Labour's tax to shut 'loophole' for rich

Russel Norman. Photo / Getty Images

New Zealand's rich would be the biggest losers if a capital gains tax was introduced, Greens co-leader Russel Norman says.

A capital gains tax on assets such as rental properties, farms and even shares but excluding the family home is expected to be the centrepiece of Labour's tax policy package to be unveiled on Thursday.

Dr Norman, whose party has long campaigned on a similar policy, yesterday pointed to Treasury and Inland Revenue Department (IRD) research showing "those on very high incomes gain disproportionately from the lack of a capital gains tax".

Research showed Americans earning US$1 million ($1.19 million) or more derived 40 per cent of their income from capital gains while those earning A$1 million ($1.28 million) or more in Australia derived 30 per cent.

In both those countries, the gains were taxed.

"This tax loophole for those who can afford to own multiple properties needs to be closed," said Dr Norman.

Prime Minister John Key and his Government's opposition to the tax amounted to an argument that "those earning more than $1 million a year shouldn't have to pay tax on 40 per cent of their income while those on the average wage should pay tax on all of their income", said Dr Norman.

Mr Key has dismissed the idea of a capital gains tax, saying it would not raise enough money to fund Labour's other policies, that it would not generate much money at all for many years, that it would be complex to implement and that it would slow the economy.

ACT leader Don Brash - who as Reserve Bank Governor in the 1990s said the lack of a capital gains tax in New Zealand was an "anomaly" which contributed to a preoccupation with property - was this week much cooler on the idea.

He said most economists liked the idea in theory, but it was compromised in practice by the fact it could only be collected when assets were realised and many assets such as the family home were exempt.

CAPITAL GAINS TAX

For:

* Labour
* Greens Party
* The International Monetary Fund
* The Organisation for Economic Cooperation and Development
* NZ Institute of Economic Research economist Shamubeel Eaqub
* Academic tax experts including Craig Elliffe of Auckland University and Chris Ohms, Ranjana Gupta, Dennis Moodley and Katherine Ritchie of AUT
* Reserve Bank Governor Don Brash in 1997
* Treasury
* The 2011 Savings Working Group

Against:

* National
* The 2010 Tax Working Group
* PricewaterhouseCoopers chairman John Shewan
* Act Party Leader Don Brash in 2011
* The IRD
* ANZ National Bank chief economist Cameron Bagrie