Louis XIVths Finance Minister once said, ‘the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.’
What strikes me about the government’s new tax – which is totally not a capital gains tax – is that (a) it will probably not deliver any feathers, because property speculators can just defer their sales to avoid the tax, but (b) there is now a ‘brightline’ tax on capital gains instead of a huge nebulous loophole, and this is a big deal on a psychological and political level. It means that subsequent governments – or maybe even this one – can incrementally increase the two year limit out to five years, ten years, then no limit, and New Zealand will have a realised capital gains tax on secondary property.
Yes, the way it came about is absurd. Labour campaigned on a Capital Gains Tax. National opposed it. More than opposed – they tore Labour apart over it. So Labour abandoned it and now National’s introduced a dummy one. Someone else will give it teeth. But it will, eventually, mean our tax system is a little bit fairer.