Nicola Willis slams Labour's capital gains tax plan: 'It's a terrible idea'

Finance Minister Nicola Willis says Labour's policy of a capital gains tax is a "terrible idea".

Labour has agreed to campaign capital gains tax (CGT) covering just property - excluding the family home and farms - to help fund three free doctor visits for everyone.

The policy would kick in from July 2027 and would not be retrospective.

Prime Minister Christopher Luxon, speaking from the ASEAN East Asia summit in Malaysia, said taxing the way out of a recession was not the way forward for New Zealand.

"This is a tax on every single business in New Zealand," he said.

"Think about that corner dairy owner that actually has to operate from premises in a building that's going to get taxed, that ends up adding cost to that business owner, that ends up putting a cost out to the consumer."

He said Labour had been the party of working people but "now it just wants to tax everyone," and criticised party leader Chris Hipkins' previous stances on the idea.

"He is Mr Flip-flop, it is all over the place," he said.

Questioned about what a CGT could mean for house price growth, Luxon said he wanted to see "good, consistent, steady, moderate house price growth", but that wages should grow faster than inflation.

He pushed back when asked if it was fair he had not paid tax on the properties he had sold since becoming prime minister.

"I haven't flipped properties, but it's not about me, it's not about me, it's about New Zealanders and I'm saying to you actually taxing Kiwi businesses, it's not the way forward."

He said 90 percent of New Zealanders paid less than $70 for GP visits, and those with Community Services Cards got discounts.

"This is a government that's invested more around GP funding than any previous government in a generation, so I mean we are doing everything we can. We're expanding through 24/7 services to make it more accessible, more timely ... we're making some good progress."

Willis, National's deputy leader, told Morning Report the capital gains tax would be "a massive tax on the New Zealand economy at a time when it could least afford it".

"This will put the economy at risk. It's a terrible idea."

While the policy was being discussed as a "narrow" tax, she told Morning Report it was anything but.

"It is certainly not narrow; they have said it would be a tax on every piece of commercial property in the country. That will hit many, many businesses, from a corner dairy to a manufacturing facility. It will also hit everyone who saved and put money into KiwiSaver, because some businesses in their KiwiSaver will now face a new tax.

"And it will hit every Kiwi who saved hard for a rental property or an investment in a commercial business. To call it narrow is completely misleading."

Nicola Willis also said free GP visits would also hit the issue that there are not enough doctors so getting a consultation was hard.

She said the coalition government was working to train more doctors or encourage them from overseas, as well as having targeted subsidies for GP visits for low income families.

"This seems to me a classic Labour policy. It is not designed well. It has shades of KiwiBuild."

Tax property, boost productivity - expert

University of Otago professor and tax expert Craig Elliffe, a member of the government's 2017 Tax Working Group, said Labour's proposed approach was narrow and targeted, and would not cover as much as similar tax regimes overseas.

"It focuses only on investment properties and commercial industrial properties," he told Morning Report on Tuesday.

"All other assets outside the net, ones that are normally within international norms of capital gains - so things like shares, retirement savings - they're all excluded, and other assets, you know, collectibles like paintings and those sorts of things."

Elliffe called it the "cleanest, simplest, most administratively simple form of capital gains tax" which tackled a "consistently valued" asset class - property - and would be "very straightforward" to implement.

"It'll raise a reasonable sum. It's nowhere near as much as a comprehensive capital gains tax would, and some of the design features take away some of the revenue," such as not taxing capital gains from inheritances and setting it at 28 percent, lower than the highest marginal tax rate.

Elliffe brushed off criticism it would impact small businesses, saying they "really won't be affected unless... their [property] assets as part of that business."

He said the tax, which would hit property investors hardest, would push more money into productive sectors instead - helping solve New Zealand's long-running issue with low productivity.

"You only need to look across the Tasman or to any other countries that have capital gains tax and see that they are not less productive, they are more productive than us."

'Any government should do it

Former Labour leader David Cunliffe - who ran unsuccessfully on a CGT policy - said it was a "very orthodox form of taxation" used in every OECD country other than Mexico and New Zealand, and it was time for New Zealand to "join the club".

"It is fairer because it spreads the load between fixed-income earners like teachers, doctors and policemen and those who have the opportunity to run and grow a business or property invest, and they only pay tax when they realise that profit," he said.

"Politicians need to be brave. People around the country are saying they want change. We can't just keep fiddling and sliding backwards down the OECD ladder. So this is part of a solution that will make us a higher wealth, higher innovation, more productive economy. Any government should do it."

Wealth taxes by comparison were "much more in an experimental stage" and there was a real risk it would drive wealthy investors overseas - something a CGT would not suffer from.

'Tall poppy'

Deputy Prime Minister and ACT leader David Seymour labelled the policy "divisive".

He told First Up New Zealand had comparatively high tax revenue, and taxed a higher percentage of the economy than the average OECD economy.

"It's not that New Zealand lacks government revenue. It seems to be about that old chestnut, the tall poppy."

Seymour said the policy is presented as someone else having to pay to solve problems in New Zealand.

It seemed every couple of years there was a different group of people deemed to have caused a problem and had to be "taxed or punished in some way", he said.

New Zealand First call it a ham-fisted policy announcement from Hipkins.

The capital gains tax plan was announced abruptly on Tuesday morning after RNZ was earlier leaked details over the long weekend.

In a tweet the party said someone in Labour leaking the old 'tax and spend' CGT announcement to media before Hipkins could announce it meant some Labour caucus colleagues were obviously not very happy.

"Last week's train-wreck list of policy announcements was bad enough but now this leak just rubs in the salt," the post said.

'Doesn't touch the sides'

Green Party co-leader Chloe Swarbrick said Labour's policy was better than nothing, but fell far short of what New Zealand needed to address the infrastructure deficit.

"Unfortunately, what we're seeing here is an announcement which doesn't touch the sides on meeting the needs of New Zealanders. New Zealanders are telling us every single day that our healthcare system, our education system, our infrastructure, is falling apart, and we need bold politics and bold policy that addresses that.

"This falls far short. Just to give some contrast ... on our wealth tax alone, we're looking at a comparison of approximately Labour raising around 6 percent of what it is that we've proposed.

"With that [wealth tax] we can fund free GPS for all New Zealanders, free dental care, free early childhood education. We can have distributed renewable electricity which is affordable."

She rebuffed Hipkins' claim a wealth tax would only happen if the Greens and Te Pāti Māori could form their own government without Labour.

"New Zealanders understand that they are the ones in charge of this country. Politicians don't actually get to dictate the limitations on our potential, the vision that we can create if we all decide to actually work together," she said.

"At the end of the day, the Greens find it abundantly unfair that what we have in this proposal ... is a watered down capital gains tax that would raise revenue that is lesser than the amounts that the richest family in the country alone could generate in some passive investment."

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