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Speaker 1: Now there is some concern that Labour's capital gains tax

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Speaker 1: might not bring in as much money as they hope.

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Speaker 1: On the show last night, Nicola Allla said Labour's policy

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Speaker 1: was already falling apart.

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Speaker 2: Based on their own statements today. They've based their costings

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Speaker 2: on the Tax Working Group proposal, and that proposal, if

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Speaker 2: you sold a property and received a gain on it,

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Speaker 2: you would pay a tax. What he said in your

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Speaker 2: interview was if you sold a commercial property but you

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Speaker 2: then bought a new one, you wouldn't pay tax on

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Speaker 2: the previous sale.

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Speaker 1: Now, Jeff Nightingale is an independent TAXIX but who was

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Speaker 1: actually a member of the aforementioned Tax Working Group. Hi, Jeff,

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Speaker 1: hi ever is Nicola writer. She got a point there.

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Speaker 3: Well, I think she's got a point in the sense that,

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Speaker 3: as I understand it anyway, Labour's proposal has this thing

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Speaker 3: called rollover relief in it because it's modeled on the

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Speaker 3: Tax Working Group, and we had proposed rollover relief for

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Speaker 3: small businesses businesses the turnover of less than five million

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Speaker 3: who were selling business assets to reinvest in the business.

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Speaker 3: You need to do that to preserve economic growth and things.

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Speaker 3: So I think she's right on that perspective. But what

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Speaker 3: I also understand those Labour's done its own costings of

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Speaker 3: the revenue that they propose, and they've included all the

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Speaker 3: assumptions are the design assumptions and that revenue costing. So

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Speaker 3: to that extent, I suspect they are standing. They'll stand

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Speaker 3: by their numbers.

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Speaker 1: Okay, so they are forecasting an average of about seven

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Speaker 1: hundred million dollars being brought in over the first four years.

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Speaker 1: That sound about right to you, And you know, having

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Speaker 1: what one point three billion in the first on year four,

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Speaker 1: does that sound right?

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Speaker 3: Yeah? Look it does sound about right. Look, look you've

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Speaker 3: got to realize there's are forecasts, right and the one

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Speaker 3: thing you know about them is they'll be wrong. But

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Speaker 3: when so labors CGT policy is modeled on the minority

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Speaker 3: view of the Tax Working Group. There was a minority.

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Speaker 3: I was in the majority, eight out of eleven was

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Speaker 3: voted for a comprehensive capital gain tax. A minority of

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Speaker 3: three put up and said, let's just extend it to property.

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Speaker 3: And in that minority report they said that residential property

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Speaker 3: will be about thirty nine percent of all revenue forecast

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Speaker 3: for the capital Gains tax, and Treasury in twenty nineteen,

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Speaker 3: long time ago, it suggested that after ten years, the

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Speaker 3: comprehensive capital gains tax might be six point two billion

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Speaker 3: of revenue per annum after ten years and thirty nine

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Speaker 3: percent of that's a couple of billions, So Labour's estimate

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Speaker 3: of a billion after four years doesn't seem out of

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Speaker 3: skew to me.

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Speaker 1: Now, yesterday Chiulpy said to me, it's not inflation adjusted?

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Speaker 1: Should it be?

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Speaker 3: Yeah, I heard that. It's a great question in theory.

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Speaker 3: Yes it should be, because we should be taxing inflationary gains.

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Speaker 3: We should only be taxing real gains. But introducing inflation

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Speaker 3: adjustment is really difficult and produces real complexity. So what

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Speaker 3: most jurisdictions around the world do is either discount the

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Speaker 3: rate to allow for inflation, or only include part of

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Speaker 3: the game as a proxy really for inflation. So you know,

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Speaker 3: you could argue that at twenty eight percent, it's already

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Speaker 3: a slight discount for an individual or a trust whose

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Speaker 3: top rate is thirty nine, but it's not a discount

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Speaker 3: for companies.

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Speaker 1: No, And I mean, geez, it's not much of a discount,

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Speaker 1: is it. Would you do if you had if you

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Speaker 1: designed it to account for inflation.

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Speaker 3: Well, when we did the working group, we didn't. We

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Speaker 3: recommend it not to account for inflation, and the reason

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Speaker 3: being that we come off of this period of historically

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Speaker 3: low inflation, but as we've seen in the last couple

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Speaker 3: years of inflation can get away and make a hell

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Speaker 3: of a difference. So I do think you need to

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Speaker 3: in principle account for inflation. It's probably too hard to

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Speaker 3: do it precisely, and a CPI adjust the cost base,

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Speaker 3: So it's probably best to apply some proxy and discount

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Speaker 3: the rate or discount the rate of inclusion of the

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Speaker 3: capital gain in order to say we recognize it. It's

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Speaker 3: a pretty rough measure, but it does recognize inflation if

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Speaker 3: you do that.

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Speaker 1: Jeff, what does your gut tell you? I mean, it

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Speaker 1: looks to me like this is a trojan horse, right,

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Speaker 1: because I don't really understand what the point is in

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Speaker 1: bringing in a tax or introducing at tax to bring

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Speaker 1: in review and immediately spending the vast majority of what

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Speaker 1: it brings in on something that we don't need right

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Speaker 1: as widespread as free GP as its for. So would

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Speaker 1: you say, looking at that that this is just the

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Speaker 1: startup something and it expands from there, and it's being

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Speaker 1: something more comprehensive, like what you'd like.

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Speaker 3: Yeah, I think some people will see it like that.

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Speaker 3: I mean, this approach is consistent with what New Zealand

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Speaker 3: has done for capital gains all along. It's coherent with

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Speaker 3: our current policy. So we don't have a comprehensive capital

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Speaker 3: gains tax, but we do tax some capital gains where

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Speaker 3: they occur systematically and they start to look like income.

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Speaker 3: So we tax financial arrangements, we tax property developed, we

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Speaker 3: tax payments around leases, and so we fire rifle shots

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Speaker 3: in law at these things. And this is another rifle shot.

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Speaker 3: It's not a broad base yet, but you know, some

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Speaker 3: people will see it as a we'll start here and

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Speaker 3: then we'll add some more asset classes in. And in

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Speaker 3: fact that that was what the minority report of the

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Speaker 3: Tax Working Group said, only add asset classes in as

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Speaker 3: you can justify that the revenue will outweigh the complexity

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Speaker 3: in compliance costs.

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Speaker 1: Jeff, it's good to talk do you. Thank you so

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Speaker 1: much for your time in your expertise. Jeff Nightingale, independent

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Speaker 1: tax expert and former member of the Tax Working Group.

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