Prime Minister uses “T” word

John-Key-and-baby

Ban and Tax are generally left-wing tools. Why is John Key open to the idea of a new tax?

John Key’s trip finished with a headline deal of a forecasted $50 million boost to the tourism industry, but the issue around those looking to come here permanently could also benefit with the possibility of a land tax, it has been suggested

In an interview with TVNZ’s political editor Corin Dann on Q+A, Mr Key discussed the possibility of a land tax on foreign investment in housing in New Zealand.

Mr Key says he thinks relationships with foreign countries wouldn’t be affected by the tax, but admitted offshore investors “probably wouldn’t like it”.

“We wouldn’t do it specifically for one country. We wouldn’t say for Chinese investors you’ve got to have a land tax but if you’re Australian you don’t.

“If we were going to apply that sort of thing, we’d apply it to all offshore investors.”

The Prime Minister says the tax could likely only apply to non-resident investors, rather than those who have citizenship.

It’s probably good politics to keep the idea of a possibility hanging in the event that the housing market starts to dent National’s numbers. And non-resident taxes on investors are likely to play well across non-National voters, while National voters may not like it but it won’t be a deal breaker as it won’t affect their own pockets.

The real solution continues to lie in easing the supply of land for development. Go out, not up. It doesn’t take long to drive out of a city to realise there is lots and lots of space available, and both land and house prices can be eased quite significantly by stopping councils from artificially restricting supply.

 

– TVNZ

 


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  • Edward M Blake

    The problem is that politicians know they have the raging bull by the tail with this one. You think an inflated property market is problematic? Wait till you see the carnage of a bubble burst. It won’t just be a few Aucklanders that suffer.
    I very much doubt that any politician has the courage to try and deflate the property bubble. They would rather stand around and blame other people until the problem solves it self (violently).
    With the cash rate at a new all time low of 2.25% and a reserve bank Governor who seems to have given up talking about property exposure there is obviously nothing to worry about. Of course the banks aren’t stupid wich is probably why the mortgage rates are not reflecting the cash rate drop.
    Of course what do I know. I have had to suspend disbelief for the last ten years.

    • I’ve been wondering if it is time to cash up, just defend the capital with relatively safe low interest bearing stuff, and be ready to be a cash buyer when the bottom falls out.

      People with cash are going to make a killing when the bubble pops.

      • Red_NZ

        they’ll only make a killing, if they are able to get their hands on their money. If the bubble bursts, who’s to say that the banks wont have to shut their doors for a few days and everyone’s accounts will have had a bit of a haircut

        • I don’t see that happening. I sincerely hope that won’t become a reality.

      • contractor

        Pete, economist Rodney Dickens argues that once the govt’s housing supply efforts deliver then in perhaps five years house price inflation will no longer be as it has been. Bold however to bet on that by being out of the market!

    • Effluent

      Banks aren’t stupid??? I’ve lost count of the number of adjustments in the property market that I’ve lived through, all fuelled by the same irrartional belief that a rising market won’t come to a violent end.

      I am convinced that we are not far off another adjustment here in NZ, and I’m pretty sure it won’t be the senior managers of the offending banks that pay the price – after all, when was the last time you heard of a bank being held to account getting prosecuted for handing out loan money like a drunken sailor in a brothel?
      It will be the taxpayers, who end up bailing out the imprudent sprendthrifts, as always.

      • Edward M Blake

        I might have been a little simplistic with the statement “Banks aren’t stupid” what I meant is more complex and scary.
        I dont want to be morbid but I fear you have never seen an adjustment in the property market of the scale I suspect is coming. What I fear is that not only a collapse of the domestic home owner but also a massive run from speculators. On the other hand maybe due to international pressures the market will stay afloat.
        I would suggest that the dropping of the cash rate is the beginning of a slow banking sector subsidy. In effect I suspect there is some hard ball negotiation’s going on on the basis of it now being way to big to fail. Increasing interest rates would probably be fatal so would stopping lending. But the banks require an increased margin to continue.
        You have to wonder at the complete lack of wisdom that got us to this point and how much further it can go.

        • Effluent

          I am just as worried that the crash, when it comes, will be well-nigh impossible to manage – the last one took years of what is euphemistically referred to as quantitative easing, that robbed savers, and rewarded the lunatic behaviour of the banks which caused the problem in the first place, only for the cycle to be repeated again.

          I think we are in for something similar to the 1929 crash, and the spinelessness of Europe and the USA, coupled with the interconnectedness of most countries economies, will mean that it is even more disastrous.

      • contractor

        Every new generation of bankers repeats mistakes and greed of previous generations, as reliably as a Swiss watch. And it is always the belief that this time is different, the good times will continue.
        Yes, it costs the low and middle earners both during the boom and bust the most.

  • Red_NZ

    Aren’t the Rates payable to local councils already a land tax, paid by most Residents of this country? There are too many people who are willing to double pay for what we’re already paying too much for.

    • johnandali

      In Aussie, Land Tax is additional to rates, and in our experience, it’s about the same again as rates. But land tax is not levied on your personal residence. If John Key is looking at imposing land tax on all non-residents who own property in NZ, I would expect that he would have to exempt NZ citizens who are living out of the country.

  • johnandali

    Or he might even adopt the Aussie system of Land Tax. Land tax is applied to the owners of any residential or commercial property over and above their residential property. The valuations are based on the improved values of the additional properties. The taxes are paid each year, directly to the state governments. I wouldn’t like to guess the total sum paid, but it would have to be in the billions. The Aussies also pay stamp duty on all housing purchased, and I reckon an $800k purchase for any house (including the one you want to live in) would be about $30k and you pay that on top of what you pay for the house. Stamp duty is also paid on trailers and car registration. However, the Aussies don’t pay GST on food that is below a certain temperature. Raw chicken – no GST. Cooked chicken, GST is payable. Condoms – no GST. Ladies sanitary products – GST is payable. Australian tax regulations are a veritable quagmire.

    • Keyser Soze

      “Australian tax regulations are a veritable quagmire.” A very good reason not to follow anything the Aussie do RE taxation. There is an entire industry dedicated to tax evas.. I mean, avoidance. While I was working there it was impossible to do my own personal or small business taxes. I guess it create a large financial services industry but it stuck in my craw…

      • Following anything Australia does in regard to legislation is an appalling idea.
        For a country that began life as a penal colony they have embraced intrusive legislation like a two year old does her comfort blankie!

      • johnandali

        I prepare our Aussie GST returns every quarter, and I’m still surprised there are no GST charges on rates, rubbish collection and water and bank fees. Moreover, we can’t claim the GST on our accountants’ bills, even though they’re listed on the account.

        However, there is one thing that the Aussies do a lot better than us. If you submit a DA (Development Application) to your local council, there is an extra charge added so that your neighbours can be advised that you have submitted the DA, and they can view the DA at the council offices and place objections if they consider they would be adversely affected by the proposal. Now that’s something we could well do with in NZ.

  • LesleyNZ

    I could not believe this mention of a land tax on foreigners by John Key. Isn’t this more a Labour/Green Winston idea? Then the thought crossed my mind – will this just be the tip of the iceberg – next minute will there be a tax imposed on those who own a bach or a rental home?

    • contractor

      That would be most unlikely.

  • Larry

    The price of every thing is controlled by demand. Oil, wheat, oranges, collectable cars or art and houses and land. If you want to change the demand, you have to change the supply. You’re dreaming if you think a tax will fix a supply problem

    • contractor

      Not true about tax. Investors globally go where the money is and that includes tax free investments. But agree about supply.

  • The real solution lies in dialing back unrestrained immigration.
    After that the whole tax regime around property investment needs to be reviewed.

    I was recently talking to a woman that owns 11 properties in Auckland and lives in a rental that was proud to admit she was completely tax neutral. i.e. she didn’t pay a cent.

    I believe her.

    As for this “If we were going to apply that sort of thing, we’d apply it to all offshore investors.”

    Quite right. It’s a disgrace that some people would be considered exempt. That type of racist behavior has no place in the modern world.

    Neither do those that are patently not paying their fair share. 22% no if ands but or maybes! For everyone.
    Come on ACT. Winston is leaving you behind. AGAIN!

  • rua kenana

    Prices of houses like anything else are determined by balance of demand and supply.Trying to put all the blame on only one of these is pointless and indeed counterproductive.
    Anyone who thinks that NZ, primarily Auckland and its citizens, should somehow be able to, or even want to, satisfy potential world demand for our housing is dreaming, totally dreaming. And it’s costing us more and more to keep trying.

    • contractor

      When supply is deficient and not quickly able to be corrected then any level of non-resident buying by people for whom money is no object can only aggravate market pricing more.

  • contractor

    This National voter would like it a lot if Key went ahead with land tax on non -residents. Fundamental really; what the heck is the delay?

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