Rodney MPs Mark Mitchell and Marja Lubeck have taken diametrically opposing positions on a Capital Gains Tax (CGT) proposed by the Government’s Tax Working Group.
At the end of February, the group suggested the Government should impose a capital gains tax on investment properties, shares, business assets and farms.
The group reckons this will reap $8 billion in revenue over five years and recommends the money be used to cut income taxes for middle and low income earners.
But National MP, and MP for Rodney, Mark Mitchell says the proposed tax is an attack on ordinary New Zealanders’ ability to invest and save for their retirement.
“The last thing New Zealand needs is more taxes, but it seems like that’s the automatic response from this Government to any issue – impose another tax,” he says.
Mr Mitchell says the proposed CGT would be one of the most onerous capital taxation regimes in the world.
He says those hurt most would be those on modest incomes, innovators and entrepreneurs.
“It is a tax on anyone who takes the initiative, works hard and tries to make something of themselves,” he says.
“This isn’t about taxing the rich – this will hit people on middle incomes.”
But Rodney-based MP, and Labour-list MP, Marja Lubeck disagrees, saying imposing a CGT will make the tax system much fairer – ensuring more tax is paid by wealthier households.
“I believe it is really important – especially considering growing inequality – that our tax system is fit for purpose now, as well as for future generations,” she says.
She says it doesn’t seem fair that a person who earns $50,000 in wages will pay $8,020 in tax on that income, while someone who makes a $50,000 capital gain from the sale of a rental property ends up paying no tax on that gain.
Meanwhile, KGA Warkworth chief executive, Jacqueline Ironside, says she agrees that treating capital gains the same as other forms of income for tax purposes is fundamentally a fairer system.
She says there is a lot of money being made by big businesses and wealthy people buying and selling companies and shares and currently not paying tax on the capital gain from those transactions, when they ought to do so.
But at the same time, she worries middle income earners could be unfairly hard hit by a CGT.
She cites the example of an older couple who downsize their home and put money into a rental property, which then becomes subject to CGT.
She is also concerned about small business owners.
“A small business owner may not earn a heck of a lot, but if they sell their business for $500,000, the capital gain on that could be, say, $200,000. They will pay 33 per cent on that, which I believe is unfair,” she says.
Ms Ironside says if a CGT is introduced, an exemption should be available for small business owners and marginal tax rates should be adjusted to reduce the tax burden for low and middle income earners.
Meanwhile, Ms Lubeck says the Government will now take some time to consider the Tax Working Group proposals. The working group’s report contains 99 recommendations for a more balanced tax system and the Government is not bound to accept all of them.
“Further announcements will happen in April, but anything the Coalition Government agrees to won’t come into force until after the next election – giving New Zealanders the chance to vote on any decisions made by the Government,” she says.
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