Latest / Best of Business / Geof Nightingale: independent tax expert weighs up Labour's proposal for capital gains tax

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Geof Nightingale: independent tax expert weighs up Labour's proposal for capital gains tax · Best of Business

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  Speaker 1: You're listening to a podcast from News Talks'd be follow
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  Speaker 2: Now, there is some concern that Labour's capital gains tax
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  Speaker 2: might not bring in as much money as they hope.
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  Speaker 2: On the show last night, Nichola will have said Labour's
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  Speaker 2: policy was already falling apart.
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  Speaker 3: Based on their own statements today. They've based their costings
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  Speaker 3: on the Tax Working Group proposal, and that proposal, if
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  Speaker 3: you sold a property and received a gain on it,
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  Speaker 3: you would pay a tax. What he said in your
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  Speaker 3: interview was if you sold a commercial property but you
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  Speaker 3: then bought a new one, you wouldn't pay tax on
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  Speaker 3: the previous sale.
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  Speaker 2: Now, Jeff Nightingale is an independent TAXIX but who was
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  Speaker 2: actually a member of the aforementioned Tax Working Group? Hi, Jeff, Hi?
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  Speaker 1: Ever is Nicola Wright.
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  Speaker 2: She got a point there, Well, I think.
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  Speaker 4: She's got a point in the sense that, as I
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  Speaker 4: understand it anyway, Labour's proposal has this thing called rollover
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  Speaker 4: relief in it because it's modeled on the Tax Working
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  Speaker 4: Group and we had proposed rollover relief for small businesses.
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  Speaker 4: Businesses the turnover of less than five million who were
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  Speaker 4: selling business assets to reinvest in the business. You need
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  Speaker 4: to do that to preserve economic growth and things. So
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  Speaker 4: I think she's right on that perspective. But what I
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  Speaker 4: also understand those Labour's done its own costings of the
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  Speaker 4: revenue that they propose, and they've included all the assumptions,
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  Speaker 4: are the design assumptions and that revenue costing. So to
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  Speaker 4: that extent, I suspect they are standing. They'll stand by
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  Speaker 4: their numbers.
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  Speaker 2: Okay, So there are forecasting an average of about seven
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  Speaker 2: hundred million dollars being brought in over the first four years.
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  Speaker 2: That sound about right to you? And you know, having
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  Speaker 2: what one point three billion in the first on year four,
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  Speaker 2: does that sound right?
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  Speaker 3: Yeah?
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  Speaker 4: Look it does sound about right. Look, look you've got
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  Speaker 4: to realize there are forecasts, right, and the one thing
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  Speaker 4: you know about them is they'll be wrong. But when so,
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  Speaker 4: Labour's CGT policy is modeled on the minority view of
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  Speaker 4: the Tax Working Group. There was a minority. I was
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  Speaker 4: in the majority, eight out of eleven was voted for
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  Speaker 4: a comprehensive capital gain SAX. A minority of three put
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  Speaker 4: up and said let's just extend it to property. And
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  Speaker 4: in that minority, report, they said that residential property will
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  Speaker 4: be about thirty nine percent of all revenue forecast for
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  Speaker 4: the Capital Gains Tax and Treasury in twenty nineteen. Long
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  Speaker 4: time ago, it suggested that after ten years, the comprehensive
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  Speaker 4: capital gain tax might be six point two billion of
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  Speaker 4: revenue per anum after ten years and thirty nine percent
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  Speaker 4: of that's a couple of billions. So Labour's estimate of
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  Speaker 4: a billion after four years doesn't seem out of skew
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  Speaker 4: to me.
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  Speaker 2: Now, yesterday Chippy said to me, it's not inflation adjusted?
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  Speaker 3: Should it be?
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  Speaker 4: Yeah, I heard that. It's a great question in theory,
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  Speaker 4: Yes it should be, because wish be taxing inflationary gains.
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  Speaker 4: We should only be taxing real gains. But introducing inflation
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  Speaker 4: adjustment is really difficult and produces real complexity. So what
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  Speaker 4: most jurisdictions around the world do is either discount the
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  Speaker 4: rate to allow for inflation, or only include part of
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  Speaker 4: the game as a proxy really for inflation. So you know,
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  Speaker 4: you could argue that at twenty eight percent, it's already
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  Speaker 4: a slight discount for an individual or a trust whose
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  Speaker 4: top rate is thirty nine, but it's not a discount
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  Speaker 4: for companies.
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  Speaker 2: No, and I mean, geez, it's not much of a discount,
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  Speaker 2: is it. Would you do if you had if you
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  Speaker 2: designed it to account for inflation.
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  Speaker 4: Well, when we did the working group, we didn't. We
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  Speaker 4: recommended it not to account for inflation, and the reason
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  Speaker 4: being that we come off of this period of historically
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  Speaker 4: low inflation. But as we've seen in the last couple
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  Speaker 4: of years, of inflation can get away and make it
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  Speaker 4: a hell of a difference. So I do think you
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  Speaker 4: need to in principle account for inflation. It's probably too
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  Speaker 4: hard to do it precisely, and it's CPI are just
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  Speaker 4: the cost base, So it's probably best to apply some
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  Speaker 4: proxy and discount the rate or discount the rate of
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  Speaker 4: inclusion of the capital gain in order to say we
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  Speaker 4: recognize as it's a pretty rough measure, but it does
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  Speaker 4: recognize inflation. If you do that, Jeff, what does.
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  Speaker 2: Your gut tell you? I mean, it looks to me
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  Speaker 2: like this is a trojan horse, right, because I don't
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  Speaker 2: really understand what the point is in bringing in a tax,
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  Speaker 2: or introducing a tax to bring in review and then
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  Speaker 2: immediately spending the vast majority of what it brings in
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  Speaker 2: on something that we don't need right as widespread as
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  Speaker 2: free GP as it's for. So would you say looking
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  Speaker 2: at that that this is just the startup something and
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  Speaker 2: it expands from there. It's being something more comprehensive, like
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  Speaker 2: what you'd like.
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  Speaker 4: Yeah, I think some people will see it like that.
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  Speaker 4: I mean, this approach is consistent with what New Zealand
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  Speaker 4: has done for capital gains all along. It's coherent with
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  Speaker 4: our current policy. So we don't have a comprehensive capital
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  Speaker 4: gains tax, but we do tax some capital gains where
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  Speaker 4: they occur systematically and they start to look like income.
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  Speaker 4: So we tax financial arrangements, we tax property development, we
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  Speaker 4: tax payments around leases, and so we fire rifle shots
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  Speaker 4: in law at these things. And this is another rifle shot.
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  Speaker 4: It's not a broad base yet, but you know, some
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  Speaker 4: people will see it as a we'll start here and
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  Speaker 4: then we'll add some more asset classes in. And in
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  Speaker 4: fact that was the that was what the minority report
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  Speaker 4: of the Tax Working Group said, only add asset classes
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  Speaker 4: in as you can justify that the revenue will outweigh
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  Speaker 4: the complexity in compliance costs.
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  Speaker 2: Jeff, it's good to talk, do you. Thank you so
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  Speaker 2: much for your time in your expertise Jeff Nightingale, independent
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  Speaker 2: tax expert and former member of the Tax Working Group.
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