Labour hits back over CGT policy

abour revenue spokesman David Clark defends his party's capital gains tax proposal. Photo by Gerard O'Brien.
abour revenue spokesman David Clark defends his party's capital gains tax proposal. Photo by Gerard O'Brien.
Labour hit back yesterday over claims its capital gains tax proposal was in disarray, misleading and complicated.

Revenue spokesman and Dunedin North MP David Clark said in an interview capital gains tax (CGT) was a way of making sure everyone paid their fair share of tax.

Labour leader David Cunliffe and finance spokesman David Parker appeared to give contradictory statements on the issue, with one suggesting if the house left to family after a death would be hit by CGT if not sold within a month and the other saying the gains between the value of the house on inheritance and when it was sold would be subject to the tax, nothing more.

However, Dr Clark said the technical issues being talked about in New Zealand were the same issues faced by all but three OECD countries and there was nothing to suggest New Zealand's tax policy would be more complicated than the policy in those countries.

An expert panel would work through the details, such as applying CGT on a house bequeathed to a family after a death.

Crowe Horwarth tax principal Scott Mason said the issue could be cleared up quickly by writing an exemption to the policy, although any exemptions created future difficulties.

He suggested that if a house was worth $500,000 when CGT was implemented, it could be worth $700,000 on the death of the owner. If the family later sold it for $800,000, the CGT could be applied to the $100,000 gain at 15%, or about $15,000.

However, if the estate retained the property and one of the family, perhaps a grandchild lived in the house, a rule would be needed to define if the property then qualified as the grandchild's family home, Mr Mason said.

''The policy is complicated and there is not enough detail.''

Dr Clark said Prime Minister John Key was wrong in the leaders debate earlier this week. A family home in a trust was not subject to CGT but Labour still wanted to stop trusts being used for tax avoidance.

In New Zealand, the majority of people with a net worth of $75 million or more were not on the top tax rate.

''That can't be right.''

In the United States, 60% of CGT was paid by the top 1%. In Australia, 60% was paid by people earning more than $180,000.

Dr Clark said New Zealand's Inland Revenue process was ''long and boring'' to those not involved in it. But the legislation would go before a select committee where the public could make submissions.

''We have a long and thorough process for making law for a good reason. You can only do that in government,'' he said.

Finance Minister Bill English said the more Mr Cunliffe tried to explain his CGT, the more he tied himself in knots and confused New Zealanders.

''He would force families to rush through the sale of their parents' family home at a distressing time in their lives or penalise them with a new tax.''

Earlier, Mr Parker said the capital gains tax would not apply, Mr English said.

If Messrs Cunliffe and Parker could not get their story straight, it was little wonder New Zealanders were confused and uncertain about Labour's higher tax agenda.

Capital gains tax was one of five new taxes Labour and the Greens would impose on New Zealanders, he said.