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Tax changes robust enough?

It is still too early to gauge whether recommendations forwarded by the Tax Working Group are robust enough to be implemented by the government, according to the Property Institute of New Zealand (PINZ).

Friday, February 5th 2010, 9:38AM 3 Comments

by The Landlord

Despite endorsing any move towards a more sustainable and equitable tax system, PINZ believes the recommendations would "clearly impact upon property owners and investors and place additional financial burden upon those currently investing in an already fragile market," PINZ said.

PINZ president Ian Campbell believes an in-depth debate is required concerning the alignment of the current tax system, plus the removal of depreciation benefits, introducing capital gains tax and land tax upon property owners, and the increasing of GST from 12.5% to 15%.

PINZ believes a cautionary approach is needed if certain recommendations were adopted.

On preliminary review of the Tax Working Group's latest recommendations released last month, PINZ acknowledges that the key element of the tax discussion has been around removing distortions and a re-distribution of the tax base away from salary and wage earners, but that a fundamental principle in tax is that taxes should be imposed on those who can afford to pay them in terms of income.

With land tax, for example, there is not necessarily any relationship between owning land, a capital asset and having the income to pay a land tax, for example Maori trusts and retirees.

Land tax would also add a significant burden to the household, particularly rural land holdings.

PINZ also says the current recommendations discourage future investment and will discourage current landlords from staying in business.

The flip-side of the possible affect to housing and land values from tax changes, is the improvement of home affordability for new entrants into the housing market. But conversely again, it will possibly be harder to save for a deposit if rents are raised because of the trickle-down of higher costs stemming from tax changes (such as a land tax), from landlords to tenants.

In all, PINZ believes if a fairer and more sustainable tax system is to be achieved in the medium term, changes need to retain the stability of property investment in New Zealand.

« Momentum building in house market, according to ANZResidential highlights - January 2010 »

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Comments from our readers

On 5 February 2010 at 4:33 pm nancy said:
couldn't agree more with PINZ's analysis of the TWG report. 92% of landlords own only 1/2 properties. Most are mum and dad investors. They house a significant portion of New Zealanders. Their withdrawal from the sector would only mean a greater burden on the public purse as the government will have to step in to provide the housing needed.
On 5 February 2010 at 5:15 pm tony said:
Hope Key and co check out the disaster created in Australia in the mid eighties when the then Govt thought they knew how to control the rental market,chaos reigned and rentals were hard to find as the mums and dads cut and ran,rents excuse the pun went through the roof.
On 7 February 2010 at 4:16 pm Carson said:
The goverment should say thanks to the private residential property investors who provide housing which suppose to be the most expensive public service.
Commenting is closed

 

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