nash said.
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