Judith Collins says capital gains tax will 'make Simon Bridges the Prime Minister'

National MP Judith Collins says if the Government adopts any form of capital gains tax, Simon Bridges will be Prime Minister after next year's election.

Both she and Sir Michael Cullen - head of the Tax Working Group (TWG) which made the recommendation - appeared on The AM Show on Friday to argue their cases.

"I said to Michael Cullen... 'Well Michael, you have just guaranteed that we are really in this, and we are going to win the next election,'" Ms Collins told host Duncan Garner.

"They are going to make Simon Bridges the Prime Minister."

Mr Bridges has called the recommendations an "assault on the Kiwi way of life", a sentiment Ms Collins echoed.

"You can have a multimillion-dollar art collection and watch that go up in value, and you get tax-free. Then everyone else with your little property next door, your little investment, you're going to get done over."

"Everyone else" might be pushing it - statistics show only a minority of Kiwis own an investment property. Ministry of Business, Innovation and Employment released figures in 2015 showing there were about 130,000 landlords with rental properties - slightly more than 100,000 owned a single property, while nearly 300 landlords had more than 200 properties each.

"This is basically about fairness," Sir Michael told The AM Show. "You've got some people with capital income, some people it's just all labour income or earnings from their business. Those on labour income pay the full tax. Those with capital income at the moment, income on what's called capital account in the tax system, is fundamentally - with a few exceptions - untaxed.

"We're about the only developed economy that does it. We're weird, we're an outlier in that regard."

He said between now and the next election, the National Party will be "salivating like a bunch of guard Alsatians from the German army in World War II" to protect wealthy people who own multiple properties, such as baches - which spend most of their time empty.

"Let's be real about this - most families in New Zealand don't own holiday homes. We never did - most families never did. We certainly don't now. Holiday homes now are often bigger than the houses most people live in, in the cities. And if they're not taxed, then it's unfair to tax the ma and pa investors in rentals."

Home ownership rates have been dropping since 1991. It's now 62.5 percent, down from 74 percent 28 years ago.

Sir Michael Cullen.
Sir Michael Cullen. Photo credit: The AM Show

The Government is expected to reveal what recommendations it will pursue in April, but none will become law until after the 2020 election - provided National doesn't topple them.

Christina Leung, principal economist of the New Zealand Institute of Economic Research, says the Government is unlikely to take on all the TWG's recommendations.

"Given the broad recommendations... on what's going to be included and subject to a capital gains tax,  it's likely perhaps the Government will decide not to take on board the full suite of recommendations, and perhaps we're going to see a more moderate view."

But she expects ideas that don't involve a capital gains tax - such as congestion charging - might be more palatable to voters.

"Even if you were not going to be paying a tax, you would be paying in terms of the time you're spending sitting in traffic."

Judith Collins and Kris Faafoi on The AM Show.
Judith Collins and Kris Faafoi on The AM Show. Photo credit: The AM Show

Prime Minister Jacinda Ardern, perhaps seeking to make a capital gains tax easier to swallow, told Sir Michael the TWG's recommendations had to be fiscally neutral.

"You can introduce these things and look at other forms of spending where needs are quite high," the former Finance Minister explained. "But she said no - this initial five-year period, this has got to be a revenue-neutral package."

If adopted, the full suite of recommendations will initially bring in about $1.2 billion a year, rising to about $6 billion in a decade, says Sir Michael.

"Everybody else has [a capital gains tax]. The United States, the United Kingdom - these rabid 'socialist' countries like the United States have a capital gains tax," Sir Michael joked.

"France, Germany, the Nordics - they all take it for granted. Many of them have higher productivity than we do. The world doesn't collapse with the introduction with a capital gains tax."

"The sky doesn't fall in," concurred Garner.

"If it does, we'll tax it," Sir Michael quickly quipped.

Newshub.

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