The Case for Capital Gains Tax
I never thought I'd hear myself say it but I think I would support a capital gains tax on property sales.
Having witnessed the futile efforts of the Reserve Bank under two governors to control inflation by way of interest manipulation and governorial tongue lashing I have concluded their remedies simply don't work. The fixed rate interest phenomonon has largely seen to that. Also having witnessed over thirty five years a roughly fifteen year boom and bust cycle of property prices, I suggest that if the Gummint wants to curb the explosion in residential property prices it will need to remove the glittering prize of tax free capital gains which is the prime motivator.
There is no doubt in my mind it is the prime motivator for the remarkable and ludicrous increase in dairy farm prices over the last three years. Dairy farms are being purchased at prices which in many cases equate with three times their true productive value. The reason for this is that accountants are advising farmers with large tax bills (and in the last three years there are thousands of these) to borrow heavily and buy property with view to selling in five to ten years' time. The high interest rates are of little concern because they are offset against income for tax deductions and are far outstripped by the perceived tax free return at the time of eventual sale.
We seem to have a half arsed capital gains tax of sorts now where the IRD looks at one's alleged intent at the time of purchase. Of course these farm purchases are set up carefully to indicate a long term productive investment but lo and behold, there is nothing to prevent the best of apparent intentions becoming the subject of a change in strategic plans.
Even serious talk of a capital gains tax will have far more effect than all Bollard's baloney. Come on Labour, let's see if you've got what it takes. After all, you are going to need some new taxes to pay for your student loan interest and Kyoto bills.