The Prime Minister is confident that exploring changes to the property investor tax - or bright-line test - is "absolutely the right thing to do" despite Labour ruling out a capital gains tax.
Jacinda Ardern was hit with questions in Parliament on Tuesday from Opposition leader Judith Collins over the recent rapid rise of house prices - up 20 percent on last year - and how the Government plans to tackle it.
Labour promised during the election no new taxes or any further increases to income tax except for a new top tax rate of 39 percent on income earned above $180,000. Ardern also ruled out introducing a capital gains tax or wealth tax.
But Newshub revealed the Government is not ruling out an extension to the bright-line test - the tax on investment properties. It means if a property is sold within five years, capital gains are taxed at the owner's income tax rate. The family home is exempt.
"You'll have seen during the course of the election that we were very clear that obviously, a capital gains tax was not in our consideration. We equally ruled out any measures around a wealth tax," Ardern said in Parliament.
Ardern said anything beyond those taxes is "purely hypothetical" but she confirmed the Government has sought analysis on the impact the bright-line test is having in the market and whether changing it could help stabilise house prices.
"In this current environment, it is absolutely the right thing to do. We need to know what levers are and aren't making a difference to house price increases."
Collins asked Ardern how more taxes will build more houses.
"I note that the member was actually in the Government that introduced the bright-line test," Ardern said. "The big difference between that member and this side of the House is that we do not accept that those house price increases are OK. We do not believe that there is no lever that can be pulled to continue to stabilise what we're seeing in the market."
Capital gains tax in disguise?
ACT leader David Seymour asked Ardern to explain how extending the bright-line test is different from introducing a capital gains tax.
The bright-line test was introduced by the previous National-led Government in 2015 and Ardern pointed out that it was supported by ACT. She also mentioned how National argued at the time that it was a tax on income, not capital gains.
"At that time there was a view that there were a number of people in the market who were purchasing homes, flicking them within a very short period of time in order to benefit from quick gains," she said. "We are seeking advice on what impact it has had on the market and that may go to answer the member's question."
Seymour argued that Ardern hadn't answered the question.
"We heard an awful lot about who had supported a bright-line test and speculation about the reasons they might have supported them. But no attempt to explain to the public what the difference between the two policies is."
House Speaker Trevor Mallard ruled that Ardern had addressed it.
Collins continued her house price offensive, asking Ardern who is responsible for house prices increasing 37 percent in her first term of Government.
Ardern shot back: "Perhaps the member would like to tell us who is to blame for the 65 percent increase we had under National? The difference is I do not accept that it is acceptable to see house price rises that lift housing out of reach of first-home buyers."
Ardern said there is a range of factors affecting house prices and she will not "apportion blame to anyone", but she acknowledged that the market has been affected by low-interest rates and lack of supply.
The Government has accepted its housing programme KiwiBuild failed to meet its targets. Its focus is now on progressive home ownership, building state homes, and reforming the RMA, the complex piece of planning law blamed for holding back developments.
"Low-interest rates are being used to stimulate growth in hard-hit economies, and members of the public - even in jurisdictions where they have things like capital gains taxes or their equivalent - are investing in property and so that is part of the issue," Ardern said.
"But low-interest rates are also benefiting first-home buyers. That is not to say there aren't other levers and we are investigating all of those to get it under control."
National's shadow Treasurer Andrew Bayly said the Government's "flirtation" with extending the bright-line test suggests Labour's pre-election commitments on tax were just "empty promises".
"The Finance Minister needs to stop being cute with the facts. It's clear that if the Government extends the bright-line test more Kiwis will be paying this tax than before, and more tax revenue will be collected by the Government."
Grant Robertson has written to the Reserve Bank Governor Adrian Orr asking for its support in stabilising house prices. Orr said last week he might raise the prospect of tax changes during their discussions.
