Labour's new revenue spokesperson Deborah Russell says might be time to 'seriously' look at capital gains tax

"We need to do something about the taxation of capital gains in this country."
"We need to do something about the taxation of capital gains in this country." Photo credit: Newshub.

Labour's new revenue spokesperson Deborah Russell believes it might be time to "seriously" look at a capital gains tax (CGT).  

Russell, a former tax lecturer who was last week appointed to the revenue role now that Labour is in Opposition, says she believes a CGT would be simpler to implement than a wealth tax, which both the Greens and Te Pāti Māori campaigned on at the election.  

She said she believed wealth taxes "are largely unknown" and it would be "complicated to explain it to people".  

In July, Labour leader and then-Prime Minister Chris Hipkins ruled out introducing either a CGT or a wealth tax after the election. He also quashed a proposal from then-Revenue Minister David Parker of a tax switch, which would have included a wealth tax.  Labour received criticism from some on the left, including the Greens, for not championing a wealth tax.   

However, last month, having lost the election, Hipkins said everything was back on the table for Labour's future policy  

"We lost so, therefore, we start again and that means everything comes back onto the table, and that includes a discussion around tax," Hipkins said. "And in 2026, our tax policy could look quite different to our 2023 tax policy."  

Speaking to Newshub on Monday, Russell said there was a process to go through with the wider party to set new policy and she would speak with members about "where they see our policy going on revenue". 

However, she said she believed "we need to do something about the taxation of capital gains in this country" and "it's a large gap in our system".   

Asked whether she preferred a CGT – which is a tax on gains made when an asset is sold – to a wealth tax, which is an annual tax on net wealth, Russell said New Zealanders "now have a pretty good understanding of capital gains taxes".  

"It has been a topic of conversation for a long time. So I think it might be time to really look at it seriously.  

"I think wealth taxes are largely unknown and it would be complicated to explain it to people. I am not sure. I think we need to have a long conversation about it before we could look at introducing it."  

Russell didn't believe Labour's tax policy alone could be blamed for the party's loss.   

"I think there was a whole lot of things that went into that result. It would be hard to put your finger on one thing.  

"I don't think the parties that did campaign on a wealth tax did especially well out of it."  

When it was pointed out to Russell the Greens' vote jumped – it went from 7.9 percent in 2020 to 11.6 percent – she said it wasn't a "spectacular gain".  

"I think it would be really hard to attribute it, the election result, to any one policy."  

Russell has previously written about New Zealand not having a CGT calling it a "significant flaw in New Zealand's tax system.  

She said in a 2016 AUT report the cost to the Government of not having one is "considerable".   

"Raising more government revenue could in itself be a good reason for introducing a capital gains tax. However, a better reason might lie in fairness."  

In a 2016 column in the NZ Herald, she said the lack of CGT was an "enormous inconsistency in the tax system".  

One of Labour's main policies at the election was to remove GST from fresh and frozen fruit and vegetables.  

At the release of Labour's fiscal plan, finance spokesperson Grant Robertson said the party would "maintain income tax settings to provide consistency and certainty in these volatile times".   

"Now is not the time for additional taxes or to promise billions of dollars in unfunded tax cuts which would add to inflation and take money away from health, education and housing."  

A report released by Inland Revenue earlier this year found the effective tax rate paid by New Zealand's wealthiest families is less than half of that of middle-income Kiwis.  

This is because wealthy families "got most of their economic income from increases in the value of businesses, property and financial portfolios they own or control" - that's capital gains - rather than from a salary or other personal taxable income.  

The capital gains are mostly not taxed, bringing down the effective tax rate paid by the families.