Capital gains tax needed – economist
Tuesday 30 Oct 2012 6:49 p.m.
By Political Editor Duncan Garner
A top economist says it's naive for the Government not to consider a capital gains tax on housing following its moves yesterday to dampen prices in Auckland.
But in an interview with 3 News the Prime Minister says they don't work and he will not introduce one, despite the growing pressure.
The Government wants more land released so more houses can be built quickly in Auckland. Labour says the Government's needs a capital gains tax on investment property.
“The Government's got its head so stuck in the sand the whole body has disappeared,” Labour MP David Cunliffe says. “It's both fair and good for the economy.”
Berl economist Ganesh Nana agrees.
“The elephant in the room is the capital gains tax.”
Green Party co-leader Russel Norman says the Government is too scared to introduce the tax.
“The Government is afraid to upset voters who bought investment property.”
We asked Prime Minister John Key why not introduce a new tax to cool house prices.
“Well, a capital gains tax won't work," he says. "Look at the housing bubble in other countries that had them. It didn't stop it there."
Home ownership used to be as high as 75 percent in the 1980s. Experts say just 58 percent of Kiwis will own a home by 2016.
Treasury says a capital gains tax should be part of the housing mix to act as a disincentive to speculators, and Dr Nana says it's time the Prime Minister changed his views.
“Yes it's naive, because it shows we haven't understood the world has changed, and it has, and we have to look at the world afresh.”
But Mr Key says it won’t have the effect people predict.
“There's no indication that it does - it takes too long to raise money and [it] doesn't deter people investing in property."
Dr Norman doesn’t understand why the Government won’t consider it.
“Lets be clear. Treasury, the OECD, and the savings working group all supported a capital gains tax. Why is it that the Government doesn't even want to discuss it?”
Auckland Mayor Len Brown, who welcomed yesterday's moves as positive, is staying out of this one. He doesn't want to upset the Government.
So the Government's changes yesterday are seen as a start, but that's all. Much more will be needed before houses become affordable, but count out a capital gains tax unless there's a change of Government.