Latest / Best of Business / Saul Eslake: Australian independent economist on the claims that the Budget is turning NZ into an Australian tax haven

Transcript

Saul Eslake: Australian independent economist on the claims that the Budget is turning NZ into an Australian tax haven · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from News Talks be follow
• 0:12
  Speaker 1: this and our wide range of podcasts now on iHeartRadio.
• 0:16
  Speaker 2: So a recent headline in the Australian newspaper declared budget
• 0:20
  Speaker 2: increases New Zealand's appeal as a tax haven. To talk
• 0:23
  Speaker 2: us through whether this is really happening or not, we
• 0:25
  Speaker 2: have saw the like an independent economist in Australia high.
• 0:27
  Speaker 3: Saul Kera that thank you for having me on the program.
• 0:31
  Speaker 2: Thanks for joining us. Is this real or are we
• 0:33
  Speaker 2: just trying to make this happen?
• 0:36
  Speaker 3: I think it is probably wishful thinking on the part
• 0:39
  Speaker 3: of some people in Australia who'll be adversely affected by
• 0:43
  Speaker 3: the changes announced in our budget last week. That is
• 0:46
  Speaker 3: to say that I'll have to pay more tax on
• 0:48
  Speaker 3: their capital gains and may not be able to negatively gear,
• 0:51
  Speaker 3: as we say over here, their investments in residential property.
• 0:56
  Speaker 3: And you know, people look over the ditch and see
• 0:58
  Speaker 3: that New Zealand's top rate of thirty nine is lower
• 1:02
  Speaker 3: than our top rate of forty six or forty seven
• 1:05
  Speaker 3: if you include our Medicare levy, and that you don't
• 1:08
  Speaker 3: really have a capital gains tax other than on assets
• 1:12
  Speaker 3: that are held for less than two years, so they
• 1:14
  Speaker 3: might think that looks a lot more attractive than Australia.
• 1:18
  Speaker 3: But it's not as if people can decide that they
• 1:24
  Speaker 3: shift their domicile to New Zealand unless they actually physically move,
• 1:29
  Speaker 3: which of course Australians can do quite freely. But they
• 1:32
  Speaker 3: would still be liable to Australian tax on capital gains
• 1:37
  Speaker 3: that they earn on assets in Australia, and they get
• 1:41
  Speaker 3: a credit for that against any tax they might have
• 1:43
  Speaker 3: to pay in New Zealand, which would probably wipe that out. Alternatively,
• 1:47
  Speaker 3: if they wanted to stay in Australia but move their
• 1:51
  Speaker 3: investments to New Zealand, say they might decide to sell
• 1:54
  Speaker 3: properties in Australia and invest in property in New Zealand.
• 1:58
  Speaker 3: They would need to be confident that property prices, for example,
• 2:04
  Speaker 3: would rise more rapidly in New Zealand than they will
• 2:07
  Speaker 3: in Australia, which hasn't happened for quite a long period
• 2:11
  Speaker 3: of time, given the success that you over there have had,
• 2:14
  Speaker 3: increase in increasing housing supply, especially in Auckland, which we're
• 2:18
  Speaker 3: struggling to do, and Australians would still be subject i
• 2:24
  Speaker 3: think to Australian tax on capital gains that they've made overseas.
• 2:29
  Speaker 3: They get a credit for any tax they paid to
• 2:32
  Speaker 3: the New Zealand government. But if that was less than
• 2:35
  Speaker 3: the tax they would pay on an equivalent investment in Australia,
• 2:38
  Speaker 3: then the Australian Taxation Office would slug them for the
• 2:42
  Speaker 3: difference if they were resident in Australia.
• 2:45
  Speaker 2: Okay, so not quite the tax haven that we might
• 2:48
  Speaker 2: have thought we were. Has it taken you by surprise
• 2:51
  Speaker 2: how badly this budget has gone down with the average punter.
• 2:55
  Speaker 3: Well, I'm not sure whether it's gone down badly with
• 2:57
  Speaker 3: the average punter who doesn't pay capital gains tax because
• 3:02
  Speaker 3: he and she doesn't have capital gains. I mean, only
• 3:05
  Speaker 3: about seven percent of Australians reported taxable capital gains in
• 3:10
  Speaker 3: the most recent year for which we have data, that's
• 3:13
  Speaker 3: our fiscal year twenty twenty two to twenty three. And
• 3:16
  Speaker 3: while quite a lot of Australians, a bigger proportion of
• 3:19
  Speaker 3: Australians are property investors. Almost one in every five tax
• 3:24
  Speaker 3: paying Australians has at least one investment property. Those investors
• 3:29
  Speaker 3: aren't going to be adversely affected by these changes because
• 3:32
  Speaker 3: they've been grandfathered. It's prospective investors in property who will
• 3:38
  Speaker 3: have to invest in a new build if they want
• 3:42
  Speaker 3: to continue to get negative gearing concessions and favorable capital
• 3:47
  Speaker 3: gains tax treatment, they won't get it for investing in
• 3:51
  Speaker 3: property we've already got. And that's the point of the exercise.
• 3:54
  Speaker 3: You know, the government wants to discourage people from bidding
• 3:58
  Speaker 3: up the price of property that we've already got out
• 4:01
  Speaker 3: competing would be home buyers and thus increasing the demand
• 4:05
  Speaker 3: for rental housing as much as they're increasing the supply
• 4:08
  Speaker 3: that we want less of that investment and more investment
• 4:11
  Speaker 3: in the construction of new housing, which actually genuinely does
• 4:15
  Speaker 3: add to housing supply. So there's a lot of noise
• 4:17
  Speaker 3: being made by people who may have to pay more
• 4:20
  Speaker 3: tax as a result of these changes. And because they
• 4:23
  Speaker 3: tend to be better off than the average punter, they
• 4:26
  Speaker 3: have more ways of making their views heard by wider audiences.
• 4:30
  Speaker 3: But that doesn't mean to say that the average punter
• 4:33
  Speaker 3: is annoyed. I think the difficulty our government will have
• 4:37
  Speaker 3: is that this does break an explicit election promise. You
• 4:41
  Speaker 3: the Labor Party who are now the government here, they
• 4:44
  Speaker 3: went to elections in twenty sixteen and twenty nineteen promising
• 4:48
  Speaker 3: that they would do what they announced last week. They
• 4:52
  Speaker 3: lost both of those elections, albeit narrowly. They won the
• 4:55
  Speaker 3: election in twenty twenty two and again in twenty twenty
• 4:59
  Speaker 3: five by a very big majority, promising that they wouldn't
• 5:02
  Speaker 3: do these things, and now they've done them. As I
• 5:06
  Speaker 3: think has happened in New Zealand as well, when governments
• 5:09
  Speaker 3: do things that they have said they wouldn't do, that
• 5:12
  Speaker 3: tends to get people's backs up, even if they're not
• 5:14
  Speaker 3: particularly fussed about the policy. They don't like being what's
• 5:19
  Speaker 3: perceived as being lied.
• 5:20
  Speaker 2: To as a fair a fair point that you make, Soul,
• 5:22
  Speaker 2: It's been very good to talk to you. We'll get
• 5:23
  Speaker 2: you on the show again and chat about some other
• 5:25
  Speaker 2: stuff when we get the chance. That's saw this like
• 5:27
  Speaker 2: Australian Independent economist.
• 5:29
  Speaker 1: For more from News Talk st B, listen live on
• 5:32
  Speaker 1: air or online, and keep our shows with you wherever
• 5:35
  Speaker 1: you go with our podcasts on iHeartRadio