Even for certain traditional naysayers there is an acceptance that a CGT is an inevitable part of our future tax landscape that once enacted will not, like the short-lived R&D regime, ever be removed.
The debate has traditionally focused on two extremes, with two factions - those who don't want any form of CGT, and those who believe a comprehensive CGT is an economic necessity.
Among those who generally support a CGT, there are ongoing debates as to the design details. Should the family home be excluded? Should the tax apply on an accruals or a realisation basis? Should it apply at a fixed rate or the taxpayer's marginal tax rate?
Economic theory would suggest that any CGT should apply comprehensively across the board (no exclusions) on an accruals basis (an annual tax on the increase in the value of the property), at the taxpayer's marginal tax rate.
There are, however, substantial political and practical problems that render this model effectively unworkable.
It is a tough sell to tax voters on unrealised gains in property when there is no cash coming in, but on the flip side, if the tax burden only comes on realising a gain it creates a "lock-in" effect (where the incentive is not to sell) and a delayed fiscal gain.
What often gets missed in these discussions is that New Zealand already has myriad tax regimes that erode the traditional capital/revenue boundary across many asset classes and tax what would otherwise be considered non-taxable capital gains.
There are a number of rules that tax property gains on a realised basis in certain circumstances (albeit generally not in the residential home context).
These rules can be quite far-reaching as they can extend to taxing property gains made by someone simply because they are "associated" with a property developer, dealer in land or a builder. They are often not that well understood and can in places be difficult to apply.
A further instance of taxing capital gains exists through the Fair Dividend Rate rules.
These rules tax gains on all international portfolio share investments (other than certain Australian equities) on an unrealised basis.
Taxpayers are required to pay tax on the value of the equities each year, even though they have not sold them and in fact may be making a loss (noting that there are some concessions which may apply in a loss scenario).
Similarly, we have a comprehensive financial arrangements regime that taxes all gains (capital or otherwise) on financial and debt instruments, again largely on an unrealised basis.
There are also a host of other lesser regimes that have been introduced by successive governments across both sides of the political divide that erode the capital/revenue boundary, including the latest proposal - relating to certain lease-related payments - from the current National government.
The upshot is that successive governments have sought to tax capital gains and are still doing so. It is just always under a different guise.
In substance, therefore, New Zealand already has a CGT regime, albeit it's not called that, it's disjointed in its application, it applies only in particular defined circumstances and by no means does it apply comprehensively.
The most marked exclusions are all domestic equities, non-portfolio investments and large tracts of real property.
There is no expectation that the continued erosion of the capital boundary will end soon. The only issue is whether it will continue to be slow and concealed or quick and overt.
Thomas Pippos is chief executive of Deloitte New Zealand.
