New Zealand Prime Minister Jacinda Ardern announced that plans to impose a capital gains tax (CGT) have been abandoned.
A recommendation by the Tax Working Group in early February, Ardern says a CGT has been “a cornerstone” of Labour’s campaigns for the past three elections – yet it won’t be happening under her leadership.
“I’ve always been clear that we would not be able to proceed unless we were able to form a consensus. That has not happened under this Government,” says Ardern.
Ardern says that although she believes that a CGT would have made a difference, that it is time to accept that the Government doesn’t and neither does New Zealand.
“Under my leadership, we will no longer campaign for or implement a capital gains tax. Not because I don’t believe in it but because I don’t believe New Zealand does,” she says.
Former politician Sir Michael Cullen said he was disappointed but unsurprised by the decision to abandon a CGT.
“The problem we have is New Zealanders seem not to want an inheritance tax, or a wealth tax, or a land tax or a capital gains tax but they still want to complain about growing inequality of wealth,” says Cullen.
So, what is a capital gains tax?
A capital gains tax (CGT) is a form of tax that concerns property. In New Zealand, it was proposed by the Tax Working Group that landlords and investors should be taxed atleast 33% of whatever extra money they make on their properties. For example, if a person buys a house for 1 million dollars in 2015 and sells it for 1.5 million dollars in 2019, their capital gain is 500,000. If they own more than one home then that 500,000 dollars will be taxed.
Although the whole idea of a CGT has been abandoned, split opinions still exist about a CGT. Some New Zealanders think it will be great for increasing homeownership and some think it will lead to higher rents and lower house prices.
To read more about the Government’s CGT decision and to watch Jacinda Ardern speak to its dismissal, click here.