Nicola Willis slams Labour's capital gains tax plan: 'It's a terrible idea'

Finance Minister Nicola Willis says Labour's policy of a capital gains tax is a "terrible idea".

Labour has agreed to campaign capital gains tax (CGT) covering just property - excluding the family home and farms - to help fund three free doctor visits for everyone.

The policy would kick in from July 2027 and would not be retrospective.

Willis, National's deputy leader, told Morning Report the capital gains tax would be "a massive tax on the New Zealand economy at a time when it could least afford it".

"This will put the economy at risk. It's a terrible idea."

While the policy was being discussed as a "narrow" tax, she told Morning Report it was anything but.

"It is certainly not narrow; they have said it would be a tax on every piece of commercial property in the country. That will hit many, many businesses, from a corner dairy to a manufacturing facility. It will also hit everyone who saved and put money into KiwiSaver, because some businesses in their KiwiSaver will now face a new tax.

"And it will hit every Kiwi who saved hard for a rental property or an investment in a commercial business. To call it narrow is completely misleading."

Nicola Willis also said free GP visits would also hit the issue that there are not enough doctors so getting a consultation was hard.

She said the coalition government was working to train more doctors or encourage them from overseas, as well as having targeted subsidies for GP visits for low income families.

"This seems to me a classic Labour policy. It is not designed well. It has shades of KiwiBuild."

Tax property, boost productivity - expert

University of Otago professor and tax expert Craig Elliffe, a member of the government's 2017 Tax Working Group, said Labour's proposed approach was narrow and targeted, and would not cover as much as similar tax regimes overseas.

"It focuses only on investment properties and commercial industrial properties," he told Morning Report on Tuesday.

"All other assets outside the net, ones that are normally within international norms of capital gains - so things like shares, retirement savings - they're all excluded, and other assets, you know, collectibles like paintings and those sorts of things."

Elliffe called it the "cleanest, simplest, most administratively simple form of capital gains tax" which tackled a "consistently valued" asset class - property - and would be "very straightforward" to implement.

"It'll raise a reasonable sum. It's nowhere near as much as a comprehensive capital gains tax would, and some of the design features take away some of the revenue," such as not taxing capital gains from inheritances and setting it at 28 percent, lower than the highest marginal tax rate.

Elliffe brushed off criticism it would impact small businesses, saying they "really won't be affected unless... their [property] assets as part of that business."

He said the tax, which would hit property investors hardest, would push more money into productive sectors instead - helping solve New Zealand's long-running issue with low productivity.

"You only need to look across the Tasman or to any other countries that have capital gains tax and see that they are not less productive, they are more productive than us."

'Any government should do it

Former Labour leader David Cunliffe - who ran unsuccessfully on a CGT policy - said it was a "very orthodox form of taxation" used in every OECD country other than Mexico and New Zealand, and it was time for New Zealand to "join the club".

"It is fairer because it spreads the load between fixed-income earners like teachers, doctors and policemen and those who have the opportunity to run and grow a business or property invest, and they only pay tax when they realise that profit," he said.

"Politicians need to be brave. People around the country are saying they want change. We can't just keep fiddling and sliding backwards down the OECD ladder. So this is part of a solution that will make us a higher wealth, higher innovation, more productive economy. Any government should do it."

Wealth taxes by comparison were "much more in an experimental stage" and there was a real risk it would drive wealthy investors overseas - something a CGT would not suffer from.

'Tall poppy'

Deputy Prime Minister and ACT leader David Seymour labelled the policy "divisive".

He told First Up New Zealand had comparatively high tax revenue, and taxed a higher percentage of the economy than the average OECD economy.

"It's not that New Zealand lacks government revenue. It seems to be about that old chestnut, the tall poppy."

Seymour said the policy is presented as someone else having to pay to solve problems in New Zealand.

It seemed every couple of years there was a different group of people deemed to have caused a problem and had to be "taxed or punished in some way", he said.

New Zealand First call it a ham-fisted policy announcement from Hipkins.

The capital gains tax plan was announced abruptly on Tuesday morning after RNZ was earlier leaked details over the long weekend.

In a tweet the party said someone in Labour leaking the old 'tax and spend' CGT announcement to media before Hipkins could announce it meant some Labour caucus colleagues were obviously not very happy.

"Last week's train-wreck list of policy announcements was bad enough but now this leak just rubs in the salt," the post said.

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