Labour's gains tax becomes a winner

Labour's finance spokesman David Parker. Photo / Greg Bowker

Once regarded as a political poison, public opinion has moved in favour of Labour's capital gains tax since it was announced three years ago and support for idea has moved well ahead of the party's own popularity, according a recent Herald Digipoll.

Numbers backing the policy, which is Labour's primary weapon to curb rising house prices, is particularly strong in Auckland where first home buyers have borne the brunt of those increases.

According to the poll of 750 New Zealanders earlier this month almost 41 per cent of respondents were either strongly or moderately in favour of the tax. That's up from just under 38 per cent in July 2011 and more than 10 percentage points higher than the number of respondents who said they would vote Labour in September.

In Auckland, 45 per cent of respondents backed the policy in the latest survey.

Those across New Zealand strongly or moderately opposed went from 37 per cent in July 2011 to just under 35 per cent this month. Of the Aucklanders surveyed this month, 36 per cent were opposed.

Labour's finance spokesman, David Parker, said the swing in favour of the policy was "significant".

"Voters better understand that a capital gains tax is both fairer and makes the economy stronger by directing capital away from housing speculation and into productive investment and higher paid jobs."

He said that better understanding came partly from " the linkages people are seeing across housing and rest of the economy" and Labour's own efforts to promote the tax and the issues it sought to address.

Revenue Minister Todd McClay said there was "a lot of confusion out there" about the proposed tax.

"Certainly the New Zealand public don't want to see taxes raised and just have them spent unnecessarily".

In Parliament yesterday, Associate Finance Minister Jonathan Coleman attacked the proposal as "full of complexities and exemptions".

Labour's plan for the tax is largely the same as that it put before voters in 2011 with the exception that an exemption for quake damaged Canterbury homes has been removed.

The 15 per cent tax on any gains between the tax being implemented and the sale of assets won't apply to the family home. While the tax will apply on the sale of farms, the gains in the value of the vendor's family home on the farm would be excluded.

The tax will not apply to assets held for personal use or as collectibles, and the first $200,000 gain on a small business sold at retirement.

There would be no change for those already paying tax on the sale of investment properties or trading shares, but those with a sideline income of making tax free profits on those markets will be hit.

Mr Parker yesterday confirmed there would be no change to the tax treatment of KiwiSaver accounts under Labour's plan. Labour had no plans at this point to tweak the policy between now and the election.

Herald-Digipoll survey

National: Regards New Zealand's current tax system as "the envy of the world" since its 2010 "tax switch" and there are no major changes planned. Last month's Budget saw Finance Minister Bill English talk of some future tax cuts.

Labour: Wants to introduce a 15 per cent capital gains tax, raise the top personal rate from 33c to 36c in the dollar, raise the trust rate also to 36c, disallow landlords from claiming losses on their properties against their personal income. Says tax cuts are "likely" if it gets a second term.

The Greens: Wants a tax free zone on the first $2000 of income to offset higher prices from its carbon tax policy. Supports a capital gains tax with possible indexation to personal rates. Would move the company tax rate from 28c to 27c in the dollar.

NZ First: Does not support Labour's capital gains tax and will make a "major announcement" on tax policy shortly.

Act: Wants to cut the top personal tax rate to 24c and cut the company rate to 20c