Valuing every single business, farm, rental property or family bach to comply with a Capital Gains Tax regime would impose billions of dollars of costs on New Zealanders while benefiting no-one apart from valuers, Leader of the Opposition Simon Bridges says.
"The Tax Working Group recommends small businesses, rental properties, family baches and farms be subject to a Capital Gains Tax (CGT) on all gains made after April 2021. As a result, eligible assets without an up to date market value would need a new valuation.
"Valuations don't come cheap, especially for business owners who want a value robust enough to stand up in court if challenged by the IRD. If every small and medium-sized business owner in New Zealand had to pay for a new valuation at say $10,000 apiece, the cost to the wider economy would be about $5 billion.
"Remarkably, that's roughly how much a CGT is projected to raise in its first four years. That isn't fiscal neutrality, it is economic stupidity. It adds costs just to tax growth.
"Every small business owner, farmer and property owner would want to maximise the valuation on 'valuation day' to limit the tax they have to pay on future capital gains. Such an incentive would ultimately undermine the credibility and fairness of the tax system.
"Other proxies for assessing the valuation of properties - such as local authority rating valuations (RVs) – are unlikely to be used as they typically understate the true market value and would, therefore, increase any future CGT.
"Mass automatic valuations have also been suggested as a way to avoid the compliance cost of valuations, but these should be ruled out because they would inevitably create significant errors and inequities in some cases.
"The huge compliance costs required to implement the recommended CGT are yet another reason why it would be disastrous for the New Zealand economy.
"National believes New Zealanders should keep more of what they earn and will fight the Government's proposed tax grab every step of the way. We will repeal a Capital Gains Tax and we will not introduce any new taxes in our first term."
