As New Zealand swings increasingly faster into election mode, many of us are keeping a close eye on our finances.
The rising cost of living is biting into everything – from rates and petrol to zucchini and avocados. Meanwhile, mother nature has done her best to convince even the most hardened climate change deniers, by laying waste to swathes of roads and other infrastructure through a series of bad weather events. Now, with the water table high, even moderate rain is cause for concern as hillsides slip and roads crumble.
Questions are being asked the length and breadth of the nation about how much-needed infrastructure renewal and repair will be funded.
The recent report from the independent Future of Local Government panel spoke about ‘peak rates’ having been reached, as local authorities struggle to fund backcountry and other road repairs.
It’s not only roads; ageing bridges, buildings and more need upgrades to cope with not only the bad weather, but increased use as the population grows and the economy diversifies. In Wairarapa, a good example is the Waihenga Bridge outside Martinborough. Built more than 100 years ago, it was slated for replacement a few years back but has since been repaired and the replacement postponed. Early photos of the narrow bridge show small to medium-sized farm vehicles on it – piled with hay. These days, you are more likely to see large vehicles crossing it several times a day.
So where is the cash for all this work expected to come from?
Both major political parties have nixed a capital gains tax [CGT]. Widely considered by most non-tax experts to be the answer to all of New Zealand’s financial woes, this simply shows a woeful lack of understanding about how CGT works. TV One News said this week that New Zealand is one of the only, if not the only, OECD country with no CGT. Does this mean CGT promotes equality, pays the bills, and answers prayers? No. Britain, Australia and other English-speaking countries are grappling with the same problems as New Zealand – even though they have a CGT. Are properties in London or Sydney more affordable than in Auckland? No. What about inflation, the cost of living, and homelessness? Other OECD countries have those problems – and they have CGT.
CGT proponents point to vast property gains by some rich people as the reason a CGT is needed. We already have a raft of property-specific taxes in New Zealand designed to address that very issue. Much property sold within 10 years of being bought must now pay what is, in effect, a property CGT. So why introduce a general CGT when many know that it is property gains that we need to address? If property gains are not being taxed adequately, then property taxes should be changed – not introduce a new tax.
A general CGT would tax everyone’s Kiwisaver, farms, lifestyle blocks, art, inherited jewellery, cars, sharesies accounts, the assets and goodwill of all businesses large and small, and so on …
If this were to happen, there could well be many currently unforeseen consequences. Most of them, not very pleasant.
