By Dan Brunskill and Mandy Te
In what Labour leader Chris Hipkins thinks would be “the most progressive change to New Zealand’s tax system in a generation” – the Labour Party caucus has agreed to campaign on a 28% capital gains tax on residential and commercial property.
This would be used to fund three visits to a general practitioner doctor for each New Zealander each year.
At a media conference on Tuesday following the party’s abrupt release of the policy, Labour leader Chris Hipkins said Labour wants to be able to “fix the issues we’re facing with our health system and we need more money to be able to do that”.
“But we also want to send a very clear message that we want to encourage investment in the productive economy.
“We’re not going to get rich as a country by continually buying and selling houses from one another,” Hipkins says.
“We need to make sure that we’re investing in businesses that create jobs, that create opportunities for New Zealanders.”
What is Labour’s capital gains tax policy?
The capital gains tax excludes family homes, farms, KiwiSaver, business assets, inheritance, and other valuables. The capital gains tax is only on investment or second properties.
It would appear to capture a holiday or second home, even if that property was not held specifically for investment purposes. While the tax excludes “business assets” it appears to include any commercial property they may own.
Labour says the tax rate would be 28% to align with the corporate rate, so that property transactions are taxed like other business activities. It would apply at the sale of an asset and be charged on any gains after July 2027.
An example used by Labour is: two business partners who own 50% of an investment property which is sold with a net gain of $100,000 – each partner would pay 28% on their $50,000 share.
There’s detailed information on the Labour policies here and here.
In its document on the proposed tax change, Labour – using a forecast revenue based on a model developed by the 2019 Taxing Working Group with an updated asset base and assumptions – says 2027/2028 would have a forecasted revenue of $100 million.
This is forecasted to rise to $385 million in 2028/2029, $965 million in 2029/2030 and $1.35 billion in 2030 and outyears. It would have an average of $700 million a year across the forecast period.
Every dollar raised by the new tax would be redirected into the healthcare system – including funding three free GP visits through “Medicard” – a physical card and digital system which would be used to track entitlements to subsidised care.
Hipkins says Labour opted for a capital gains tax because it’s a simple change and brings New Zealand in line with many other countries who already have a capital gains tax.
“My message to New Zealanders is very clear: if you don’t own a rental property, you don’t own something other than your family home, you don’t own commercial property – you won’t pay a capital gains tax. That’s 90% of New Zealanders.”
“It is time for New Zealand to take that step and I’m very proud to be campaigning on it,” Hipkins says.
When asked about a wealth tax (which is supported by Greens and Te Pāti Māori), Hipkins says this would be the policy Labour campaigns on and the one they would be implementing should Labour form the next Government.
“This is not our fiscal plan, it’s not our alternative budget.”
Hipkins made clear it was the party’s policy on capital gains taxation and its policy on free doctors’ visits.
He says there will be more policies to come from Labour and a fiscal plan showing how the party would pay for everything it is committing to.
‘Always debate around tax’
When asked about how much disappointment he thought there may be on the left about how far Labour has gone with the policy, Hipkins says: “In political circles, there’s always debate around tax and there are always going to be a wide range of views on that.”
“We’re putting forward a tax proposal that we think is fair. It’s reasonable, it’s measured, it’s targeted – and it helps us to fix a problem.”
National Party spokesperson for finance Nicola Willis was quick to slam the policy, saying that “Labour’s tax grab” would put New Zealand’s economic recovery at risk.
“It’s a tax on savings, investment and growth. The complete opposite of what our economy needs right now.”
Green Party co-leader and finance spokesperson Chlöe Swarbrick called Labour’s capital gains tax policy “watered down”, saying it falls short of meeting the needs of New Zealanders.