... Or just a mangy dog?
Federated Farmers had said from the outset that a capital gains tax was a “mangy dog” that would add unacceptably high costs and complexity, and there was nothing in the Tax Working Group’s final report that persuaded the federation otherwise according to vicepresident Andrew Hoggard.
“A CGT would make our wellregarded tax system more complex, it will impose hefty costs, both in compliance for taxpayers and in administration for Inland Revenue, and it will do little or nothing to ease the housing crisis,” he said.
It was notable that even the members of the working group could not agree on the best way forward, three deciding a tax on capital gains should only apply to the sale of residential rental properties, the other eight recommending it should be broadened to also include land and buildings, assets, intangible property and shares.
Federated Farmers believed that the majority on the tax working group had badly under-estimated the complexity and compliance costs of what they were proposing, and over-estimated the returns.
The recommended ‘valuation day’ approach to establishing the value of assets, even with a five-year window, would be a feeding frenzy for valuers and tax advisers, and just the start of the compliance headaches for farmers and other operators of small businesses who were the driving force of New Zealand society and the economy.
Lifestyle block owners whose properties were bigger than 4500 square metres would not be fully exempt.
“Trying to look for positives, at least if farmers and small business operators have to swallow the CGT rat it is made slightly more palatable by the recommendation that roll-over relief applies,” Mr Hoggard said.
“That would mean that if a farm is ‘sold’ to family successors, or there is a transfer on death or matrimonial separation to a family member, or a business restructuring where there is no change of ownership, there would be no capital gains tax to pay at that time. However, the potential tax liability would accumulate, and kick if the farm property was ever sold out of that family’s ownership.
“We’re also glad that the Tax Working Group has confirmed that money that farmers and other land owners spend on QEII and Nga Whenua covenants, locking up and protecting land for biodiversity and environmental enhancement, should be tax deductible.”
There were many other aspects of the report that Federated Farmers would wish to examine and debate further, but in the meantime the mangy dog should be put back in its kennel.